Recording Inventory at Net Realizable Value

Companies usually record inventory at cost. But according to U.S. GAAP, a company may initially record inventory at net realizable value if 3 things are true:
1. it is a controlled market with quoted prices for the product
2. the costs to dispose of the product must not be significant
3. the product must be available for immediate delivery
The types of products this applies to are rare metals, animals, and agricultural products.

IFRS defines farm animals as "biological assets" and the things harvested from those animals as "agricultural produce." For example, a sheep would be a biological asset whereas the wool sheared from that sheep would be agricultural produce. IFRS requires both biological assets and agricultural produce to be recorded at net realizable value.

One reason that companies are allowed to record such assets at net realizable value instead of cost is that it can be very difficult to determine the cost of these assets. For example, how do we calculate the cost of a sheep's wool? It is difficult to separate the cost of producing the wool versus the cost of raising the sheep, since they represent two different assets.
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