Carrying value là gì

What is Book Value vs Fair Value?

In accounting và finance, it is important khổng lồ underst& the differences between book value vs fair value. Both concepts are used in the valuation of an asset, but theyrefer khổng lồ different aspects of an asset’s value. In this article, we will discuss book value vs fair value in detail & indicate their key distinctions.

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Book value indicates an asset’s value that is recognized on the balance sheet. Essentially, book value is the original cost of an asmix minus any depreciationDepreciation ExpenseWhen a long-term asmix is purchased, it should be capitalized instead of being expensed in the accounting period it is purchased in. It is, amortization, or impairmentImpairmentThe impairment of a fixed asmix can be described as an abrupt decrease in fair value due lớn physical damage, changes in existing laws creating costs.

On the other h&, fair value is referred to lớn as an estimate of the potential value of an asset. In other words, it is the intrinsic value of an asmix.

What is Book Value?

Book value (also known as carrying value or net asset valueNet Asphối ValueNet asphối value (NAV) is defined as the value of a fund’s assets minus the value of its liabilities. The term "net asphối value" is commonly used in relation lớn mutual funds và is used to determine the value of the assets held. According to lớn the SEC, mutual funds & Unit Investment Trusts (UITs) are required to calculate their NAV) is the value of an asmix that is recognized on the balance sheet. It is determined as the cost paid for acquiring an asphối minus any depreciation, amortization, or impairment costs applicable khổng lồ the asphối. The concept of book value arises from the practice of recording the assets on the balance sheet at its historical cost.

Book value is one of the most important concepts in accounting. Book value is the historical value of an asset on a company’s balance sheet. Since stockholders’ equityStockholders EquityStockholders Equity (also known as Shareholders Equity) is an account on a company"s balance sheet that consists of cốt truyện capital plus is calculated as the difference between the assets’ và liabilities’ values, the book value is used khổng lồ determine the theoretical equity value attributable khổng lồ the company’s shareholders.

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lưu ý that the book value of assets indicates the recorded value that shareholders own in case of the company’s liquidation. In addition, the book value is commonly used lớn evaluate whether an asphối is over- or underpriced by comparing the difference between the asset’s book & market values.

What is Fair Value?

Fair value is a reasonable & unbiased estimate of the intrinsic value of an asmix. Essentially, the fair value of an asphối is based on several factors such as utility, related costs, & supply và dem& considerations. Another common definition of fair value is the price that would be obtained for the sale of an asset or paid khổng lồ transfer a liability in a transaction between the market participants at the measurement date.

Essentially, the estimation of an asset’s fair value is a generally complicated process. Determining the asset’s fair value is generally guided by the accounting standards. IFRSIFRS StandardsIFRS standards are International Financial Reporting Standards (IFRS) that consist of a mix of accounting rules that determine how transactions & other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world và US GAAPGAAPGAAPhường., Generally Accepted Accounting Principles, is a recognized phối of rules & procedures that govern corporate accounting & financial provide guidance on how khổng lồ measure the fair value of an asmix.

cảnh báo that in accounting, the concept of fair value is not applied to lớn all assets. Fair value is usually estimated for current assets that are held for resale such as marketable securities. Accounting using fair values is frequently exposed to lớn potential accounting fraud due khổng lồ the fact that companies can manipulate the fair value calculations.

Related Readings

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