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Inventory Accounting Policy

Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Cisco provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In addition, Cisco records a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of Cisco's future demand forecasts consistent with its valuation of excess and obsolete inventory.

Source: Cisco Systems Inc., Annual Report


Inventory Disclosure

Cisco Systems Inc., Statement of Financial Position, Inventory

USD $ in millions

Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013 Jul 28, 2012
Raw materials
Work in process
Distributor inventory and deferred cost of sales
Manufactured finished goods
Finished goods
Service-related spares
Demonstration systems

Source: Based on data from Cisco Systems 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. Cisco Systems Inc.'s raw materials declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
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.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Cisco Systems Inc.'s finished goods declined from 2015 to 2016 but then slightly increased 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). Cisco Systems Inc.'s inventories declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.