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Definition of Write-down

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Write-down

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


Write-Down

A reduction in the balance-sheet valuation of an asset with an accompanying
expense or loss recorded in earnings.



Related Terms:

inventory write-down

Refers to making an entry, usually at the close of a
period, to decrease the cost value of the inventories asset account in
order to recognize the lost value of products that cannot be sold at their
normal markups or will be sold below cost. A business compares the
recorded cost of products held in inventory against the sales value of the
products. Based on the lower-of-cost-or-market rule, an entry is made to
record the inventory write-down as an expense.


Impairment Loss

A special, nonrecurring charge taken to write down an asset with an overstated
book value. Generally an asset is considered to be value-impaired when its book value
exceeds the future net cash flows expected to be received from its use. An impairment write-down
reduces an overstated book value to fair value.


Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).


Buydowns

Mortgages in which monthly payments consist of principal and interest, with portions of these
payments during the early period of the loan being provided by a third party to reduce the borrower's monthly
payments.



Cramdown

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
some classes of creditors.


Direct write-off method

A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.


Write-down Image 2

Down-and-in option

Barrier option that comes into existence if asset price hits a barrier.


Down-and-out option

Barrier option that expires if asset price hits a barrier.


Downgrade

A classic negative change in ratings for a stock, and or other rated security.


downsizing

any management action that reduces employment
upon restructuring operations in response to competitive
pressures


Life Underwriter

Insurance Agent.


Option writer

Option seller.


Paydown

In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that
of those sold.


Top-down equity management style

A management style that begins with an assessment of the overall
economic environment and makes a general asset allocation decision regarding various sectors of the financial
markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the
favored sectors.


Underwrite

To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase
and sale agreement. To bring securities to market.


Underwriter

A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking
ownership of the securities. Or, stated differently, a firm, usually an investment bank, that buys an issue of
securities from a company and resells it to investors.


underwriter

Firm that buys an issue of securities from a company and resells it to the public.



Underwriter

See investment banker.


Underwriter

This could be the person (broker or agent) who helps you choose the proper type of life insurance or disability insurance and the insurance company for your particular needs. This could also be the person at the insurance company's head office who reviews your application for coverage to determine whether or not the insurance company will issue a policy to you.


Underwriter

Person that uses various types of evidence to evaluate the insurability of a client.


Write off

The transfer of some or all of the contents of an asset account into an expense
account upon the realization that the asset no longer can be converted into cash, can
be of no further use to the company, or has no market value.


Writer

The seller of an option, usually an individual, bank, or company, that issues the option and
consequently has the obligation to sell the asset ( if a call) or to buy the asset (if a put) on which the option is
written if the option buyer exercises the option.


Amortization

The write-off of an asset over the period when the asset is used. This term
is most commonly applied to the gradual write-down of intangible items, such as
goodwill or organizational costs.


Big Bath

A wholesale write-down of assets and accrual of liabilities in an effort to make the
balance sheet particularly conservative so that there will be fewer expenses to serve as a drag on future earnings.


mark to market

Refers to the accounting method that records increases
and decreases in assets based on changes in their market values. For
example, mutual funds revalue their securities portfolios every day based
on closing prices on the New York Stock Exchange and Nasdaq. Generally
speaking, however, businesses do not use the mark-to-market method
to write up the value of their assets. A business, for instance, does not
revalue its fixed assets (buildings, machines, equipment, etc.) at the end
of each period—even though the replacement values of these assets fluctuate
over time. Having made this general comment, I should mention
that accounts receivable are written down to recognize bad debts, and a
business’s inventories asset account is written down to recognize stolen
and damaged goods as well as products that will be sold below cost. If
certain of a business’s long-term operating assets become impaired and
will not have productive utility in the future consistent with their book
values, then the assets are written off or written down, which can result
in recording a large extraordinary loss in the period.


Restructuring Charge

A special, nonrecurring charge taken in conjunction with a consolidation
or relocation of operations, or the disposition or abandonment of operations or productive
assets. Such charges may include impairment losses as well as other expenses, such as writedowns
of other assets including accounts receivable and inventory, and accruals of liabilities for
so-called exit costs, including such expenses as lease terminations, closure costs, severance pay,
benefits, and retraining.



 

 

 

 

 

 

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