{“title”:“Understanding Write-Ups in Asset Valuation”,“sections”:[{“heading”:“What Is a Write-Up?”,“content”:“A write-up is an increase made to the book value of an asset because its carrying value is less than fair market value. Typically, a write-up occurs in scenarios such as company acquisitions, where assets and liabilities are adjusted to fair market value under the purchase method of M&A accounting. It may also occur if the asset’s initial value was not accurately recorded or if a previous write-down was too large. An asset write-up is the opposite of a write-down, and both are non-cash items.,{“heading”:“Effects of Write-Ups”,“content”:“Because a write-up impacts the balance sheet, it often goes unnoticed in financial news unless it is of significant size. While a write-down is generally viewed as a red flag for potential issues, a write-up is not typically seen as a positive indicator for the business\u2019s future since it is usually a one-time event. Special treatment for intangible assets and tax effects, such as deferred tax liabilities from future depreciation expense, are taken into consideration during the write-up process.,{“heading”:“Real-World Example of a Write-Up”,“content”:“Imagine Company A acquiring Company B for $100 million. At the time, the book value of Company B’s net assets was $60 million. Before completing the acquisition, Company B’s assets and liabilities must be adjusted to determine their fair market value (FMV). If the FMV of Company B’s assets is found to be $85 million, the increase of $25 million represents a write-up. The $15 million difference between the FMV of Company B’s assets and the purchase price of $100 million is recorded as goodwill on Company A’s balance sheet.]}
Related Terms: write-down, book value, carrying value, balance sheet, goodwill, deferred tax liability.
