write-down

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Write-down

Reducing the book value of an asset if its is overstated compared to current market values.

Write-Off

A reduction in an individual's or a company's income as the result of an expense. For example, an unpayable credit sale may be a write-off for the creditor, especially if the debtor declares bankruptcy. The bankruptcy means that the debtor is unable to pay the debt, which results in a loss of income for the creditor. A write-off may usually be deducted from one's taxable income.

write-down

(1) To reduce the value of an asset on the books and records of a company because of a decrease in value of that asset. Because of the mechanics of double-entry bookkeeping, writing down an asset has the consequence of reducing income for that time period. The timing of write-downs is therefore critical because of the impact on taxable income, earnings reported to shareholders, asset value, earnings reported to lenders, and other instances. Large companies will often write down assets in a quarter that is already disappointing, in an attempt to get all the bad news over with at the same time.(2) A lender's agreement to accept less than the full principal balance of a loan, usually in recognition of the fact that it won't collect the full balance anyway.

References in periodicals archive ?
In the euro area, write-downs so far have totaled $154 billion, with another $750 billion in write-downs expected through 2010.
However, in light of the adverse effects of the global financial crisis, the bank adopted a conservative and prudent approach to the valuation of its private equity portfolio and recorded investment write-downs of $31.8m.
The three lenders posted CAD2.26bn in pre-tax write-downs, adding to about CAS2.3bn taken by Bank of Montreal (NYSE: BMO), Bank of Nova Scotia (NYSE: BNS) and Royal Bank of Canada (NYSE: RY) (TSX: RY).
The company said its write-down was $170.7 million "in light of the current market conditions."
The funds at Bear Stearns, which contained some of the highest-risk securities available, collapsed in June 2007, causing more than $350 billion in write-downs and culminating in the demise of one of the nation's largest underwriters of mortgage bonds.
This, in turn, can trigger write-downs, and enough write-downs can create problems with creditors.
A&L, which employs more than 2,000 people at its commercial banking arm in Bootle, said operating profits without the write-downs would have been flat for the first four months of the year.
Strong and Meyer (1987) identify a change in senior management as the primary reason for write-down decisions and document a positive stock price effect, which they interpret as write-downs being a signal of future events, similar to stock splits.
The fourth quarter results include a pre-tax bulk wine inventory write-down of $4 million, employee severance packages worth $2.9 million, and grape contract buyouts of $1.2 million, all of which were offset by a pre-tax gain of $41.2 million on sales of assets.
* Asset write-downs are included in core earnings but gains/losses on asset sales are not.
SHARES in Cordiant, the old Saatchi & Saatchi advertising giant, slid again yesterday on fears about the size of the group's expected write-downs.
Beset by low metal prices, turmoil in key Asian markets, and under-performing minerals operations, beleaguered Melbourne-based BHP announced asset write-downs of $A3.05B before taxes when it released financial results for its 1997-98 fiscal year ended May 31, 1998.