Write-off

A write-off is a reduction of the recognized value of something. In accounting, this is a recognition of the reduced or zero value of an asset. In income tax statements, this is a reduction of taxable income, as a recognition of certain expenses required to produce the income.

Income tax

In income tax calculation, a write-off is the itemized deduction of an item's value from a person's taxable income. Thus, if a person in the United States has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900. If that person is in a 25% tax bracket, the tax due would be lowered by $25. Thus the net cost of the telephone is $75 instead of $100.

Accounting

In business accounting, the term write-off is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely. The item's potential return is thus canceled and removed from ("written off") the business's balance sheet. Common write-offs in retail include spoiled and damaged goods. In commercial or industrial settings, a productive asset may be subject to write-off if it suffers failure or accident damage that is infeasible to repair, leaving the asset unusable for its intended purpose.

Revaluation of fixed assets

In finance, a revaluation of fixed assets is a technique that may be required to accurately describe the true value of the capital goods a business owns. This should be distinguished from planned depreciation, where the recorded decline in value of an asset is tied to its age.

Fixed assets are held by an enterprise for the purpose of producing goods or rendering services, as opposed to being held for resale for the normal course of business. An example, machines, buildings, patents or licenses can be fixed assets of a business.

The purpose of a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. If a company wants to sell one of its assets, it is revalued in preparation for sales negotiations.

Reasons for revaluation

It is common to see companies revaluing their fixed assets. It is important to make the distinctions between a 'private' revaluation to a 'public' revaluation which is carried out in the financial reports. The purposes are varied: