2/19/2023 0 Comments 100 writedown of debt![]() If a new model of a product comes out, consumer demand decreases, or market trends shift, and companies may be left holding inventory that is a fraction of its original value. Obsolescence tends to be a common reason why inventory might be written down. Inventory write-downs occur when the value of an inventory is diminished-which can happen for a multitude of reasons. Instead, it would be treated as an inventory write-off. It should be noted though that if a piece of inventory loses all its value as opposed to just some, it would not be eligible for a write-down. Items affected by a range of different scenarios-like damage, theft and shifting market trends-are all subject to an inventory write-down if their actual worth drops below the book value. This includes the raw materials, in-progress products and finished merchandise. Inventory can be written down if the value is reduced. ![]() ![]() What Items are Eligible for a Write-Down? Companies can reduce incidents of inventory write-downs through effective inventory management strategies like avoiding excessive inventory, reviewing order frequency, tracking trends in demand and implementing precautionary measures to avoid theft or damage.An inventory write-down impacts both the income statement and the balance sheet-reducing net income, retained earnings and shareholder equity.Inventory often loses value because of obsolescence, theft, decrease in consumer demand, damage, spoilage, misplacement and shifts in the market. ![]()
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