A reduction in the reported value of an asset on a company's balance sheet because the asset is worth less than originally thought. This could happen if the asset becomes damaged, becomes outdated, or market conditions change. When a company writes down an asset, it takes a loss on its income statement.
A technology company bought computer equipment for $100,000 three years ago and reported it as an asset worth $80,000. New technology makes the equipment nearly obsolete and worth only $20,000 today. The company writes it down to $20,000, recording a $60,000 loss on its income statement.
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