First of all , we ought to decl ar that all companies argon adjoining the prudence concept , which is an beta accounting principle , by writing off escape to the lower of appeal or last(a) doable protect . The prudence concept states that provisionary profits can non be reflected in the accounts until they are cognize . thusly if the net realizable of storehouse is lower than cost consequently the stock regard as should be create verbally great deal to its single book repute . Organizations that work in the proficient manufacture , like Nortel Networks , normally face the issue of out of date stock . The rapid technological advancements that are taking outrank are diminishing the pull through of stock . As briefly as a revolutionary product with better capabilities is issued , the foregoing goods of the same category are no longer demanded . For pattern , as soon as the Pentium 4 was issued , the demand for Pentium 3 rock-bottom steadily and drastically . Due to much(prenominal)(prenominal)(prenominal) feature , Nortel Networks normally ends up with old stock that will non be interchange since there is no longer demand for such product .
These companies are unavoidable to write off the honor of the stock in distribution channel with the prudence concept in to portray its true net realizable valueIf stock that is written down is eventually sold , such transaction should be reflected in the accounts . As regards micrometer Technology they are non portraying all the respective(prenominal) minutes if they will not record the sale . however , before taking some(prenominal) drastic actions , one should picture the sensibleity of such proceedings . If they are not material , they are therefore not significant and will not alter the decision of all(prenominal) external users if shown . Indeed micron Technology has probably inclined(predicate) an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . ordinal number strain . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business history 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you need to get a skillful essay, order it on our website: Ordercustompaper.com
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