Ore Stockpile NRV Write-Down
Writing down ore stockpile inventory to net realizable value when metal prices decline below cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Inventory Write-Down — Ore Stockpile | Expense (+) | 2,100,000.00 | - |
| Ore Stockpile Inventory | Asset (-) | - | 2,100,000.00 |
💡 Accountant's Note
Ore stockpile and concentrate inventory are carried at the lower of cost and net realizable value (IAS 2). NRV is the estimated selling price (at current metal prices) less estimated costs of completion (processing for ore, shipping and TC/RC for concentrate) and selling. When metal prices fall sharply, the NRV of ore stockpiles can fall below production cost — requiring a write-down.
Practitioner & Systems Framework
💻 ERP Architecture
NRV testing is performed at each reporting date for all inventory categories. The NRV calculation for ore stockpile is: (ore grade × metal price × plant recovery) less processing cost to convert to saleable product, less freight and selling costs. For concentrate inventory in transit, NRV is the provisional selling price less remaining TC/RC and freight. The NRV write-down is recognised as a period cost. IAS 2 permits reversal of NRV write-downs in subsequent periods if metal prices recover — the reversal is recognised as a reduction in COGS in the reversal period.
⚠️ Audit Flags
Auditors test NRV at period-end using the prevailing metal price and the actual cost structure (not budgeted costs). For ore in a heap leach or stockpile with a long processing time, the NRV calculation must include discounting to reflect the time value of money if the processing period is extended. Confirm that the metal price used for NRV is the spot price at the reporting date (not a management forecast). Test reversal of previous write-downs — reversals cannot exceed the original write-down amount.
📄 Required Documentation
Metal price at reporting date (LME closing, iron ore index), ore grade survey, plant recovery rate, processing cost per tonne, NRV calculation by stockpile type, write-down journal and approval, reversal assessment in subsequent periods, and NRV sensitivity analysis to metal price changes.
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