Write-Up Definition & Example

Write-Up Definition

A write-up is when an asset's value is increased on the income statement, to reflect its increased market value.  The benefit of a write-up is that it allows a company to increase its profits on the income statement without increasing its expenditures.  This in turn makes the company a more attractive opportunity to potential investors.

Write-Up Example

Hypothetically let's say that a company produces 5,000 widgets.  The company plans to sell these widgets at $5 per widget.  So, the company would reflect this inventory with a value of $25,000.  Now, if inflation were to increase significantly, the company would have to increase the cost of the widget to $5.25.  Hence the value of the inventory would now be $26,250.  This increase in the value of the inventory would be reflected in the company's income statement, but would not be reflected as an expenditure.
Tim Ord
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