Carrying Value or Book Value

What is Carrying Value?

In accounting ‘Carrying Value or Book Value‘ is the value of an asset according to its balance sheet. In other words, it is the value at which an asset is shown (carried) on the balance sheet. For assets, the value is based on the original cost of the asset less any depreciation, amortization, or impairment costs made against the asset.


Traditional approach to carrying or book value of assets is the enterprise’s ‘total asset minus intangible assets including goodwill and liabilities’. This method of calculation is termed as ‘tangible book value’. However, in practice, depending on the source of calculation, carrying or book value include may vary goodwill, intangible assets or both. This method or calculation is simply termed as book value or carrying value.

Formula to Calculate Carrying or Book Value

Book Value or Carrying Value = Total Assets – Total Liabilities

Tangible Book Value = Tangible assets – Total Liabilities

Where tangible assets is equal to total assets – goodwill and intangible assets.

Uses of Carrying or Book Value

The carrying value has two main uses:

  1. When compared with an enterprise’s market value, the carrying value can indicate, whether a stock is underpriced or overpriced.
  2. In personal finance, ‘carrying or book value of an investment’ is the price paid for the investment in shares/stock or debt. When this stock or debt is sold, the selling price less the book value is the ‘capital gain’/’capital loss’ from investment.

Therefore book value is the accounting value of the enterprise. In other words, it is the total value of the enterprise’s assets that owners (shareholders) would ‘theoretically’ receive if an enterprise was liquidated. In reality, the book value does not always reflect what shareholders will get in the event of a liquidation. For example, inventory is stated at full cost (100% value) in the books. But, who would want to buy a bunch of Pentium IV chips of the company is not going to exist tomorrow? That means the realization value of assets of ongoing concern is different from the one which is under liquidation.

The learning from business experience is that there is a need to ‘predict the fair value’ of all the assets, when the enterprise stops its operations. Generally, it is estimated that the fair value of cash and cash equivalents, short-term investments (less than one year), long-term investments (beyond one year) are equal to 100% of the book value. The fair value of the items such as account receivables (Debtors + B/R) and inventory is equal to 50% of the carrying value. The fair value of plant and equipments is equal to around 25% of the carrying or book value. The fair value of Land and Buildings in a business-oriented city may be beyond 100% of carrying value. The fair value of goodwill and itangibles is equal to zero. However, all the liabilities should be paid in full, i.e., the fair value or liabilities is equal to 100% of the book value.

This experience of fair value prediction of assets clearly indicates that the owner’s (shareholders) cannot get the net carrying value of assets as recorded in the balance sheet, if the enterprise is liquidated. This thought process of Book or Carrying Value versus fair value prediction has paved way for entity value or enterprise value.


From the following information ascertain:

(1). Book or Carrying Value of the assets and
(2). Tangible book value of the assets



1. Book value or assets: Total assets – Total liabilities

$6,000,000 – 1,200,000 = 4,800,000

Liabilities = Debentures + Bank overdraft + Accounting payable

= $600,000 + 400,000 + $200,000 = $1,200,000

2. Tangible book value of assets = Total tangible assets – Total liabilities

= $5,100,000 – $1,200,000 = $3,900,000

Tangible assets = Total assets – (Goodwill + Patent rights)

= $6,000,000 – ($500,000 + $400,000) = $5,100,000

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