What is Write-down?
Nexa Consultancy | Startup & Finance Glossary
A write-down is an accounting action that reduces the book value of an asset because its fair market value has fallen below the carrying value on the balance sheet. It is a way to recognize that an asset has lost some of its value, but has not become completely worthless.
For Startups: A startup might have to write down the value of its inventory if the products have become obsolete or are no longer sellable at their original price. A write-down is recorded as an expense on the income statement, reducing the company's profit.
Distinction: A write-down is different from a write-off, which reduces the value of an asset to zero.
Example: A D2C startup has inventory that cost ₹1 Lakh. Due to a change in trends, it can now only be sold for ₹60,000. The company must record a write-down of ₹40,000.