Write up can be defined as an increase that is made to the book value of the asset due to the fact that the asset is carrying less value than its value in the fair market. A write up is usually occur in a situation where a company is being acquired by another company and its assets and securities and liabilities are needed to be traded at a fair market value or a fair market price. All the procedure of the write up is done under the method of M and A accounting. Another situation of having a write up is that the initial value of the asset was not recorded properly or the initial price recorded for the asset was large and that is called a write –down which is totally opposite to that of write up.
Both the asset writes up and the asset write down are non-cash items. The example of write up can be understood by taking a following assumption where a company A is acquiring a company B for the acquisition amount that is $100 million. Now at the point of the acquisition the book value of the assets of the company B are $60 million. In order to complete the acquisition process accurately the assets and liabilities of the company B must be marked according to the fair market value that is actually now established in the market. This is done to establish the fair market value of the assets and liabilities of company B.
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