At the end of every year NIKE and adidas record inventory write-downs for items (footwear and apparel) that have lost value due to a variety of reasons, such as changing styles, defective merchandise, and lost items. Occasionally, the values of some of these inventories recover in subsequent period. NIKE reports under U.S. GAAP and adidas reports under IFRS.
a. Explain in general how the changes in inventory values are reflected on U.S GAAP-based vs. IFRS-based balance sheets.
b. How might NIKE’s accounting for these events differ from that of adidas?