Vol. 1 No. 1 (2021): Journal of AI-Assisted Scientific Discovery
Articles

Accounting for Supply Chain Disruptions: From Inventory Write-Downs to Risk Disclosure

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  • Piyushkumar Patel,
  • Hetal Patel,
  • Deepu Jose
Piyushkumar Patel
Accounting Consultant at Steelbro International Co., Inc, USA
Hetal Patel
Manager- finance department at Jamaica hospital, USA
Deepu Jose
Audit - Manager at Baker Tilly , USA
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Published 15-05-2021

Keywords

  • Supply chain disruptions,
  • inventory write-downs
Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

How to Cite

[1]
Piyushkumar Patel, Hetal Patel, and Deepu Jose, “Accounting for Supply Chain Disruptions: From Inventory Write-Downs to Risk Disclosure”, Journal of AI-Assisted Scientific Discovery, vol. 1, no. 1, pp. 271–292, May 2021, Accessed: Jan. 01, 2025. [Online]. Available: https://scienceacadpress.com/index.php/jaasd/article/view/259

Abstract

Supply chain disruptions have become a significant challenge for businesses, often leading to complex accounting implications. From unforeseen natural disasters to geopolitical tensions, these disruptions can result in inventory write-downs, supply shortages, and increased costs, all of which need careful financial reporting and risk management. This article explores how companies account for the economic impact of supply chain interruptions, focusing on inventory valuation adjustments and write-downs when goods become obsolete or lose value. It also addresses the broader implications of financial statement disclosures, emphasizing the importance of transparent communication about supply chain risks to stakeholders. Regulatory requirements and accounting standards such as ASC 330 and IAS 2 are critical in guiding businesses through these complexities, ensuring accurate inventory costs and impairments reporting. Additionally, we discuss how organizations can improve resilience by integrating supply chain risk management into their broader enterprise risk frameworks. This includes identifying and quantifying risks, implementing diversification strategies, and leveraging data analytics for predictive insights. As stakeholders increasingly demand greater transparency, the role of risk disclosure in financial statements has grown, providing essential insights into potential vulnerabilities and mitigation strategies. Through real-world examples and best practices, this article sheds light on how businesses can navigate the accounting challenges posed by supply chain disruptions, fostering better decision-making and improved stakeholder trust. The analysis underscores the necessity for companies to comply with accounting standards and adopt proactive measures to mitigate the impact of future disruptions, balancing short-term financial adjustments with long-term strategic planning.

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