Portfolio Company - Full Write-Off (Total Loss)
Recording the complete write-off of a portfolio company investment to zero upon bankruptcy filing, liquidation, or determination that the investment has no remaining recoverable value.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Net Realized Loss on Investments - Write-Off | Expense (+) | 5,500,000.00 | - |
| Net Unrealized Depreciation Reversal - Portfolio Co. Q | Income (+/- Reversal) | - | 1,500,000.00 |
| Investments at Fair Value - Portfolio Co. Q | Asset (-) | - | 4,000,000.00 |
💡 Accountant's Note
When a portfolio company is determined to have zero recoverable value, the investment is written off entirely. Previously recorded unrealized depreciation is reversed (offsetting the realized loss) so that the net economic loss to the fund equals the original cost basis. The total realized loss equals the original cost ($5.5M), while the unrealized reversal and the remaining carrying value ($4M) combine to extinguish the asset.
Practitioner & Systems Framework
💻 ERP Architecture
Close the position in the portfolio system. The write-off triggers a realized loss that flows into the fund's income statement and reduces LP capital accounts. Inform LPs in the quarterly report of the write-off. The realized loss may be recyclable for tax loss harvesting purposes.
⚠️ Audit Flags
Auditors verify the basis for the write-off determination — specifically whether the write-off event (bankruptcy, liquidation, board decision) has actually occurred and is documented. Early write-offs of struggling but not-yet-bankrupt companies require strong evidence of zero recovery expectation.
📄 Required Documentation
Bankruptcy filing (if applicable), liquidation notice, board of directors write-off resolution, legal opinion confirming no recovery prospects, GP IC memo documenting the decision.
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