Markets · 6 pages · 12 min

How inventory can be a loss waiting

Inventory is a cost sitting in unsold goods, and it becomes a loss if those goods will not recover their cost.

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From the opening

Inventory is the cost of goods purchased or made and not yet sold, sitting as an asset because the firm expects to recover that cost through ordinary sales. If demand, fashion, spoilage, or price moves so that recovery fails, the asset is a loss that has not yet been recognized. The opening covers unsold cost sits as an asset, recovery depends on a buyer, and write-downs admit the shortfall.

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Inside

Unsold cost sits as an asset
Recovery depends on a buyer
Write-downs admit the shortfall
Holding ties up cash
Where the idea stops applying
A distinction worth keeping

Sources

Lower of cost or net realizable value
Inventory obsolescence write-down

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How inventory can be a loss waiting

From the opening

Inside

Sources

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