Asset Write-Downs
Also called Write-Down · Writedown · Impairment · Asset Impairment
Asset write-downs occur when a company reduces the book value of an asset on its balance sheet because its current market value or recoverable amount is lower than its carrying value. This can happen due to events like obsolescence, damage, market declines, or changes in expected future cash flows, and the write-down is recorded as a loss on the income statement, reducing net income.
Companies often do sneaky stuff regarding choosing when to write-down an asset. For example during Covid, lots of companies wrote down their assets more aggressively than usual since the overall performance expectations were low, meaning they could take a bigger hit now and outperform the following period.
Why Asset Write-Downs matters in investment banking interviews
Write-downs are a classic non-recurring adjustment, which makes them relevant to normalizing EBITDA. Recognizing that management has discretion over timing, and that this discretion gets used strategically, is the kind of skepticism interviewers want to hear.