In an accounting context, when companies reduce the book value of assets such as buildings, machinery, equipment, vehicles, inventory/stock, this is referred to as a write-down. The size of the write-down is typically the difference between the value the asset is carried on the balance sheet and the market value (or recovery, sale or scrap value). Write-downs are carried through the income statement as an expense so will reduce profits (although they will also lower the company’s tax liability). In a capital markets context, a write-down is a reduction in the value of a security. Additional Tier 1 securities (cf.), for example, deeply subordinated hybrid capital perpetual securities, have principal write-down features (which can be permanent or temporary) to enable them to fulfil their purpose of absorbing losses if an issuer’s CET1 ratio falls below a trigger as defined in the prospectus

Related terms