Group discussion,

As an accountant for a large clothing manufacturer, the CFO has asked you to prepare the inventory valuation adjustment. As you had done in previous years, you applied the lower of cost or net realizable value rule to each major category of inventory, which resulted in a material write-off of $100,000. This write-off was primarily due to the mens clothing line experiencing poor sales over the previous year. Upon review of your analysis, the CFO has requested that you apply the LCNRV rule to the total of inventory. Due to the success of the womens clothing line, no write-off would be necessary as the combined net realizable value of both clothing lines is above the combined cost. The CFO argues that all clothing is essentially the same and should be combined for such an analysis. Further, the CFO states that if the company takes a large write-off, it would place the business in a difficult financial position and would most likely result in large layoffs. Discuss your ethical responsibilities in this situation.

This is a group discussion about that scenario.