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 book value of an assetBook Value Of An AssetBook Value of Assets is the asset's value in the books of records of a company or an institution at any given instance. Assets Book Value Formula = Total Value of an Asset – Depreciation – Other Expenses Directly Related to it read more 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 balance sheet Balance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the more 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 the carrying amountThe Carrying AmountThe carrying amount or book value of asset is the cost of tangible, intangible assets or liability recorded in the financial statements, net of accumulated depreciation or any impairments or repayments. Accordingly, the carrying amount may differ from the market value of more 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

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For eg:
Source: Carrying Value (


#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.

Carrying value Example 1

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 price of bondsPrice Of BondsThe bond pricing formula calculates the present value of the probable future cash flows, which include coupon payments and the par value, which is the redemption amount at maturity. The yield to maturity (YTM) refers to the rate of interest used to discount future cash more 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 bond is issued at a premiumBond Is Issued At A PremiumPremium bonds are those long-term financial instruments which trade at a price exceeding their face value. The coupon rate of these bonds is higher because they tend to provide more interest than the standard rate of interest prevailing in the more, 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

                      Carrying ValueFair Value
It is the book value or the asset value, which is the actual cost of the asset.The fair value of assets and liabilities is calculated on mark-to-market.
Based on the figures from an entity’s balance sheet;Whereas, the fair value figures depicts the value of the assets sold in the open market.
Calculated by taking the difference of the assets and liabilities on the balance sheet, also known as the Net worth of the company;Calculated by multiplying the market price per share with the number of shares outstandingShares OutstandingOutstanding shares are the stocks available with the company's shareholders at a given point of time after excluding the shares that the entity had repurchased. It is shown as a part of the owner's equity in the liability side of the company's balance more;
Based on the historical cost of the asset.Based on the current market price of the assets.
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 Intangibles assetsIntangibles AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more are copyrights, patents, software, franchise agreements, trademarks, etc.

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