Inventory is stated at the lower of cost or net realizable value (“LCNRV”) and consists of raw materials, work in progress, finished goods, and service parts. The Company primarily calculates the carrying value of inventory using standard cost, which approximates actual cost on the first-in, first-out (“FIFO”) basis. NRV is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion. The Company assesses the valuation of inventory and periodically adjusts its carrying value for estimated excess and obsolete inventory based upon expectations of future demand and market conditions, as well as damaged or otherwise impaired goods. The following table summarizes the components of “Inventory” on the Consolidated Balance Sheets (in millions):

The carrying value of the Company’s inventory was written down by $319 million and $66 million from its cost to its NRV as of December 31, 2023 and 2024, respectively. Additionally, the Company has a liability for LCNRV losses related to firm purchase commitments of $126 million and $5 million as of December 31, 2023 and 2024, respectively, which is reflected in the “Inventory” component of “Accrued liabilities” on the Consolidated Balance Sheets. Refer to Note 11 "Accrued Liabilities" for more information about Accrued liabilities.

The net impact of LCNRV write-downs and the change in accrued liabilities for losses on firm purchase commitments was $920 million and $107 million during the years ended December 31, 2022 and 2023, respectively, and recorded in automotive cost of revenues in the Consolidated Statements of Operations. Because the $121 million year-over-year decrease in losses on firm purchase commitments exceeded the $66 million LCNRV write-down on the carrying value of inventory as of December 31, 2024, the Company did not have a net non-cash loss for inventory LCNRV write-downs and losses on firm purchase commitments during the year ended December 31, 2024; that is, the net loss for inventory LCNRV write-downs and losses on firm purchase commitments was realized into cash losses.