The value of an asset as reflected in a company’s book or balance sheet, minus its depreciation value

What is the Carrying Amount?

The carrying amount is the original cost of an asphối as reflected in a company’s books or balance sheetBalance SheetThe balance sheet is one of the three fundamental financial statements. These statements are key lớn both financial modeling and accounting, minus the accumulated depreciation of the asphối. It is also called book value và is not necessarily the same as an asset’s fair valueFair ValueFair value refers to the actual value of an asset - a hàng hóa, stoông chồng, or security - that is agreed upon by both the seller and the buyer. Fair value is applicable to lớn a hàng hóa that is sold or traded in the market where it belongs or under normal conditions - and not to one that is being liquidated. or market value.quý khách hàng sẽ xem: Carrying amount là gì


Carrying Amount vs. Market Value

Carrying amount và market value differ in many ways, as listed below:

Example of Carrying Amount

Let’s say a company owns a tractor worth $80,000 to be used for developing its newest l& property. The said tractor’s annual depreciation is $3,000 & is expected khổng lồ still be of use for 20 years, at which time the salvage value is expected lớn be $đôi mươi,000. The annual depreciation is therefore $3,000 ($80,000-đôi mươi,000)/20 years. At the over of the 20 years, the tractors carrying amount is $20,000.

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Example of Fair Value

Given the same tractor, its fair value will depend on the supply & demand in the market. If, at the time it was sold in the market, the demvà for tractors is high, it can be priced higher than its carrying value. The opposite can also be true if the demvà goes down. The price of the tractor can go up or down, depending on how much buyers are willing lớn give sầu for it.

Carrying Value vs. Book Value

How lớn Calculate for Carrying Amount

It is a very simple task to calculate for carrying amount, as shown in the example above sầu. But lớn make it clearer, let’s explain it below:

Take the original cost of purchasing the asset less salvage value.Divide that number by the number of years the asset is expected lớn be of use lớn generate the annual depreciation amount and record annually.Calculate the accumulated depreciation (number of years past * annual depreciation)Subtract the accumulated depreciation from the original purchase price to lớn get the carrying amount.

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Depreciation in the Carrying Amount

Depreciation is the lowering of the value of a tangible asphối because of wear & tear. Tangible assets include buildings, equipment, furniture, và vehicles. One of the easiest and most commonly accepted methods of computing for depreciation is the straight-line depreciation methodStraight Line DepreciationStraight line depreciation is the most commonly used and easiest method for allocating depreciation of an asset. With the straight line. Using the straight-line method, the same depreciation value is copied for every year, such as what was done in the above sầu example wherein if the depreciation value for the first year is $3,000, it would be the same value for the succeeding years.

The other method is the double-declining balance depreciation methodDouble Declining Balance DepreciationThe double declining balance depreciation method is a khung of accelerated depreciation that doubles the regular depreciation approach. It is, otherwise known as the 200% declining balance method. With the DDB method, the depreciation is faster than that of straight-line but will not make the depreciation value bigger. It just means that depreciation is bigger in the early years but smaller in the later years.

Related Readings


certification program, designed lớn help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful: