MANAGEMENT

Detailed explanation-1: -Obsolescence costs are incurred when an item in inventory becomes obsolete before it is sold or used. Inventory may become obsolete due to product design changes, changes in customer demand, or by remaining unsold after an acceptable shelf life.

Detailed explanation-2: -Obsolete inventory refers to a product that has reached the end of its lifecycle. It happens when a business considers it to be no longer sellable or usable and most likely will not sell in the future due to a lack of market value and demand.

Detailed explanation-3: -Obsolescence Obsolete inventory-stock that can no longer be sold because it’s reached the end of its lifecycle-can lead to a spike in inventory carrying costs. Products become obsolete after they depreciate to the point of having no value and must be written-off.

Detailed explanation-4: -What is inventory obsolescence reserve? An obsolescence reserve is created when a company determines that specific items, or a category of items, in its inventory are worth less than their book value.