A company writes down an asset by $100. Walk me through the three statements.

I'll assume a 25% tax rate, and I'll treat the write-down as deductible for tax. On the income statement, the write-down is a $100 expense, so pre-tax income falls by $100. The tax bill falls by $25, so net income is down $75. On the cash flow statement, net income is down $75 at the top. No cash left the business when the asset was written down, so I add the full $100 back in cash flow from operations. That leaves cash flow from operations up by $25, and with nothing in investing or financing, cash is up $25. On the balance sheet, the asset is down $100 and cash is up $25, so total assets are down $75. Liabilities don't move. Retained earnings are down $75 from the lower net income, so both sides are down $75 and it balances.

I'll assume a 25% tax rate, and to begin with I'll treat the write-down as deductible for tax. On the income statement, the write-down is a $100 expense, so pre-tax income falls by $100. The tax bill falls by $25, so net income is down $75. On the cash flow statement, net income is down $75 at the top. No cash left the business when the asset was written down, so I add the full $100 back in cash flow from operations. That leaves cash flow from operations up by $25, and with nothing in investing or financing, cash is up $25. On the balance sheet, the asset is down $100 and cash is up $25, so total assets are down $75. Liabilities don't move. Retained earnings are down $75 from the lower net income, so both sides are down $75 and it balances. The intuition is that a write-down is the company admitting an asset is worth less than the books say. Nothing is paid out, so the only cash effect is the lower tax bill. The follow-up I'd expect is whether that tax saving is real. Often it isn't right away, because many write-downs can't be deducted until the asset is sold or scrapped. In that case net income is still down $75, but no cash tax is saved today. The $25 becomes a deferred tax asset. On the cash flow statement I'd add back $100 and subtract the $25 rise in the deferred tax asset, so cash doesn't change. On the balance sheet the asset is down $100 and the deferred tax asset is up $25, so assets are still down $75 against the $75 drop in retained earnings.