On the balance sheet, the asset account of inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write-down, reducing net income.
On the cash flow statement, the write-down is added back to Cash from Operations, as it’s a non-cash expense, but must not be double-counted in the changes of non-cash working capital.
