Write-off - Financial definition
Concise definition of the term write-off
A write-off in corporate finance is the removal of an asset or liability from the balance sheet due to it being deemed unrecoverable or no longer economically viable.
Comprehensive definition of the term write-off
In corporate finance, a write-off refers to the accounting practice of recognizing a decrease in the value of an asset or the removal of a liability from the balance sheet. This occurs when an asset has become impaired or a liability is no longer enforceable, typically due to factors such as obsolescence, bankruptcy, or uncollectibility.
Write-offs are essential for accurately reflecting the financial health of a company and are often used to adjust financial statements to reflect the true economic value of assets and liabilities. For example, a company may write off bad debts when customers default on payments, or write off obsolete inventory that cannot be sold. Write-offs can impact profitability, taxation, and investor confidence, making them a critical aspect of financial management and reporting.