Diversified inc. is a retailer that sells a variety of goods under three major business units. its food products division delivers wholesale food products to national grocery store chains. Its home appliances division manufactures and sells home kitchen appliances such as refrigerators, microwave ovens, and dishwashers. Finally, its High fashion division is a recognized leader in high-end women clothing. During his annual review of the company's financial condition, Diversified's president noted that the company's inventory included a material reduction described as an "allowance to reduce inventory to market". While the Home Appliances Division had received a considerable amount of negative publicity relating to fires caused by defective switches in its products, the president felt that any reduction value of these products that was taken in the third quarter was more than offset by the high margins in the High Fashion Division. Therefore, the president felt that no write-down should have been taken. Further, the president notes that the company had replaces the faulty switches in the third fiscal quarter and subsequent sales had shown that the market value of its appliances had partially recovered by the fourth quarter of the next fiscal year.DIRECTIONS: Research the related GAAP and prepare a short memo that addresses the presidents concerns. Cite your references and applicable paragraph numbers.