Writedown
A writedown is an accounting treatment that recognizes the reduced value of an impaired asset. The value of an asset may change due to fundamental changes in technology or markets. One example is when one company purchases another and pays more than the net fair value of its assets and liabilities. The excess purchase price is recorded on the buying company's accounts as goodwill. If it becomes apparent that the purchased company no longer has the value recorded in the goodwill account (it can't be resold at the same price), the value in the goodwill asset account is "written down". Rupert Murdoch's News Corp bought Wall Street Journal publisher Dow Jones at a 60 percent premium in 2007, which News Corp later had to write down by $2.8 billion because of declining ad revenues.
A writedown is sometimes considered synonymous with a write-off. The distinction is that while a write-off is generally completely removed from the balance sheet, a writedown leaves the asset with a lower value. As an example, one of the consequences of the 2007 subprime crisis at financial institutions was a revaluation under mark to market rules:
- "Washington Mutual will write down by $150 million the value of $17 billion in loans...":
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