Inventory Reserve for Obsolescence is an accounting term that describes the retention of a certain amount of inventory for items that may become obsolete in the future. This reserve serves to protect companies from loss due to unsellable products or otherwise outdated items. Companies typically set aside a portion of their inventory that may be considered obsolete and record it in their financial statements as a reserve. This allows them to minimize risk while still having access to the most up-to-date stock. Ultimately, the goal is to maintain profitability by minimizing losses associated with out-of-date items.