NRV and Fair value less costs to sale: Are they same?

Although NRV and Fair value less costs are sometimes used inter-changeably you should be aware that they are never same. IAS 2: inventories clearly distinguishes these two from three perspectives:

• Net realisable value (NRV) has been defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale whereas fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
• NRV refers to the net amount that an entity expects to realize from the sale of inventory in the ordinary course of business. And fair value reflects the price at which an orderly transaction to sell the same inventory in the principal (or most advantageous) market for that inventory would take place between market participants at the measurement date. Fair value is a gross amount.
• NRV is an entity specific value while fair value is not.

Entity specific value in this regard means that the value of the inventory will differ from entity to entity.

Suppose, Company A produces and sells product X to only Company B. The sales price of Company A is $10 and the costs to sell are $2. However, the fair value of product X is $9. The net realizable value to Company A will be $8 (10-2). Since, Company A does not sell product X to none other than Company B so the fair value of product X will not affect its net realizable value.

 It is clearly evident that, NRV and fair value less costs to sell may not be equal all the time.