Write-Down
1. Investment Dictionary: Reducing the book value of an asset because it is overvalued compared to the market value. // Investopedia Says:
This is usually reflected in the company's income statement as an expense, thereby reducing net income.
2. Banking Dictionary: Revaluation of securities, loans, or other assets when the market value is lower than the book value at which the asset is carried. Marketable securities carried as Trading Account Assets for a bank's trading account or held for other institutions must be adjusted to market value (Mark to the Market) daily, by either writing down or writing up. Loans and leases are carried to maturity at the original book value, unless a bank is required to write down their value by a banking regulatory agency.
3. Accounting Dictionary: Reduction of part of the balance of an asset by charging an expense or loss account. The reason for a write-down is that some economic event has occurred indicating that the asset's value has diminished. An example is the obsolescence of some inventory.
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Write-Off
1. Investment Dictionary: A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. // Investopedia Says:
For example, if you spend money on dinner to take out a client, that meal is a possible write-off towards your income(???) because you presumably discussed business opportunities during the dinner. Suppose, for another example, you made a sale on credit to a customer, but two weeks later the client's business declared bankruptcy and became completely unable to pay off the credit account with you. This uncollectible debt would then be written off by your company and recorded as an expense by accountants.
2. Banking Dictionary:
- Accounting process whereby a loan determined to be a worthless asset is removed from the books as an earning asset and charged to the Loan Loss Reserves account. Its book value is written down to zero.
- Process of removing a Bad Debt or uncollectible loan from the balance sheet.
3. Financial & Investment Dictionary: Charging an Asset amount to expense or loss. The effect of a write-off is to reduce or eliminate the value of the asset and reduce profits. Write-offs are systematically taken in accordance with allowable tax Depreciation of a Fixed Asset and with the Amortization of certain other assets, such as an Intangible Asset and a capitalized cost (like premiums paid on investments). Write-offs are also taken when assets are, for whatever reason, deemed worthless, the most common example being uncollectible Accounts Receivable. Where such write-offs can be anticipated and therefore estimated, the usual practice has been to charge income regularly in amounts needed to maintain a Reserve, the actual losses then being charged to the reserve. The Tax Reform Act of 1986 required that Bad Debt write-offs be charged directly to income by taxpayers other than small banks and thrift institutions. See also Extraordinary Item: Nonrecurring Charge.
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