Write-Down

Loading the player...

DEFINITION of 'Write-Down'

Reducing the book value of an asset because it is overvalued compared to the market value. A write-down typically occurs on a company's financial statement, when the carrying value of the asset can no longer be justified as fair value and the likelihood of receiving the cost (book value) is questionable at best.

BREAKING DOWN 'Write-Down'

Write-downs are typically reflected in a company's income statement as an above-the-line expense, thereby reducing net income. This, however, is not always a bad thing, since a write-down is simply a paper loss, which, since it lowers net income, will reduce a firm's tax burden. Companies will usually attempt to time large write-downs together, so they can "take a bath" in one reporting period with the hope of quickly recovering in the next period.

RELATED TERMS
  1. First-Year Allowance

    A U.K. tax allowance that permits British corporations to claim ...
  2. Vendor Note

    A type of debt instrument used in a particular type of short-term ...
  3. Impairment

    1. A reduction in a company's stated capital. 2. The total capital ...
  4. Written-Down Value

    The value of an asset after accounting for depreciation or amortization. ...
  5. Write-Up

    An increase made to the book value of an asset, because its carrying ...
  6. Write-Off

    A reduction in the value of an asset or earnings by the amount ...
Related Articles
  1. Stock Analysis

    3 Changes to Watch at Sony (SNE)

    Learn how Sony's restructuring has returned the company to profitability, and what signs to watch for to see if Sony can achieve further improvements.
  2. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  3. Stock Analysis

    How the Decline of the Personal Computer Market is Affecting HP (HPQ)

    Learn how falling demand for PCs has hurt Hewlett-Packard's revenues and income. Read about how the company is splitting into two separate companies.
  4. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  5. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  6. Forex Education

    The Credit Crisis And The Carry Trade

    When boom times turned to bust, these trades proved devastating for traders and the broader markets.
  7. Fundamental Analysis

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  8. Retirement

    Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.
  9. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  10. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
RELATED FAQS
  1. What is the difference between a write-off and a writedown?

    In terms of accounting, a write-down is performed to reduce the value of an asset to offset a loss or expense. A write-down ... Read Full Answer >>
  2. Why did Target's (TGT) expansion into Canada fail so quickly?

    Target (TGT) decided to expand north into Canadian markets in 2011. By 2013, it had built 133 stores across several Canadian ... Read Full Answer >>
  3. How does a company derecognize a deferred tax liability?

    Under U.S. generally accepted accounting principles, or GAAP, deferred tax positions must be derecognized during the first ... Read Full Answer >>
  4. How do leverage ratios help to regulate how much banks lend or invest?

    Banks are among the most leveraged institutions in the United States; the combination of fractional-reserve banking and Federal ... Read Full Answer >>
  5. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  6. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center