Write-Down

What you should be doing so you stop forgetting everything (but really though, it’ll make your life easier, so get on it).

In legal-speak, a “write-down” is an accounting term for an asset when it becomes impaired. An asset becomes impaired when its current market value is well below its historical average, or less than the value listed on the company’s balance sheet.

Think of it less as “writing something down” and more as writing that an asset has gone down in value. If a write-down is the Wicked Witch of the West, the write-up is the Good Witch of the North, which is when an increase is made to the book value of an asset.

During the financial crisis, a huge rise in write-downs on banks’ balance sheets forced them to scramble to find other capital that they needed in order to fulfill minimum capital requirements (banks legally have to have a certain amount of cash and capital on hand at any given time). Write-downs aren’t always bad, though. They lower the amount of taxable income for companies, so a write-down every once in a while is fine. It’s when they come en masse that panic ensues.