How CFOs Can Prepare for Year-End E&O Without Surprises
How CFOs Can Prepare for Year-End E&O Without Surprises
Every electronics company faces excess and obsolete (E&O) inventory. GAAP requires you to recognize losses as soon as they are known or can be reasonably estimated, which means year-end often becomes a scramble of SKU-level reviews, hurried write-downs, and difficult conversations about margin. Much of this pain is avoidable.
The real challenge is timing. When write-offs accumulate and hit the P&L in a single quarter, the impact can distort earnings, surprise boards, and complicate tax planning. The companies that manage E&O best do one thing exceptionally well: they treat year end as a controlled financial event, not a reaction.
Why Q4 is the most important moment for E&O
Under GAAP, inventory must be written down to the lower of cost or Net Realizable Value once obsolescence is known. In electronics, NRV usually ranges from 8 to 25 percent of the original purchase price, which is why waiting until the final weeks of the year often exposes companies to:
• Unplanned P&L hits
• Missed opportunities to reduce taxable income
• Higher storage and insurance costs
• Price drops that occur between December and January
E&O value erodes quickly. Studies shows idle inventory drops an average of 43 percent in value per year, and most of it becomes worthless within 12 months.
A structured year-end review allows CFOs to capture value while the market still exists.
Start with a rapid E&O assessment
A year-end E&O run begins with a clear trigger set. Items generally qualify as excess or obsolete when:
• They have been removed from the BOM
• Market pricing falls below carrying cost
• Forecasts show no expected use within normal cycles
• The part has aged beyond its expected life or has not moved for 3 to 6 months
Once identified, finance must verify whether each SKU is already covered by the E&O reserve and whether the reserve is adequate. If the provision is insufficient, the reserve should be adjusted before any sale or scrap takes place to avoid creating new P&L shocks.
Why NRV documentation is critical in Q4
NRV determines both your GAAP valuation and your tax position. It must be supportable, auditor-friendly, and tied to real market data. For most electronics companies, this is the missing link between operations and finance.
Mobius provides NRV support using real spot-market pricing across thousands of electronics and semiconductor SKUs, which gives CFOs a defensible appraisal and the documentation required for audit trails.
Selling surplus before December 31 creates immediate financial benefits
Once a part is confirmed as E&O, selling it is almost always preferable to scrapping:
• E&O sales generate cash
• Write-offs reduce taxable income
• Provisioned items can be removed from the balance sheet with zero EBITDA impact
• Cash recovered offsets warehouse and insurance costs
Why companies are turning to Mobius for year-end cleanup
Mobius is the fastest and safest way for CFOs to run an end-to-end E&O cycle before year end.
Mobius advantages:
• Transparent pricing from a real spot market
• Inspection and authentication through certified hubs
• Escrow-backed transactions with safe settlement
• Recovery rates 2 to 3 times higher than brokers
• Full NRV documentation for GAAP compliance
• A 14-day listing-to-sale workflow designed for Q4 deadlines
Leading manufacturers now run quarterly appraisals and year-end cleanup directly on Mobius to optimize tax outcomes and preserve margin.
Bottom Line: The next two weeks matter
If you want to clean up 2025 E&O, achieve GAAP compliance, and reduce taxable income, the window is now. Carrying 2025 stock into 2026 introduces depreciation risk and storage drag at a time when component prices historically fall.
