In real estate, once a property is being developed or held for resale it will generally be classified as inventory. It is important that inventory is valued properly as it can have a significant impact on net income year to year.
Real property can be valued at the lower of cost or market value. The method used in valuing a corporation’s inventory must be consistently applied year to year. There must be an acceptable reason for changing methods and it must be acknowledged by Canada Revenue Agency (CRA).