How is a write-down different from a write-off?

A write-down is correctly identified as an adjustment to the value of an impaired asset. This means that when a company recognizes that an asset has lost some of its value—due to impairment, market conditions, or other factors—it will reduce the book value of that asset on its financial statements. This adjustment reflects a more accurate representation of the asset's current worth, ensuring that stakeholders have valid financial information.

The distinction between a write-down and other terms such as a write-off is important. A write-off typically refers to a complete removal of an asset from books or recognition that it has no value left, while a write-down indicates there is still some value retained in the asset, but its book value needs to be reduced. By adjusting for impairment, the write-down acknowledges the loss while still reflecting that the asset has some residual value. This adjustment is essential for accurate financial reporting and maintaining the integrity of the company’s financial statements.