Chapter 1, Introductory Cases Dublin Small Animal Clinic, Inc. 1 page; introductory

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Undergraduate intermediate accounting

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Financial reporting

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Brief Excel Case: Securitization (Chapter 8)

Chapter 3, Financial Reporting, U.S. GAAP

  1. Intel Corporation: Inventory Write-downs

9 pages; introductory to intermediate

Inventory write-downs

Financial disclosure

Accounting estimates

Intel, like all other U.S. firms, values its inventory at the lower of cost or market. Intel’s inventory primarily consists of semiconductors that rapidly decline in value as newer products enter the market. Furthermore, inventory demand is difficult to estimate because demand for end products that use Intel semiconductors is highly volatile. As a result, it is difficult to determine whether Intel has excess inventory and difficult to estimate the current value of its inventory.

This case discusses those issues and also includes inventory disclosures in Intel’s quarterly reports from quarter 1, 1996, through quarter 3, 2009. Although inventory valuation is an important component of Intel’s operating results, Intel provides only minimal inventory disclosures. Intel probably has inventory write-downs every quarter, but it apparently mentions inventory write-down only if the write-down is significant. During that 13-year period, Intel never disclosed the amount of a quarterly inventory write-down.

Intel occasionally mentions that it sold previously written-down inventory at a higher than expected price, which led to increased quarterly profits. As with inventory write-downs, Intel never mentions by how much profits increase from the sale of written-down inventory.

The case can be used to introduce the lower of cost or market rules and to evaluate the quality of Intel’s inventory disclosures.

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