Valuing inventories in the annual accounts
The value of inventory at the balance sheet date directly determines your gross margin. The law gives a main rule, a lower limit and a few permitted calculation methods.
The short answer
You value inventories at acquisition or production cost, or at the lower current value at the balance sheet date (art. 2:387(2) DCC). For similar goods you determine cost using FIFO, weighted average prices or LIFO (art. 2:385(2) DCC). Obsolete or damaged inventory you write down to what it still yields.
Updated 30 October 2026
Key facts
| Legal basis | art. 2:369 DCC (items), art. 2:385(2) and (3) DCC (calculation methods), art. 2:387(2) DCC (lower value), art. 2:388 DCC (cost) |
| Guideline | RJ 220 Inventories; projects for third parties in RJ 221; for micro and small RJk B4 and B5.3 |
| Items | Raw materials and consumables, work in progress, finished goods and merchandise, prepayments on inventories |
| Tax | Cost; a lower value only for obsolete goods (Dutch Tax Administration) |
Legal framework and RJ 220
Under current assets, inventories appear in four items (art. 2:369 DCC). Valuation starts at cost. For purchased goods that is the purchase price with incidental costs, such as freight and import duties. For what you make yourself it is the production cost: raw materials and consumables and directly attributable costs, if desired with a reasonable share of indirect costs (art. 2:388 DCC). Selling costs and general administrative costs do not belong in it.
If you cannot track similar items individually, you may calculate with weighted average prices, with FIFO (first in, first out) or with LIFO (last in, first out). You keep to the chosen method. If the current value at the balance sheet date is lower than cost, you value at that lower value (art. 2:387(2) DCC); for inventories that is the net realisable value: the selling price minus the costs still to be incurred. If the reason lapses later, you reverse the write-down (para. 4).
Work you carry out for a customer, such as a construction project, follows its own rules for recognising profit by progress (RJ 221). See the term work in progress.
Valuing inventory in five steps
- Count. Determine the quantities at or around the balance sheet date and reconcile the movements up to the balance sheet date; see the year-end closing checklist.
- Cut off. Goods in transit count if the risk has already passed to you. Consignment goods of a supplier are not yours.
- Determine cost per item using the chosen method, without deductible VAT.
- Test net realisable value. Assess per item or item group what is old, damaged or out of the range.
- Explain. Disclose the policy and the method. A write-down larger than usual you show separately in the profit and loss account (art. 2:377(3) DCC).
Worked example: three methods, three outcomes
A wholesaler has an opening inventory of 100 units at € 10 of one item. In March it buys 200 units at € 12 and in October 100 units at € 14. There are 400 units available for € 4.800; of these 250 are sold. At year-end 150 are in stock.
| Method | Closing inventory (150 units) | Cost of sales |
|---|---|---|
| FIFO | 100 × € 14 + 50 × € 12 = € 2.000 | € 2.800 |
| Weighted average | 150 × (€ 4.800 : 400) = € 1.800 | € 3.000 |
| LIFO | 100 × € 10 + 50 × € 12 = € 1.600 | € 3.200 |
With rising prices FIFO gives the highest inventory and the highest profit, LIFO the lowest. Suppose the wholesaler uses the weighted average and that 20 units are damaged and still yield € 5 each. The write-down is 20 × (€ 12 − € 5) = € 140. The journal entry: Cost of sales € 140 to Inventory € 140. The balance sheet shows € 1.660.
Inventories per size class
Valuation is the same for every class; the breakdown is not. The limits below apply to financial years that began on or after 1 January 2024. Whoever meets at least two of the three criteria on two consecutive balance sheet dates falls in that class; a new legal entity tests on the first balance sheet date in the first and second financial year (art. 2:398(1) DCC).
| Class | What you show | Particularity |
|---|---|---|
| Micro (balance sheet total ≤ € 450.000, net turnover ≤ € 900.000, < 10 employees) | Only the total of current assets (art. 2:395a(4) DCC) | With tax-based principles (art. 2:395a(7) DCC) the tax inventory valuation applies |
| Small (balance sheet total ≤ € 7,5 mln, net turnover ≤ € 15 mln, < 50 employees) | Inventories as one item, without the four components (art. 2:396(3) DCC) | Cost of sales is absorbed in the gross operating result (para. 4); tax valuation is a permitted choice (para. 6) |
| Medium-sized (balance sheet total ≤ € 25 mln, net turnover ≤ € 50 mln, < 250 employees) | Four items in the prepared annual accounts; publicly the total suffices (art. 2:397(5) DCC) | Policy and method in the notes |
| Large (balance sheet total > € 25 mln, net turnover > € 50 mln, ≥ 250 employees) | Four items, also publicly | In the consolidated annual accounts the breakdown may be omitted if the costs are disproportionate (art. 2:410(2) DCC) |
Tax inventory valuation
For taxable profit, according to the Dutch Tax Administration you normally value inventory at cost. A lower value is only allowed for obsolete goods, such as clothing that has gone out of fashion. If you trade in textiles, clothing, furniture or upholstery, fixed maximum percentages apply to the write-down (Staatscourant 2023, 4100). Work in progress you value for tax at the part of the agreed fee that can be attributed to the work (art. 3.29b Wet IB 2001, the Income Tax Act 2001); commercially that depends on the type of project. The outcomes therefore differ.
Common mistakes in inventory valuation
- Valuing inventory at selling price, so that profit not yet earned ends up on the balance sheet.
- Leaving last year's trial balance item in place without a count.
- Including deductible VAT or selling costs in cost.
- Choosing a different method every year. That is a change of accounting policy and is only allowed for well-founded reasons (art. 2:384(6) DCC).
- Not assessing obsolete items because the margin is good on average.
- Counting consignment stock or goods already invoiced but not yet collected.
Inventory valuation in Jaarrekening.io
The bookkeeping of Jaarrekening.io tracks inventory items with purchase, sale and correction movements and a count that books the difference. The Inventory valuation screen shows per item the value at the weighted average purchase price and according to FIFO side by side; consignment goods stay outside the balance sheet value. A write-down to a lower net realisable value you assess and book yourself.
Sources
- Art. 2:369 DCC: inventories (wetten.overheid.nl)
- Art. 2:385 DCC: weighted average, FIFO and LIFO
- Art. 2:387 DCC: valuation at lower current value
- Art. 2:388 DCC: acquisition and production cost
- Besluit actuele waarde (Current Value Decree): definition of net realisable value (art. 5)
- Raad voor de Jaarverslaggeving (Dutch Accounting Standards Board): RJ bundle (RJ 220 and 221)
- Belastingdienst (Dutch Tax Administration): valuation of inventory
- Art. 3.29b Wet IB 2001: work in progress
Frequently asked questions
Which method do I choose: FIFO or weighted average?
Both are permitted. FIFO matches the actual flow of goods if you sell old stock first and lets the balance sheet show the most recent prices. The weighted average smooths price fluctuations and is simpler with many small movements. More important than the choice is that you keep to it year after year.
May I use LIFO in the Dutch annual accounts?
Yes, art. 2:385(2) DCC expressly mentions LIFO. With rising prices LIFO gives a lower balance sheet value and a lower profit than FIFO. Explain the policy clearly and keep to the method.
Do I have to count the inventory on 31 December?
The law mentions no counting moment. The balance sheet must however show the inventory at the balance sheet date and the bookkeeping must make your rights and obligations apparent (art. 2:10(1) DCC). If you count on another day, you reconcile the purchases and sales between count day and balance sheet date.
May I reverse a write-down later?
Yes. As soon as the impairment no longer exists, you reverse the write-down (art. 2:387(4) DCC), up to at most the original cost. That happens, for example, if the market price recovers or if you still find a buyer.
Does VAT belong in the inventory value?
Only VAT that you cannot deduct, for example because you make exempt supplies. Deductible VAT is a receivable from the Dutch Tax Administration (Belastingdienst) and not part of cost.
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