Write-Up

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Write-Up (Accounting): Definition and Examples

Definition

A write-up is an increase to the book (carrying) value of an asset when that carrying value is below the asset’s fair market value (FMV). It is the opposite of a write-down. Write-ups are non-cash accounting adjustments that typically arise when assets are remeasured to FMV, most commonly during an acquisition under purchase accounting.

How write-ups occur

  • Acquisition accounting: When a company is acquired, the target’s assets and liabilities are restated to fair market value. If FMV exceeds the recorded carrying value, the difference is recorded as a write-up.
  • Prior misvaluation: A write-up can also result if an asset was initially undervalued or if a previous write-down was excessive.
  • One-time event: Write-ups are usually isolated adjustments and are not generally taken as indicators of improved ongoing business performance.

Accounting effects

  • Balance sheet: The asset’s book value increases by the write-up amount.
  • Goodwill: If the purchase price exceeds the FMV of net assets, the excess is recorded as goodwill on the acquirer’s balance sheet.
  • Taxes and intangibles: A write-up can create deferred tax liabilities because future depreciation or amortization on the higher asset base may generate deductible differences that affect tax timing.

Example

Company A acquires Company B for $100 million. Company B’s book value of net assets is $60 million, but a fair-value assessment finds the net assets are worth $85 million.

  • Write-up: $85M (FMV) − $60M (book value) = $25M write-up to asset values
  • Goodwill: $100M (purchase price) − $85M (FMV of net assets) = $15M recorded as goodwill

Key takeaways

  • A write-up raises an asset’s carrying value to match fair market value and is non-cash.
  • It commonly occurs in acquisitions under purchase accounting.
  • Write-ups are distinct from write-downs: write-downs often signal deterioration, while write-ups are generally one-time remeasurements and not necessarily a sign of improved future performance.
  • Write-ups can affect deferred tax balances and the composition of the balance sheet (including goodwill).