After the enterprise selects a certain comparison method and determines the ending value of the inventory, it needs to perform accounting processing and adjust the accounts. According to the lower of cost and net realizable value method.

If the cost is lower than the net realizable value, no accounting treatment will be performed, and the inventories in the balance sheet are still listed at the end of the period book value; if the net realizable value is lower than the cost, the allowance method is required. accounting processing. The allowance method means that if the net realizable value is lower than the cost, the inventory account will not be directly written off, and a separate "inventory depreciation reserve" account will be set up.

Notes on provision for impairment

According to the provisions of Article 55 of the Enterprise Income Tax Law and the Implementation Regulations, various assets that do not comply with the provisions of the State Council’s financial and tax authorities Impairment reserves, risk reserves and other reserve expenditures are not deductible before tax.

Currently, pre-tax deductions are only allowed for reserves accrued in accordance with regulations in some specific industries such as finance, insurance, securities, futures, and small and medium-sized enterprise credit guarantee institutions. For general enterprises, any asset impairment reserves accrued by the enterprise shall not be deducted before tax.