What is the impact on Abercrombie \& Fitch's financial statements from the write-down of its logo-adorned merchandise inventory? Recently, Abercrombie \& Fitch (NYSE: ANF) has been implementing a turnaround strategy since its sales had been falling for the past few years (11\% decrease in 2014,8% in 2015 , and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30,2016 . Some of this inventory dated back to late 2013 . The writedown was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Questions to Consider 1. What does the "write-down" mean? 2. What journal entry would Abercrombie \& Fitch have made to write down its merchandise inventory during the year ended January 3016 ? 3. What impact would the write-down of inventory have had on Abercrombie's assets? Liabilities? Equity? 4. What impact would the write-down of inventory have had on Abercrombie's expenses? Gross margin? Net income? 5. What impact, if any, would the write-down of inventory have had on Abercrombie's current ratio? 6. From an investor standpoint, do you think that the effect of the inventory write-down should be considered when evaluating Explain. What is the impact on Abercrombie \& Fitch's financial statements from the write-down of its logo-adorned merchandise inventory? Recently, Abercrombie \& Fitch (NYSE: ANF) has been implementing a turnaround strategy since its sales had been falling for the past few years (11\% decrease in 2014,8% in 2015 , and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30,2016 . Some of this inventory dated back to late 2013 . The writedown was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Questions to Consider 1. What does the "write-down" mean? 2. What journal entry would Abercrombie \& Fitch have made to write down its merchandise inventory during the year ended January 3016 ? 3. What impact would the write-down of inventory have had on Abercrombie's assets? Liabilities? Equity? 4. What impact would the write-down of inventory have had on Abercrombie's expenses? Gross margin? Net income? 5. What impact, if any, would the write-down of inventory have had on Abercrombie's current ratio? 6. From an investor standpoint, do you think that the effect of the inventory write-down should be considered when evaluating Explain
