[Verse 1] When inventory sits upon your shelf too long And market prices drop, something's going wrong The value on your books might be too high Net realizable value tells you why Take the selling price, subtract the costs to sell If it's less than cost, you've got a story to tell [Chorus] Write it down, write it down, when NRV's below COGS goes up, profits drop, that's the way it goes LIFO reserve, FIFO gap, helps you compare the firms Inventory adjustments, these are the terms you need to learn [Verse 2] Some companies use FIFO, others choose LIFO way When prices rise, LIFO shows higher COGS today But FIFO companies show their profits high How do you compare them, eye to eye? LIFO reserve bridges this divide Shows the difference that methods hide [Chorus] Write it down, write it down, when NRV's below COGS goes up, profits drop, that's the way it goes LIFO reserve, FIFO gap, helps you compare the firms Inventory adjustments, these are the terms you need to learn [Bridge] Lower of cost or market, that's the rule to know Conservative accounting makes the bad news show Add LIFO reserve to inventory amount Convert to FIFO numbers, that's what analysts count [Verse 3] When you see a write-down in the financial news It means NRV was less, the company had to choose Record the impairment loss, reduce the inventory cost Show the true economic value, though some profit might be lost [Chorus] Write it down, write it down, when NRV's below COGS goes up, profits drop, that's the way it goes LIFO reserve, FIFO gap, helps you compare the firms Inventory adjustments, these are the terms you need to learn [Outro] From obsolete to damaged goods, adjustments tell the tale Net realizable value keeps your balance sheet from fail LIFO reserve disclosure helps you see through the disguise Inventory adjustments open up your analyst eyes
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