This excerpt taken from the VLG 10-K filed Sep 28, 2006.
Valleys inventories are stated at the lower of cost or market with cost being determined by the first in, first-out method. Valley writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon its physical condition as well as assumptions about future demand and market conditions. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. Estimates of physical losses of inventory are made on a quarterly basis based upon historical results.
The components of inventory for the years ended June 30 were as follows: