# Carrying Value  ## Carrying Value Definition

Carrying value is the reported cost of assets in the balance sheet of the company wherein its value is calculated as the original cost less than the accumulated depreciation/impairments and that of the intangible asset is calculated as the actual cost less the amortization expense/impairments.

In simple words, it is the value of an asset in the books of accounts/balance sheet less the amount of depreciation on the value of the asset on the basis of the useful life of the asset. In other words, we can say it is equal to the because it is not the same as a market/fair value of an asset.

The carrying value of a bond is different from the calculation of carrying value of bonds. It means the amount stated in the company’s on the date of its issue. It is a combined total of its face value and the amortization premium or discount. It is also called or the value of the book of the bond.

### Carrying Value Formula and Calculation

Given below are the formulas of carrying the value of the asset and bond.

Carrying value of asset  = Original price of an asset – Depreciation value
Carrying value of bond  = Face value of bond + unamortized premium – unamortized discount

For eg:
Source: Carrying Value (wallstreetmojo.com)

### Examples

#### #1 – Carrying Value of Asset

Let us assume; a company owns a plant and machinery amounting to \$1,00,000 to be used for the production of certain products of the company. The above machinery has a depreciation value of say \$4000 and has a useful life of 15 years.

Please note that the cost of plant & machinery includes the cost of transportation, insurance, installation, and other testing charges, which are necessary to get the asset ready for its use.

Further, depreciation means lowering the value of tangible assets due to its wear and tear. Tangible assets mean plant & machinery, furniture, office equipment, etc.

#### #2 – Carrying Value of Bond

When the is too high, investors pay a higher premium on the price of the bond. If the price of the bond is low, then the investors purchase the same at the discounted price, also depending upon the market rate of interest on the date of the issue of bond. These premiums and discounts are amortized throughout the life of bond so that the bond matures its book value, which is equal to the face value of the bond.

In simple words, we can say that the carrying value of bond means the par value of the bond add unamortized premium and less unamortized discount. The same is reported in the balance sheet of the company, and also called the book value of a bond.

For example, the face value of the bond is \$ 1000, and the date of the issue of bond is 1st January 2019, and the maturity date is 31st December 2021. Let’s assume the coupon rate at 5%.

Now, when the bond is issued, investors require a rate of return as 4%.

First of all, we need to check whether the bond is issued on a premium or discount. We must be aware of the market rate of interest, which is 4%. The rate of interest, i.e., 4%, is less than the coupon rate, i.e., 5%. Therefore, the , i.e., \$ 1250. Suppose after two years, \$ 100 is amortized. Thus, the carrying value of the bond is \$ 1000 plus \$ 150, i.e., \$ 1150. And vice versa, if the market rate of interest is 6%, then the bond shall be sold at a discount.

### Difference between the Carrying Value vs. Fair Value

Note: We have used the word ‘amortized’ several times in our article. It means the spreading of intangible assets cost over the assets’ useful life, unlike depreciation. Intangible assets are not tangible assets. Examples of are copyrights, patents, software, franchise agreements, trademarks, etc.

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