Yes I think the actual case law was "Thor power tool" where they were no longer allowed to write down spare parts to a fraction of full value based on expectation of not selling everything and having to discard unused parts years in the future. Arguably some could abuse the write down to understate inventory, but they would book extra profit if/when they sold the repair parts that have been written down.PRR said:> an important tax law decision .... Not very prudent accounting
Major effects in several industries.
Chrysler had a stockholder dispute, and the unintended consequence was that Production got full credit for every car they made, whether Sales could sell it or not. Chrysler was renting every vacant lot in the city to store unsold cars, but they could call it "inventory". New tax rule, they couldn't count iron that would not sell near nominal price. Which was perhaps better than a runaway production department, but forced major changes.
Books. It was normal for a book to be held in inventory "back catalog" for years. A book might sell 5K the first year and 1K/yr for a few more years. The economics of printing mean that once you start a run, you may as well roll-off 10K. It worked out. But New tax rule, books not sold that season were a liability, back catalogs trimmed to a few profitable bones. Also (along with the rise of used-text markets) academic authors were encouraged to "revised new edition" every year, even if only to shuffle page-numbers and confound students with the old edition. (Profs can always get the new edition free.) Yes, PoD has opened new ways to account small-run books, though the price is far higher than the tail-end of a large press run.
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