NRV

Why do we subtract the normal profit margin from NRV when thinking about revaluation? I mean- I know that is the financial reporting rule, but is there any logic to it? Seems to be it would be more logical to compare cost to NRV itself…why do we take the normal prof margin away and see if replacement value is in the middle of that range? Any logic to this?

Because you’re trying to approximate cost:

cost + profit = (selling) price

cost = price − profit.

ah- thank you!

You’re welcome.