Write-Up Accounting
Write-up is the accounting method in which company increases its asset book value when it decreases below the market value. It is different from the revaluation method as write-up only incurs during the business acquisition. This method used when the company assets are not properly recorded in the initial recognition. Some assets are not properly writedown in the past, so they need to adjust back.
Write-up shows that the company is more attractive to the investors than the number on the financial statement. It is the opposite of assets write down, and both methods only happen to non-cash assets.
The write-up will impact assets on the balance sheet, it requires a professional judgment to prevent any window dressing financial statements. Auditor will pay much attention to the write-up as it suddenly increases company assets.
Write-Up Example
Company ABC acquires 100% share in XYZ Co,…Ltd for $ 200 million. Base on the balance sheet, XYZ’s total assets are only $ 150 million. Both companies know that XYZ’s assets are undervalued if compare to the market as the majority of assets are not properly accounted, and the financial statements are never audited. They decide to revalue the assets and liabilities.
As the result, the market value of the asset is equal to $ 180 million which led to the write-up of $ 30 million. The difference between the purchase price and assets’ fair value is $ 20 million will be recorded as Goodwill.
Accounting Write-up Service
Write-up work is the accounting service that prepares the financial statement for the client. The company hires an external account to prepare the financial statements for them, but this service does not include any review or audit of the information.
This kind of service almost disappears as it does not provide any value to the client. The consultant has simply recorded the transaction base on whatever the client provides. They do not review or audit the transaction, so any mistake or error will not be detected. The financial statements are not reliable, and require further review from another qualified accountant/auditor.