Change in Inventories

Category

Cash Flow

Units

Currency

US-GAAP elements

IncreaseDecreaseInInventories

Reference

ASC 230, Statement of Cash Flows (operating activities, indirect method); ASC 330

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Change in inventories is the operating cash flow adjustment for the growth or reduction in the goods a company holds for sale or for use in production during a period. When inventory rises, the increase is subtracted from net income, because the company spent cash buying or making goods that have not yet been sold and expensed. When inventory falls, the decrease is added back.

The line covers raw materials, work in process, and finished goods together. It shows how much cash was tied up in, or released from, stock on hand.

Under the indirect method in ASC 230, net income already reflects the cost of the goods that were sold, not the cost of everything purchased. Inventory bought but still unsold is a use of cash that the income statement does not show, so this adjustment corrects for it. Companies tag the line IncreaseDecreaseInInventories in XBRL. The tagged value is positive when inventory grows and is subtracted on the statement, so raw XBRL signs are the reverse of the printed "(Inc) Dec" presentation.

The figure can differ from the simple balance sheet difference. Inventory acquired with a business, currency translation, and write-downs to net realizable value under ASC 330 can change the balance without passing through this line, and some companies show write-downs as a separate noncash adjustment. Last-in, first-out (LIFO) users may also see reserve changes affect reported balances. Read the footnotes before reconciling the two.

Analysts compare the inventory change with revenue and cost of revenue. Inventory growing much faster than sales can mean weakening demand, overproduction, or obsolete stock that may later be written down. A company deliberately building stock ahead of a product launch or a busy season will show the same negative figure for a benign reason, so context from the filing's MD&A matters. The line feeds directly into inventory turnover and the cash conversion cycle.