Article 2:387 DCC: impairments and the lower market value
Article 2:387 DCC is the statutory basis of "cost or lower market value": when you write down inventories, receivables and fixed assets, and when you reverse a write-down.
The short answer
Article 2:387 DCC requires current assets, such as inventories and receivables, to be written down to current value if that is lower than cost, and fixed assets on an expected permanent fall in value. The write-down is charged to the result, unless there is a revaluation reserve, and is reversed as soon as the fall disappears; for goodwill never.
Updated 30 October 2026
Key facts
| Place in the law | Section 6 of Title 9 |
| Applies to | Every class; the separate disclosure of paragraph 4 not for micro |
| Current assets | Lower current value (for inventories usually the net realisable value) or another lower value if that serves the view |
| Fixed assets | On an expected permanent fall; for financial fixed assets a fall at the balance sheet date is also allowed |
| Elaboration | RJ 121 (impairments), RJ 220 (inventories), RJ 222 (receivables), RJ 214; RJk A2 and B4 |
Paragraphs 1 and 2: current assets at the lower value
1. Impairments of assets are taken into account independently of the result of the financial year.
2. Current assets are valued at current value if this is lower at the balance sheet date than the acquisition or production cost. The valuation is at another lower value if the view referred to in article 362 paragraph 1 is thereby served.
What this means. As with depreciation, writing down is not a choice that you let depend on profit (paragraph 1). Inventories, receivables and securities stand at cost, unless their current value at the balance sheet date is lower; then you go to that lower value (paragraph 2). In practice this is called "cost or lower market value". For inventory the yardstick is usually the net realisable value: the expected selling price less the costs to sell and, for semi-finished goods, to complete (RJ 220.322; RJk B4.108). You do not write down raw materials as long as the end product sells at a profit. For a receivable the lower value is the amount you expect to receive, see receivables.
Paragraph 3: fixed assets on a permanent fall
3. In the valuation of fixed assets, account is taken of a reduction in their value if this is expected to be permanent. In the valuation of financial fixed assets, account may in any case be taken of an impairment that has occurred at the balance sheet date.
What this means. You write down a machine or a property if its value is expected to stay below the carrying amount. RJ 121 makes that measurable: on an indication, such as a sharply falling turnover of the product or damage, you calculate the recoverable amount. That is the higher of the net realisable value on sale and the value in use, the present value of what the asset will still yield. If it lies below the carrying amount, you write down. Because the value in use takes in the entire remaining useful life, the requirement of permanence is thereby met (RJ 121.104). For financial fixed assets, such as a loan to a participating interest, you may also process a fall at the balance sheet date that may be temporary.
Paragraphs 4 and 5: processing, reversal and goodwill
4. The write-down in accordance with the preceding paragraphs is, insofar as it is not deducted from the revaluation reserve pursuant to article 390 paragraph 3, charged to the profit and loss account. The write-down is reversed as soon as the impairment has ceased to exist. The write-downs pursuant to paragraph 3, as well as the reversals, are presented separately in the profit and loss account or in the notes.
5. The second sentence of paragraph 4 does not apply to write-downs of goodwill.
What this means. A write-down goes through the profit and loss account. Only if the asset was previously revalued above cost does the write-down first come off the revaluation reserve. If the cause disappears later, you reverse the write-down, but never beyond the carrying amount the asset would have had without the write-down (RJ 121). Impairments of fixed assets and their reversals are shown separately to the reader, in the profit and loss account or in the notes. A write-down of goodwill is final.
For the profit and loss account by nature this aligns with article 2:377: impairments of fixed assets are with the depreciation, ordinary write-downs of inventory and debtors with the costs, and only unusually large write-downs of current assets on a separate line.
From micro to large, and the editions per financial year
Article 2:387 is a valuation rule and applies to every class, including micro. A micro entity shows depreciation and impairments on one line and need not give the separate disclosure of paragraph 4 (art. 2:395a(5) and (6) DCC). Small entities follow RJk A2 paragraph 3, which summarises the test of RJ 121 and refers to the RJ bundle for details, and give per category of assets the amount of the write-downs and the item they are in (RJk A2.324). With tax-based policies the tax rules for write-down to a lower going-concern value apply. The statutory text is the same in financial years 2025, 2026 and 2027; RJ 121 has been unchanged since 2021, RJ 220 and RJ 222 were amended for financial years from 2026. See also RJ 220 inventories and RJ 222 receivables.
Case: bicycles, a machine and goodwill
Bicycle dealer Lindeboom BV (fictional, small) still has 40 model-2025 e-bikes in inventory at the end of 2026, bought at € 1.200 each. The new model is out; the old bikes are expected to sell for € 1.050, with € 50 selling costs per bike. Its workshop machine stands at € 400.000; because of a new technique at a competitor, demand for repairs falls. And on the goodwill of a shop taken over in 2024, carrying amount € 120.000, turnover has permanently halved.
| Item | Calculation | Write-down 2026 |
|---|---|---|
| E-bikes (paragraph 2) | Net realisable value 1.050 − 50 = € 1.000; 40 × (1.200 − 1.000) | € 8.000 |
| Workshop machine (paragraph 3) | Value in use € 310.000, net realisable value € 260.000; recoverable € 310.000; 400.000 − 310.000 | € 90.000 |
| Shop goodwill (paragraphs 3 and 5) | Recoverable amount € 70.000; 120.000 − 70.000 | € 50.000 |
| Total charged to the result | € 148.000 |
Check: 8.000 + 90.000 + 50.000 = 148.000. If the repair market picks up again in 2027 and the recoverable amount of the machine is then € 380.000, while the carrying amount without write-down (after an extra year of depreciation) would be € 350.000, Lindeboom reverses up to € 350.000 and no further. The write-down on the goodwill stays, however well the shop later does. In the profit and loss account of a small BV the € 140.000 for machine and goodwill is with the depreciation and impairments, with the amount of the impairment separately on the account or in the notes; the € 8.000 on the bikes belongs to the cost of goods, unless it is unusually large for Lindeboom.
Mistakes in writing down
- Leaving obsolete inventory at cost because "we can still sell it", without testing the expected price and selling costs.
- Writing down raw materials while the end product sells at a profit.
- Reversing an impairment to above the carrying amount that would have existed without the write-down.
- Reversing a write-down of goodwill in a better year.
- Booking a write-down on a revalued property directly in the profit and loss account instead of first against the revaluation reserve.
Sources
Frequently asked questions
What does cost or lower market value mean?
That current assets, such as inventories, stand at cost unless their current value at the balance sheet date is lower; then you go to that lower value (art. 2:387(2) DCC). For inventories that is usually the net realisable value: the expected selling price less the costs to sell.
When must I write down a fixed asset?
If the value is expected to lie permanently below the carrying amount (art. 2:387(3) DCC). Under RJ 121, on an indication you test the recoverable amount, the higher of the net realisable value and the value in use. If it is lower than the carrying amount, you write down at the expense of the result.
May a write-down be reversed later?
Yes, as soon as the impairment has ceased to exist (art. 2:387(4) DCC), and no further than the carrying amount the asset would have had without the write-down. A write-down of goodwill is never reversed (paragraph 5).
Must a small BV state a write-down separately?
Yes. Impairments of fixed assets and their reversals are shown separately in the profit and loss account or in the notes (art. 2:387(4) DCC). A micro entity shows depreciation and impairments on one line and gives no notes.
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