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.