Writeup

Assets are normally recorded at cost, less depreciation. Over time, the real value of some assets, such as land, buildings or investments, may rise well above that figure.

A write-up adjusts the books upward to reflect the new, higher value. Accounting frameworks treat this differently.

Under international standards (IFRS), a company may choose a revaluation model for certain assets, such as property and equipment, and record increases in value. Under US accounting rules (US GAAP), upward revaluations of most property and equipment are not allowed, and a write-up is generally limited to situations like business combinations and certain financial instruments carried at fair value.

When a write-up is allowed, the entry increases the asset on the balance sheet and usually credits a revaluation surplus within equity, instead of recording profit. If the asset had earlier been written down and the loss was charged to profit, the reversal may be recognised in profit up to that earlier amount.

Deferred tax may also arise, since the higher accounting value can differ from the tax value. The term also appears in acquisitions.

When one company buys another, the acquired assets are recorded at fair value, which may be higher than the seller's book values, and the uplift is often called a step-up or write-up. The extra depreciation on those higher values reduces future profit, so analysts examine it carefully.

The nuance is that a write-up makes the balance sheet look stronger without bringing in any cash. Lenders and investors should ask how the new value was determined, who valued it and whether it is likely to hold.

An aggressive write-up based on optimistic estimates can mislead. Disclosure is an important part of the process.

Companies that revalue assets normally explain the method used, the date of the valuation and whether an independent valuer was involved. Readers of the accounts can then judge how reliable the higher figure is and whether it is likely to stay that high.