FSA - Obsolete inventory why

grharmeyer

why does failuure to recognize obsolete inventory considered understating expenses?

chandsingh

i am not good in explaining let me try..
its obvious when there is n expense and u don’t recognize it.. u are showing less of ur expenses… obsolete inventory is what u cant use it… useless for you… u had to get rid of that but u are not that’s understating your expenses …
hope that help

optiix

I think its a form of hiding expenses because although you know the inventory is obsolete and cannot be sold or used , you continue to show it in working capital . If you are honest you will write it off , and take a hit in the income statement .
Doesn’t matter that you will get fired by the board as a result , just do it ( TM Nike )