Write-Down
A partial reduction in the carrying value of an asset to reflect impairment or decline in fair value below book value.
What is Write-Down?
A write-down is a partial reduction in the reported value of an asset when its fair value or recoverable amount falls below its book value on the balance sheet. Unlike a write-off (which eliminates an asset entirely), a write-down reduces the carrying value to the new, lower recoverable amount. Write-downs are required under GAAP when an asset is impaired — meaning the carrying value exceeds the present value of expected future cash flows. Common triggers include goodwill impairment (often following acquisitions that underperform), inventory obsolescence, and declines in the value of long-lived assets or investments. Write-downs are recognized as losses on the income statement and reduce net income in the period recorded.
Example
A media company acquires a streaming platform for $2 billion, recognizing $1.2 billion in goodwill. Three years later, subscriber growth stalls and content costs rise, materially reducing the platform's projected cash flows. The company performs its annual goodwill impairment test and determines the carrying value exceeds fair value by $400 million. It records a $400 million goodwill impairment charge — a write-down — on its income statement, reducing the goodwill balance from $1.2 billion to $800 million and reducing earnings per share for the period.