ABSTRACT

Cisco Systems, Inc. manufactures and sells networking and communications products and provides services associated with that equipment and its use. In April 2001, Cisco announced a charge of $2.249 billion against earnings for obsolete inventory. The financial press gave extensive coverage to the write-off, including claims that Cisco was writing off inventory in an effort to set up future windfall profits. Students are required to examine and integrate information from multiple sources, including the relevant U.S. authoritative literature, SEC commentary relevant to Cisco's decision, and Cisco's disclosures, to critically evaluate reactions from the financial press and examine the potential for biased reporting in both Cisco's disclosures and the reactions of the financial press. This case is appropriate for an undergraduate intermediate accounting course or for graduate courses in financial statement analysis or accounting theory.

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