Can someone explain to me what a "write-down" is?

Gosh I hate to do this! But anyways and BTW if the mods feel to move this please do so.

So I been watching the news like I always do and following really closely the mortage crisis and now at every turn you see the phrase "write-down" being use to explain some of the measures being taken by banks or financial institutons. Just today Bank of America anounce they would take a 3 billion dollar write-down.

I did my homework try to look it up, but I'm not an accounting or economic expert to really understand what that means, and since I know that there is a lot of smart people here, maybe someone would explain to me on average Joe terms what this "write-down" thing means.

Is pretty clear to me that is a loss of something, but of what?

reply to post by Bunch


I'll take a shot. Banks (in this case) have lists of assets that are assigned a specific value. The "write down" is basically a reassignment of the value of an asset to reflect a lesser value. For example, they may have an entry like "Value of Outstanding Loans" as an asset. As more and more loans are defaulted, the overall value of that asset decreases. So they reassign a lesser value to that category of asset, thus "writing it down".

This could apply to any business and for any asset. The books are constantly adjusted to show the current value of held assets.

But don't quote me.