book value

(noun)

The value of an asset as reflected on an entity's accounting books, net of depreciation, but without accounting for market value appreciation.

Related Terms

(noun)

the value is based on the original cost of the asset less any depreciation, amortization or Impairment costs made against the asset.

Related Terms

Examples of book value in the following topics:

  • Market/Book Ratio

    • The price-to-book ratio is a financial ratio used to compare a company's current market price to its book value.
    • The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's current market price to its book value.
    • The second way, using per-share values, is to divide the company's current share price by the book value per share (i.e. its book value divided by the number of outstanding shares).
    • For companies in distress, the book value is usually calculated without the intangible assets that would have no resale value.
    • When intangible assets and goodwill are excluded, the ratio is often specified to be "price to tangible book value" or "price to tangible book".

  • Market Value vs. Book Value

    • Book value is the price paid for a particular asset, while market value is the price at which you could presently sell the same asset.
    • In accounting, book value or carrying value is the value of an asset according to its balance sheet account balance.
    • An asset's initial book value is its its acquisition cost or the sum of allowable costs expended to put it into use.
    • The book value is different from market value, as it can be higher or lower depending on the asset in question and the accounting practices that affect book value, such as depreciation, amortization and impairment.
    • If the asset is valued on the balance at market value, then its book value is equal to the market value.

  • Impairment Measurement

    • Perform a recoverability test is to determine if an impairment loss has occurred by evaluating whether the future value of the asset's undiscounted cash flows is less than the book value of the asset.
    • If the cash flows are less than book value, the loss is measured.
    • Measure the impairment loss by calculating the difference between the book value and the market value of the asset.
    • Since the asset's future undiscounted cash flows are USD 6,000, less than the USD 10,000 book value, an impairment loss has occurred.
    • Use the market value of the sewing machine, USD 20,000, and deduct the USD 10,000 book value to arrive at an impairment loss of USD 10,000.

  • The Weightings

    • If the person analyzing a company chooses or if the market value of a company's debt and equity is not available, the book value can be used.
    • Book value refers to the value of an asset according to the account balance present on the balance sheet of a company.
    • An asset's initial book value is its actual cash value or its acquisition cost.
    • Cash assets are recorded or "booked" at actual cash value.
    • The book value of debt and equity can be found on the company's balance sheet.

  • Loss Restoration

    • Under US GAAP, once an asset is impaired its value cannot be increased regardless of what its fair market value is; once the value of an asset is decreased, it stays at that value unless its market value declines again.
    • Under International Financial Reporting Standards, once a fixed asset has been revalued its book value can be adjusted periodically to market value using the cost model or the revaluation model.
    • If an asset becomes impaired and an impairment loss results, the asset can fall under the revaluation model that allows periodic adjustments to the asset's book value.
    • The asset's new book value can be divided by its remaining useful life to adjust the amount of depreciation expense reported on the income statement after the revaluation.
    • Only assets accounted for under the revaluation model can have their book value adjusted to market value.

  • Performance per Share

    • The below ratios describe the value of shares of stock to stockholders, both in terms of dividends and their general ownership value:
    • Market To Book ratio is used to compare a company's current market price to its book value.
    • In the first method, the company's market capitalization can be divided by the company's total book value from its balance sheet (Market Capitalization / Total Book Value).
    • The second method, using per-share values, is to divide the company's current share price by the book value per share, which is its book value divided by the number of outstanding shares (Share Price / Book Value Per Share).
    • A higher market to book ratio implies that investors expect management to create more value from a given set of assets, all else equal.

  • Cost of Buildings

    • Since buildings are subject to depreciation, their cost is adjusted by accumulated depreciation to arrive at their net carrying value on the balance sheet.
    • The building's net carrying value or net book value, on the balance sheet is $110,000.
    • If at a future date a building is sold due to a business relocation or other reason, any gain or loss on the sale is based on the difference between the building's net book value and the market sales price.
    • If the sale results in a gain, the excess received over the building's net book value is disclosed on the income statement as an increase to the accounting period's income.
    • If the sale results in a loss and the business receives less than book value, the loss is also disclosed on the income statement as a decrease to income.

  • Impairment Recognition

    • the asset is set for disposal before the end of its useful life A loss on impairment is recognized as a debit to Loss on Impairment (the difference between the new fair market value and current book value of the asset) and a credit to the asset.
    • A loss on impairment is recognized as a debit to Loss on Impairment (the difference between the new fair market value and current book value of the asset) and a credit to the asset.The loss will reduce income in the income statement and reduce total assets on the balance sheet.
    • For an example, take a retail store that is recorded on the owner's balance sheet as a non-current asset worth USD 20,000 (book value or carrying value is USD 20,000).
    • Based on the asset's book value, assume the store has a historical cost of USD 25,000 and accumulated depreciation of USD 5,000.
    • The Loss on Impairment is calculated to be USD 8,000 (20,000 book value - 12,000 market value)

  • Basic Components of Asset Valuation

    • In the case of a fixed asset, its value on the balance sheet is historical cost less accumulated depreciation, or book value.
    • Appraisals are used often to value works of art, rare books, antiques, and real estate.
    • The book value of a fixed asset asset is its recorded cost less accumulated depreciation.
    • An old asset's book value is usually not a valid indication of the new asset's fair market value.
    • However, if a better basis is not available, a firm could use the book value of the old asset.

  • Block Books

    • Around 1450, small woodcut books called "block books" or "xylographica" came into prominence and were reproduced in large numbers.
    • Block books were short books consisting of up to 50 leaves block-printed with woodcuts carved to include both text and imagery.
    • It is widely believed that block books existed as a cheaper alternative to the movable-type printed book, which was in use but still very expensive.
    • Block books are considered incunabula (or "incunable"), a term referring to a book, pamphlet, or broadside printed before the year 1501 in Europe.
    • Various insect species were also used for a variety of red values.