A) My understanding of an inventory write-down is when a company accepts that their inventory is worth less than they had hoped for, and they eat the loss officially. Say for example Nike produces 1,000,000 pairs of shoes at $5 each. They hope to sell shoes to stores for $22 each. Unfortunately, they can only move 700,000 units, so they are left with 300,000 out -of-fashion pairs. The total value of a write down would be 300,000 X 5 = 1.5 million?
B) If a company were trying to manipulate inventory figures, would they be trying to overstate or understate inventory, or either?
C) What would be the most likely way a company would try to fraudulently report inventory?