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Finance Dictionary and Glossary of Investment Terms
Firms are said to write down an asset when they recognize, for accounting purposes, that it has less value than previously thought. Inventory write-downs are classic examples; for awhile, purveyors of bell-bottoms probably felt the need to take significant write-downs, although they might have had the chance to book significant profits if they held on long enough. Note that a write-off is an extreme example of a write-down; a write-off reduces the asset''s value to zero. Both write-downs and write-offs reduce net income when taken.
Reducing the book value of an asset if its is overstated compared to current market values.
Reducing the book value of an asset because it is overvalued compared to the market value.