Firms are said to write down an asset when they recognize, for accounting purposes, that it has less value than previously thought. Inventory write-downs are classic examples; for awhile, purveyors of bell-bottoms probably felt the need to take significant write-downs, although they might have had the chance to book significant profits if they held on long enough. Note that a write-off is an extreme example of a write-down; a write-off reduces the asset's value to zero. Both write-downs and write-offs reduce net income when taken.



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