RJ 220 Inventories: cost, net realisable value and notes

The short answer

RJ 220 governs how you recognise, value and disclose inventories. Trade goods, raw materials and own production are at cost, or at net realisable value if that is lower: the expected selling price minus the costs still needed. Current value is allowed only for agricultural inventories. Micro and small follow RJk B4, medium-sized and large RJ 220.

Updated 30 October 2026

Key facts

What RJ 220 covers, and what it does not

Inventories are goods that you hold for sale, that are still in production, or raw materials and supplies that you consume in production or services. The purpose decides: the same parts are inventory if you sell them, and tangible fixed assets if they keep your own machines running (RJ 220.102). The law determines which kinds of inventory you distinguish:

Among the inventories belonging to the current assets the following are recognised separately:

a. raw materials and supplies;

b. work in progress;

c. finished products and trade goods;

d. prepayments on inventories.

The work in progress in this list is semi-finished product in your own production. A project that you build for a customer, or a service assignment that is still running, belongs not here but under RJ 221 Work in progress on projects (RJ 220.103). The difference is fundamental: on inventory you recognise profit only on sale, on a project according to progress.

On the balance sheet the inventory you have at your disposal counts; goods on consignment with a customer generally remain yours (RJ 220.203). Forward sales and forward purchases do not count, and neither does a fixed ‘normal stock’ (RJ 220.204). If a loss threatens on an ongoing purchase or sales contract, you test it as an onerous contract under RJ 252 (RJ 220.205).

Which version applies to your financial year

What belongs in cost

Cost is the acquisition price (purchase price plus incidental costs, art. 2:388(1) DCC) or the production price (art. 2:388(2) DCC), plus what is needed to bring the goods to their location and present condition (RJ 220.302). Trade discounts are deducted as soon as you are likely to receive them; recoverable VAT is not included (RJ 220.303). The main choices:

• Indirect production costs. RJ 220 allocates fixed and variable production overheads systematically to inventory (RJ 220.305 and 306). You spread the fixed costs over normal capacity, not over actual production. If the factory runs less, the unallocated part goes directly to the result (RJ 220.307). RJk B4.104 uses the same allocation key.
• What never belongs in it. Abnormal waste and spoilage, storage (unless the product has to mature or the storage is a production step), general administration costs and selling costs (RJ 220.310).
• Interest. You may capitalise interest over the production period under the conditions of RJ 273; you then disclose that you do so (art. 2:388(2) DCC).
• Long payment term. If you pay the supplier much later than usual, the present value of that payment is the cost (RJ 220.311).

Choosing a cost method

For interchangeable goods the law allows weighted average prices, FIFO, LIFO and comparable methods (art. 2:385(2) DCC). Similar inventory gets one method; a different branch or a tax reason does not justify a second (RJ 220.313 and 314). The RJ discourages LIFO because the balance sheet then shows old prices; whoever uses it anyway discloses how, and the inventory according to FIFO or the average if that differs materially (RJ 220.316 and 602). Under the RJk the latter is for consideration (B4.110).

Unique items and goods that you make for a single project, you value at their own costs (RJ 220.317). A standard cost or, in retail, selling value minus gross margin is allowed, as long as the outcome approximates actual cost (RJ 220.320 and 321). Small, constantly replenished inventories of raw materials and supplies may be set at a fixed quantity and value (art. 2:385(3) DCC).

Lower net realisable value

Current assets are valued at current value if this is lower at the balance sheet date than the acquisition or production price. Valuation is at another lower value if the insight referred to in article 362 paragraph 1 is served by it.

For inventory that lower value is the net realisable value: the expected selling price minus the costs of completion and sale. Four rules from RJ 220 make it concrete:

1. You test per item, or per group of items from the same range; writing down a whole category such as ‘finished product’ in one go is not allowed (RJ 220.324).
2. Price falls after the balance sheet date count if they confirm how things stood at the balance sheet date (RJ 220.325). What you sell under a fixed sales contract you test against the contract price (RJ 220.326).
3. Raw materials and semi-finished products are not written down as long as the end product is expected to yield at least cost (RJ 220.327; RJk B4.108).
4. You reverse a write-down as soon as the reason lapses, up to at most cost (RJ 220.328; art. 2:387(4) DCC).

Agricultural inventories may also be at current value, which is net realisable value (art. 8 Dutch Current Value Decree). Without a frequent market quotation, an increase in value then goes through a revaluation reserve (RJ 220.401 to 403).

Per size class

Case: furniture factory with an idle saw line

Meubelfabriek Linde BV (fictitious) makes dining tables. Under normal conditions 10.000 tables a year come off the line. Fixed production costs (depreciation of machines, rent of the hall, salary of the shift supervisor) are € 300.000 a year, so € 30 per table at normal capacity. Per table, wood and fittings cost € 80 and direct labour € 50. Because of a broken saw line, Linde makes only 8.000 tables in 2026.

Of the fixed costs, 8.000 × € 30 = € 240.000 goes into cost. The other € 60.000 is an expense of 2026, whichever format you use for the profit and loss account. Whoever takes actual production as the allocation key charges € 37,50 per table and, with a closing stock of 1.500 tables, keeps € 11.250 too much on the balance sheet.

At the end of 2026 there are 1.500 tables in the warehouse. For 200 tables in a colour that no longer sells, Linde expects € 150 each, with € 15 of transport and commission: a net realisable value of € 135, so € 25 below cost.

Outcome per class. The valuation is the same in every class. As a small entity under the RJk, Linde puts one inventories item on the balance sheet and discloses the principle, average cost as the method and how it determines net realisable value; mentioning the € 27.000 at net realisable value is allowed but not required. If Linde is medium-sized, it does disclose that € 27.000 and the write-down of € 5.000, but not the cost of the tables sold. A large Linde also discloses that last amount. As a micro-entity Linde shows only its current assets in total, without notes.

Common mistakes

• Dividing fixed production costs by actual production in a poor year, so that idle capacity stays on the balance sheet as inventory.
• Including selling costs, warehouse rent or general office costs in cost.
• Putting a ‘provision for obsolete inventory’ on the liabilities side. An impairment of an asset is not a provision (art. 2:374(2) DCC); you write it off against the inventory itself.
• Writing down raw materials because the purchase price fell, while the end product still sells at a profit.

How it works at Jaarrekening.io

If you keep your bookkeeping in Jaarrekening.io, you record the valuation method per administration, with a start date: weighted average, FIFO or a fixed settlement price (LIFO is not included). The write-down per item is the larger of two amounts: the shortfall against net realisable value (expected selling price minus selling costs) or an obsolescence percentage that you enter. In the notes the app asks about the cost method and the way you determine net realisable value. Determining normal capacity and estimating the selling price remain your judgement.

Sources

• Art. 2:369 DCC: classification of inventories (wetten.overheid.nl)
• Art. 2:385 DCC: FIFO, LIFO, average prices and fixed quantity
• Art. 2:387 DCC: lower current value of current assets
• Art. 2:388 DCC: acquisition and production price
• Dutch Current Value Decree, art. 8 (agricultural inventories)
• RJ-Uiting 2025-3A: amendment of RJ 220.505, 601a and 606 (rjnet.nl)

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