In October 2010, Logitech launched a co-developed Google TV product called the Revue at a price of $299. In advance of the product launch Logitech contracted with a Chinese manufacturer to purchase components and produce the Revue on its behalf. Logitech estimated sales of 350,000 units during the 2010 holiday season.

At its launch the product received largely poor reviews, with most analysts saying that the product was not ready for prime-time. During the 2010 holiday season, Logitech sold only 165,000 units. On December 7, 2010, facing poor sales numbers, Logitech instructed its manufacturer not to ship over 26,000 finished Revue units. In addition to the cost of the 26,000 units of inventory, Logitech was also on the hook for over $11 million dollars of Revue inventory components that the manufacturer had purchased on behalf of Logitech. 1. Under US GAAP, how should companies value inventory? Under what circumstances should companies record reductions and losses associated with declines in inventory values? Should Logitech have recorded a reduction in its inventory valuation at the end of 2010? Are there any additional facts or questions that might you ask management to help you make the proper determination?