Hello all,
I have a question regarding a CFAI problem. It is as follows:
Zimt AG wrote down the value of its inventory in 2007 and reversed the write-down in 2008. Compared to the results the company would have reported if the write-down had never occurred, Zimt’s reported 2008:
a.) Profit was overstated
b.) Cash flow from operations was overstated
c.) Year-end inventory balance was overstated
To be honest, I’m not sure I understand the exact question posed. I’m pretty well versed in the effects of inventory writedowns, but the wording of the question seems quite confusing to me. Can anyone shed some light on this?
Thanks!