The simple version

Unsold goods are recorded at what they cost to produce. That is the starting point and it holds as long as the company expects to sell them for more than that.

When the company's own forecast of future selling prices falls under that cost, it has to cut the recorded value down to what it now expects to get. The difference lands on earnings immediately.

Nothing has been bought or sold at that point. A forecast moved, and the accounts moved with it.

The numbers

• The rule is called lower of cost or net realizable value. Net realizable value is what the company expects to sell the goods for, less what it expects to spend getting them sold.
• Micron's fiscal 2026 annual report, for the year ended September 3, 2026, states that inventories are carried at the lower of cost or net realizable value, with cost determined on a FIFO basis.
• The same note says determining net realizable value for finished goods and work in process requires projecting future average selling prices, sales volumes, and costs per part.
• When net realizable value sits below cost, the stated practice is a charge to cost of goods sold to write down inventories in advance of when inventories are actually sold.
• Micron's inventory at September 3, 2026 totaled 10,372 million dollars, against 8,355 million a year earlier: finished goods 958 million, work in process 8,252 million, raw materials and supplies 1,162 million.
• The note also discloses the grouping choice. Micron categorizes all inventories, including DRAM, NAND, and other memory, as a single group for the comparison.

Why the grouping choice changes the answer

The comparison between cost and expected proceeds is not run on every single item. It is run on groups, and the company decides how wide a group is.

Make the group wide and a product line expected to sell well can absorb one that will not, so the comparison comes out above cost and no charge is recorded. Split the same goods into narrow groups and the weak line stands alone, so a charge appears.

Same goods, same prices, two different earnings numbers. Companies disclose the grouping they use, which is why that sentence in the note is worth reading.

The actual math on one company's mix

Of the 10,372 million dollars Micron reported at the fiscal year end, 8,252 million was work in process. That is about 80 percent of the total sitting in a half-built state.

The total also rose by 2,017 million from the 8,355 million reported a year earlier, an increase of about 24 percent.

Those two facts together are why the forecast matters so much here. Most of the value is in goods that cannot be sold yet, so the recorded amount rests on forecast prices rather than on anything observable today.

What this means

When you see a large charge to cost of goods sold described as an inventory adjustment, no money left the company that quarter. A projection changed and the accounts recognized it early.

The reverse is also worth knowing. If prices recover later, US rules do not let the company undo that reduction, so the goods carry the lower value right up until they are sold.

What this is NOT

This article explains how unsold goods get valued and when that value gets cut. It is not an estimate of what any company's inventory is worth, a forecast of memory prices, or a signal about any stock.

Micron appears here because its annual report spells out the rule and the grouping choice in plain terms, not as a recommendation either way.

Sources

• Micron Technology, Inc., Form 10-K for the fiscal year ended September 3, 2026, filed October 9, 2026 (accession 0000723125-26-000023), significant accounting policies, inventories.
• Micron Technology, Inc., same filing, inventories note, components of inventory at September 3, 2026 and August 28, 2025.
• US Securities and Exchange Commission, Staff Accounting Bulletin Topic 5.BB, Inventory Valuation Allowances, citing FASB ASC paragraph 330-10-35-14: a write-down of inventory at the close of a fiscal period creates a new cost basis that subsequently cannot be marked up based on changes in underlying facts and circumstances. Read November 6, 2026: https://www.sec.gov/interps/account/sabcodet5.htm
• US Securities and Exchange Commission, EDGAR full-text filing archive, read November 6, 2026.