Suppose the inventory write-down that you will be forced to take because of the regulatory obsolescence is material—nearly a 20% reduction in income will result.

If you can sell the inventory in a foreign market, legally, there will be no write-down and no income reduction.

A reduction of that magnitude would substantially lower market share price, which in turn would lead your large, institutional shareholders to demand explanations and possibly seek changes in your company’s board of directors. In short, the write-down would set off a wave of events that would change the structure and stability of your firm. Do you now feel justified in selling the product legally in another country?. LO58