Explore BrainMass

Explore BrainMass

    Many high-technology companies, like Nortel Networks....

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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)

    © BrainMass Inc. brainmass.com June 3, 2020, 11:09 pm ad1c9bdddf

    Solution Preview

    Dear student,

    Please find the solution described below. You can extend it further based upon your understandings.

    Take Care.
    Thank You.

    The Exchange Commission (SEC) should ask the Nortel Networks, Micron Technology and JDS Uniphase to always have their write-offs inventory and future sales included in its financial ...

    Solution Summary

    The answer is given complete step by step and in an easy to understand manner. Grab the solution and enjoy the learning.