Carrying Value vs Fair Value: What’s the Difference?


is carrying value the same as book value

Book value is the value of a company’s assets after netting out its liabilities. It approximates the total value shareholders would receive if the company were liquidated. In the fixed asset section of the balance sheet, each tangible asset is paired with an accumulated depreciation account. At the is carrying value the same as book value end of year two, the balance sheet lists a truck at $23,000 and an accumulated depreciation-truck account with a balance of -$8,000.

Is Carrying Value the Same as Book Value?

However, most commonly, book value is the value of an asset as it appears on the balance sheet. Both depreciation and amortization expenses can help recognize the decline in the value of an asset as the item is used over time. Since it is based on historical costs, it may not accurately reflect the true market value of a company’s assets.

  1. For value investors, this may signal a good buy since the market price generally carries some premium over book value.
  2. In other words, it is the total value of the enterprise’s assets that owners (shareholders) would theoretically receive if an enterprise was liquidated.
  3. A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.

Accounting for Bond Premiums and Discounts

Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos. Finance Strategists has an advertising relationship with some of the companies included on this website. We may earn a commission when you click on a link or make a purchase through the links on our site. All of our content is based on objective analysis, and the opinions are our own. This means that the realization value of assets of ongoing concern is different from the value of assets under liquidation.

is carrying value the same as book value

Accounting for Intercorporate Investments: What You Need to Know

Value investors look for relatively low book values (using metrics like P/B ratio or BVPS) but otherwise strong fundamentals in their quest to find undervalued companies. Overall, both book value and carrying value have their own strengths and limitations, and investors and analysts should consider both metrics when assessing the value of a company’s assets. Hence, if an enterprise undergoes liquidation, the fair value prediction of assets clearly indicates that the owners (shareholders) cannot receive the net carrying value of assets. Carrying value or book value is the value of an asset according to the figures shown (carried) in a company’s balance sheet. Carrying value is typically determined by taking the original cost of the asset, less depreciation.

The following image shows Coca-Cola’s “Equity Attributable to Shareowners” line at the bottom of its Shareowners’ Equity section. In this case, that total of $24.1 billion would be the book value of Coca-Cola. It’s one metric that an investor may look for if they’re interested in valuating Coca-Cola as a potential investment. Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Book Value vs. Carrying Value: What’s the Difference?

A financial statement reader can see the carrying amount of the truck is $15,000. Both depreciation and amortization expenses are used to recognize the decline in value of an asset as the item is used over time to generate revenue. This is due to the fact that land is often considered to have an unlimited useful life, meaning that the value of the land will not depreciate over time. The figure of 1.25 indicates that the market has priced shares at a premium to the book value of a share.

At the end of year one, the truck’s carrying value is the $23,000 minus the $4,000 accumulated depreciation, or $19,000, and the carrying value at the end of year two is ($23,000 – $8,000), or $15,000. ABC decides to depreciate the asset on a straight-line basis with a $3,000 salvage value. The depreciable base is the $23,000 original cost minus the $3,000 salvage value, or $20,000.


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