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Details: Many high-technology companies, like Nortel Networks, Micron Technology and JDS Uniphase, have written down massive amounts of their inventory. For example, Nortel Networks revalued some of its inventory parts at $0, though the inventory initially cost Nortel $650 million.

Companies are required to report whether they write off the cost value (or book value) or their inventory even if they do not dispose of the inventory. Later on, they may sell this inventory but are not required to report the sale for cash of previously "worthless" inventory. The effect may be that in future years, when the inventory is sold, profits are overstated.

Also in the article, JDS Uniphase said it will write off $250 million of its inventory but promised to disclose any future sale. On the other hand, Micron Technology, which wrote down $260 million, won't disclose any future sale (Krantz, 2001). Should the Securities and Exchange Commission do anything? Why?

Do you not understand what a write-down is to begin with, or you don't get the part about the future sales, or do you mean you're just lost on whether this is an OK thing to be doing? (That last part kind of has to be based on your opinion.) Some detail about what you do or don't understand would help. Do keep in mind that we don't just answer homework questions for people, so it's easier to guide someone if we know exactly what they do and don't get.

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Originally Posted by morgaine300

Do you not understand what a write-down is to begin with, or you don't get the part about the future sales, or do you mean you're just lost on whether this is an OK thing to be doing? (That last part kind of has to be based on your opinion.) Some detail about what you do or don't understand would help. Do keep in mind that we don't just answer homework questions for people, so it's easier to guide someone if we know exactly what they do and don't get.

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I got it all figured out know and also have it done, thanks anyhow