What is obsolete inventory?

What is obsolete inventory?

• A. Inventory held for a promotional event
• B. Inventory items that have met obsolescence criteria established by the company
• C. Inventory in transit
• D. Cycle stock

Answer: (B)

Obsolete inventory consists of items that a company has determined can no longer be sold or used as planned because they have reached a state of obsolescence. The company sets obsolescence criteria—such as age, lack of demand, or changes in technology or market trends—and once stock meets those criteria, it is classified as obsolete. This is why the correct choice describes inventory items that have met the company’s obsolescence criteria. Such inventory is typically written down or written off its carrying value and removed from regular stock measures. It’s different from inventory held for a promotional event (still saleable but earmarked for a promotion), inventory in transit (not yet in stock), and cycle stock (normal inventory used to meet expected demand).