Write-Down

Decreasing the value of an asset from its former value on the balance sheet. This may occur for various reasons. A company’s management may feel that an asset is worth materially less than it is on the balance sheet due to it generating less earnings than expected. Also, mark-to-market accounting may cause banks to write-down assets when its market price falls.

Write-downs are reported on the income statement as expenses. A write-down is supposed to be a one-time non-recurring charge and should not affect business fundamentals. However, beware of a company that takes write-downs too often—the management may not have an idea about how to run the company.

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