Markets · 6 pages · 12 min

Why a write-down is a confession about a past price

A write-down lowers a carrying amount when a past cost is no longer supported, and it does not spend new cash.

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From the opening

A write-down reduces the carrying amount of an asset when that recorded figure is no longer recoverable under the reporting rules. It confesses that a past price, or a past allocation of a past price, was too high for what the asset now supports. The opening covers carrying amount fails a test, the past price was high, and profit takes a noncash loss.

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Inside

Carrying amount fails a test
The past price was high
Profit takes a noncash loss
Future charges use a lower base
Where the idea stops applying
A distinction worth keeping

Sources

Asset impairment write-down
Historical cost carrying amount

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Why a write-down is a confession about a past price

From the opening

Inside

Sources

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