Inventories

12 Months Ended

Aug. 31, 2023


As of	August 31, 2023		September 1, 2022

Finished goods	$	1,616	$	1,028
Work in process	6,111		4,830
Raw materials and supplies	660		805
	$	8,387	$	6,663

In 2023, we recorded charges of $1.83 billion to cost of goods sold to write down the carrying value of work in process and finished goods inventories to their estimated net realizable value.

Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to FIFO. This change in accounting principle is preferable because in an environment with continuously changing production costs FIFO more closely matches the actual cost of goods sold with the revenues from sales of those specific units, better represents the actual cost of inventories remaining on hand at any period-end, and improves comparability with our semiconductor industry peers. The change to FIFO was not material to any prior periods, nor was the cumulative effect of $133 million material to the second quarter of 2021. As such, prior periods were not retrospectively adjusted, and the cumulative effect was reported as an increase to cost of goods sold for the second quarter of 2021 of $133 million, with an offsetting reduction to beginning inventories. This charge resulted in a corresponding reduction to operating income (loss), a $128 million reduction to net income (loss), and an $0.11 reduction to diluted earnings per share for both the second quarter and the year ended 2021.