Inventory Markdown 2026: Rules, Accounting & Process

Inventory markdown in 2026: when it is needed, how to process it, and what businesses should consider

An inventory markdown is not a promotional campaign or a regular marketing discount. For accounting purposes, it is a reduction in the value of inventory to its net realizable value when, as of the balance sheet date, the enterprise no longer expects to receive an amount from the sale equal to their original cost. Inventories in financial statements are reported at the lower of two valuations: original cost or net realizable value. (Law of Ukraine)

A price reduction in the store does not in itself mean an accounting markdown. If a business temporarily offers a promotional discount, but the criteria for reducing the carrying amount of inventory are not met, this is a change in the selling price, not a markdown in accounting. An accounting markdown is needed when the original cost of inventory exceeds its net realizable value. (Law of Ukraine)

When is a markdown conducted

A markdown is conducted if, as of the balance sheet date, the inventory has lost some of its expected economic benefits. NP(S)BO 9 explicitly lists typical grounds: price decline, spoilage, obsolescence, or other loss of initially expected economic benefits. (Law of Ukraine)

For a product business, these are most commonly the following situations:

A specific nuance applies to raw materials, components, and other inventories that will still be used in production. Following the 2022 changes, they are not automatically marked down just because of a market drop. If the finished product in which they are incorporated is expected to be sold at or above cost, such inventories may remain at their original cost. If a decline in market price causes the expected cost of the finished product to exceed its net realizable value, then these materials are also measured at net realizable value. (Law of Ukraine)

How to determine net realizable value

Net realizable value is the expected selling price of inventory minus the expected costs of completion and sale. This is the formula provided by the Methodological Recommendations for Inventory Accounting. (Law of Ukraine)

In practice, this means the enterprise must record not only the new selling price but also the reason why this price is now realistic, as well as the expenses without which the sale is impossible. The more expensive or risky the product, the more important it is to have internal justification: product inspection, photo documentation of defects, stock balance report, expiration date data, market price comparison, memo from the responsible employee. Such a package of documents helps confirm that the markdown was made not arbitrarily, but based on the actual condition of the inventory. (Law of Ukraine)

How to document a markdown

The Accounting Law does not bind markdowns to a single special standard form for all enterprises. But any document on the basis of which a markdown is recorded in accounting must be a primary document with mandatory details: document name, date of creation, enterprise name, content and volume of the business transaction, positions of responsible persons, and signatures or other data to identify such persons. Primary documents can be paper or electronic. Electronic documents and automatically generated documents are permissible if the requirements for electronic document flow and electronic signature/seal are met. (Law of Ukraine)

In practice, the following are usually issued for a markdown:

For retail trade, it is also important to remember that retail prices are recorded in the retail price register, and documents justifying them may include invoices, waybills, inventory acts, and markdown or markup records. (Law of Ukraine)

How to correctly remark prices in the store

If a product is sold at retail, after a price change it must be properly displayed in customer information tools. The current Instruction on the procedure for designating retail prices requires that after a revaluation, the price be remarked by crossing out the previous price and marking the new one on price tags, labels, packaging, and other media on each unit. Such remarking is certified by the signature of the employee responsible for setting or applying prices. If crossing out the old price is impossible, the new one is glued over the previous one. (Law of Ukraine)

For goods marked down due to partial loss of quality, the letter "P" is placed on labels, packaging, or price tags. Announcements about new prices are also posted in the sales area, and they must remain until the final sale of such goods. If the price is applied with a pricing gun or a price tape is affixed, the responsible employee's signature and date are not mandatory. (Law of Ukraine)

What must be communicated to the buyer

A markdown does not cancel the consumer's right to necessary, accessible, reliable, and timely information about the product. The law requires providing this information before purchase. Therefore, if a product is marked down due to a partial loss of quality, damage, defect, incomplete set, or other flaw, the buyer must be informed before the sale. Hiding the reason for the markdown is prohibited. (Law of Ukraine)

The sale of dangerous, low-quality, or counterfeit products, as well as improper pricing or limiting the consumer's right to information, is explicitly classified by law as a violation of consumer rights. For the lack of necessary, accessible, reliable, and timely information about products or the seller, the law provides for a fine of 30% of the value of the batch of goods, but not less than five non-taxable minimum incomes of citizens. (Law of Ukraine)

How to conduct the sale of a marked-down item through a cash register (RRO) or software cash register (PRRO)

If a settlement transaction occurs during a sale, it must be conducted for the full actual purchase amount through a registered RRO or PRRO, generating a settlement document of the established form and content. The buyer must receive a settlement document for the full amount of the transaction. (Law of Ukraine)

The form and content of settlement documents are determined by the Law on RRO and Ministry of Finance Order No. 13. Order No. 13 is valid as amended on January 11, 2025. If the document lacks even one mandatory detail, it will not be accepted as a settlement document. For business, this means a simple rule: after a markdown, the price in the accounting system, on the price tag, and in the RRO/PRRO must match, and the receipt must be generated correctly. (Law of Ukraine)

How to show a markdown in accounting

The amount by which the original cost of inventory exceeds its net realizable value is written off as an expense of the reporting period. This is the accounting consequence of a markdown. If it is not a markdown, but a complete loss or spoilage of inventory, such amounts are also reflected in expenses according to the rules of NP(S)BO 9. (Law of Ukraine)

If subsequently the net realizable value of those same inventories increases, the previous value reduction can be reversed, but only up to the amount of the previous markdown. That is, a markdown is not permanently irreversible if the market situation or product condition improves. (Law of Ukraine)

Taxes: what is important to consider

Income tax

For income tax payers, the starting point is the accounting financial result, formed according to accounting data, with further adjustments only in cases expressly provided for by the Tax Code. Therefore, the consequences of a markdown primarily pass through accounting, and separate tax adjustments are possible only when the Code explicitly establishes a corresponding difference for a specific transaction. (Law of Ukraine)

VAT

An accounting markdown in itself is not a supply of goods. For VAT, the key is the actual sales transaction. Moreover, paragraph 188.1 of the Tax Code requires that the tax base for operations involving the supply of goods/services cannot be lower than the purchase price of such goods/services. Therefore, if a purchased product is sold below its purchase price, the VAT issue must be evaluated taking into account this minimum base. (Law of Ukraine)

Special cases where a markdown has additional restrictions

Not all goods can be marked down in the same way. If state price regulation, marginal trade markups, or other mandatory pricing rules apply to a product, you cannot arbitrarily lower the price without checking the special regime. The Law on Prices and Pricing provides that state regulation can be carried out, in particular, through fixed prices, marginal prices, and marginal trade markups. (Law of Ukraine)

Separately, it's worth checking goods for which legislation establishes minimum retail prices. For example, for certain alcoholic beverages, such minimum prices are explicitly provided by a special law, and the procedure for their review is within the competence of the Cabinet of Ministers of Ukraine. For such goods, a markdown cannot ignore special price restrictions. (Law of Ukraine)

Practical algorithm for the entrepreneur

Inventory markdown in Torgsoft accounting software: principles and tools

An inventory markdown in the Torgsoft program is a tool to stimulate sales of products that for various reasons have lost their primary value for sale at full price. The main goal of a markdown is to quickly lower the price or set a product discount to sell the item and not "freeze" company funds in illiquid inventory.

When and why it is necessary to conduct a markdown:

Important features of marked-down goods in Torgsoft:

How to perform an inventory markdown in the Torgsoft program:

The program offers several convenient methods for conducting a markdown.

Method 1: setting a product discount with the "Markdown" flag

This is the fastest way to lower the price on a specific item, guaranteeing it will not be returned.

Method 2: mass reduction of selling price

This method is suitable if you need to reduce the price of a whole group of goods at once.

Method 3: via "Revaluation Act"

If you need to formally document who, when, and on what basis the prices were lowered, use the Revaluation Act.

Official sources

Програма обліку товару для інтернет-магазинів, крамниць, торгових точок, складів та виробництва