How does a writedown decrease net income for the current period?
Do you mean a writedown of something like fixed assets or goodwill? It decreases net income in the current period as you write down the asset. So Fixed Assets goes from $100 to $80 as you’ve deemed them impaired. Well, your Total Assets have decreased $20, so you need an offset on your Liabilities and Equity side in order to make your balance sheet balance. How does it happen?
You decrease net income through a loss in the current period. So, your Net Income is $20 lower than before due to a loss of $20. Net Income flows to Equty in the Balance Sheet through Retained Earnings, as such, Retained Earnings is $20 lower than before. Since Total Assets is $20 lower and Equity is $20 lower, you’re back in balance!!!
We must remember, though, that these write downs do not decrease CASH FLOW, just ACCOUNTING NET INCOME. i.e. they are just accounting conventions.