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Technology Stocks : Micron Only Forum

MU 243.83

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2:32 PM EST

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To: Ohkami who wrote (53468)	1/10/2002 2:04:58 PM
From: Bilow	Read Replies (1) of 53903

Hi Ohkami; Re: "Both are writing down not from a previous market price but from their cost basis (which is why the inventory write-down can be used for the argument in the first place)." My link to Edgar is busted right now, but I'm close to 100% sure that Micron uses the LIFO technique for valuing inventory and that you are therefore dead wrong. If you don't know what "LIFO" means, then read this: Inventories - Introduction to Accounting and Finance Columbia University Accounting Lecture notes, September 27, 2001 ... Choosing a Method More than 1/2 of all companies use LIFO. Why? • Tax savings: LIFO underreports earnings if prices are rising • Many companies adopted LIFO during 1970s inflation • Conformity rule: If LIFO is used for tax purposes, it also has to be used for financial reporting • The Conformity rule is an exception • In many other countries other than US, LIFO is not permitted ... LIFO Layers LIFO company selling more than it purchased: dips into old inventory “layers” Effect on income: may be extremely high if this happens ... columbia.edu -- Carl P.S. Also note that since Micron had an inventory write down in the quarter prior to the one you're analyzing, it is the case that their incoming inventory was already valued at market rather than cost. So to the extent that their inventory (in terms of chips) didn't increase during the quarter, it is the case that their write down would be proportional to the difference in DRAM pricing between the beginning of the quarter and the end.

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