Meaning and valuation example
In management analysis, illiquid inventory means stock that is difficult to sell or use in the ordinary cycle on the expected terms. Possible causes include obsolescence, damage, lack of demand or incompatibility with production. The label itself does not establish the amount of an accounting write-down. If an item cost 140, its expected selling price is 120 and the necessary selling expenses are 15, its educational net realisable value is 105. Check separate groups and documents rather than writing down the entire warehouse by one general percentage.
How to avoid a mistake
Do not confuse illiquid goods with goods that are temporarily selling slowly. Compare the storage period, actual orders, rework costs and possible alternative uses. If part of the stock can be used in another production process, its economic outcome may differ from that of products that are finally obsolete; the same age since receipt does not make the items equivalent.
For more on the relationship between cost and write-downs, see the [educational analysis](/guides/inventory-cost-nrv/).
Sources and review boundaries
Support: **report-ias2**, **gl-mit-eoq**. The example is editorial. The sources verify the concept, but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.