how does inentory write down work? How it increase COGS and reduce the carrying value of inventory? Thanks.
Inventory write downs occur for a couple of reasons, but they all revolve around the inventory having an impairment in value. Obsolescence is a big part of this. This write down is reflected in COGS and it taken out of the value of inventory. Ex: Inventory impaired by 100. COGS +100 Inventory -100 There will also be tax effects, obviously.