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Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out (FIFO) basis. Applied adjusts inventory carrying value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. Applied fully writes down inventories and noncancelable purchase orders for inventory deemed obsolete. Applied performs periodic reviews of inventory items to identify excess inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by Applied, additional inventory adjustments may be required.

Source: Applied Materials Inc., Annual Report


Inventory Disclosure

Applied Materials Inc., Statement of Financial Position, Inventory

USD $ in millions

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Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013 Oct 28, 2012
Customer service spares hidden hidden hidden hidden hidden hidden
Raw materials hidden hidden hidden hidden hidden hidden
Work-in-process hidden hidden hidden hidden hidden hidden
Finished goods hidden hidden hidden hidden hidden hidden
Inventories hidden hidden hidden hidden hidden hidden

Source: Based on data from Applied Materials Inc. Annual Reports

Item Description The company
Raw materials Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product. Applied Materials Inc.'s raw materials increased from 2015 to 2016 and from 2016 to 2017.
Work-in-process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Applied Materials Inc.'s work-in-process increased from 2015 to 2016 and from 2016 to 2017.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Applied Materials Inc.'s finished goods increased from 2015 to 2016 and from 2016 to 2017.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Applied Materials Inc.'s inventories increased from 2015 to 2016 and from 2016 to 2017.