This technique is often employed in a year when sales are down from other external factors and the company would report a loss in any event. For example, inventory valued on the books at $100 per item is written down to $50 per item resulting in a net loss of $50 per item in the current year. Note there is no cash impact to this write-down. When that same inventory is sold in later years for $75 per item, the company reports an income of $25 per item in the future period. This process takes an inventory loss and turns it into a 'profit'. Corporations will often wait until a bad year to employ this 'big bath' technique to 'clean up' the balance sheet. Although the process is discouraged by auditors, it is still used. In recent times, General Motors and other US Corporations have taken huge write downs on balance sheet assets resulting in massive losses. The same result can be achieved by recording in one year the future cash costs of expected plant closing or employee layoffs. The objective is to take these losses all at once, so future periods can show positive net income.