In what circumstances might the NRV of inventories lower than their cost?

The net realizable value (NRV) of inventories may be lower than their cost in situations where the market price of the inventory has declined due to changes in consumer demand, technological obsolescence, or increased competition. Additionally, if the inventory is damaged, outdated, or excessively overstocked, its sale value can fall below the original cost. This situation necessitates a write-down in the financial statements to reflect the lower value of the inventory, ensuring accurate reporting and compliance with accounting standards.