Calculation of book value. How to find the book value of a building. Application in practice

03.07.2021

The book value of assets is the monetary value of all assets of the company, reflected in the balance sheet. Let us consider in more detail how the book value differs from the residual and initial value, and also for which assets these concepts should be applied.

Is the book value residual or original?

Any property belonging to the organization can be both tangible, that is, in kind, in the form of real estate, machines, tools, various equipment, and intangible form: investments in scientific developments, know-how, formalized patents. The cost of such property upon registration with the company consists of:

the cost of its creation or purchase;
the cost of loading and unloading, delivery;
commissioning works;
costs of consulting services required for use;
registration, customs fees;
minus indirect taxes.

The monetary valuation of the company's property formed in this way is the initial cost. In the balance sheet, non-current assets are reflected at their residual value, that is, the initial value minus the accrued depreciation for the entire period of operation. Answering the question, is the book value residual or initial, we can say that the book value is equal to the residual.

It is also necessary to distinguish between depreciable property, the value of which is not written off immediately, but during the useful life. This period must exceed 1 year, and current assets, whose value is repaid at a time. Working resources include:

materials, various stocks;
accounts receivable and outstanding VAT;
granted loans and short-term financial investments;
cash and non-cash funds.

Current assets do not relate to depreciable property and are reflected in the balance sheet at their actual acquisition cost.

Book value and residual value: difference

The difference between these two concepts is in the amount of accrued depreciation, since, according to clause 49 of the Regulations on Accounting and Reporting, fixed assets are reflected in the balance sheet at residual value. The same applies to intangible assets in accordance with paragraph 57 of the same Regulations. Therefore, there is no difference between the concepts of book value and residual value, they are absolutely identical in Russian legislation. The tax legislation adheres to the same opinion.

There is also the concept of the replacement cost of property in the form of fixed assets and intangible assets. This is understood as the value of the property at market prices on the current date or calculated using specified inflation rates. The cost of fixed assets that were revalued by decision of the Government of the Russian Federation can also be a replacement cost. If the depreciable property was revalued, then it is reflected in the balance sheet at the replacement cost minus the accrued depreciation amounts.

What is the difference between book value and residual value and why is it calculated?

The book value of the assets is equal to the residual value of non-current resources and the sum of the balance of current reserves in kind and in cash according to accounting registers. The calculation of the book value is necessary to analyze the financial position of the enterprise, determine the level of profitability of existing assets.

Determining the book value of assets is required to calculate the size of the transaction. A transaction is considered to be a major one if its amount exceeds 25% of the book value of all available assets of the company. In the event of an incorrect calculation of balance sheet assets, the transaction may be declared invalid.

The value of the company on the balance sheet is determined by the total assets of the company, taking into account the deductions of its intangible assets and other liabilities indicated in the balance sheet. Often the book value of the company differs significantly from the market price.

The value of the company on the balance sheet

To assess the productivity of the enterprise, a balance is calculated, which reflects the assets and liabilities of the company. Moreover, assets are divided into current and fixed assets. Taking into account the former, as a rule, there are no problems, but the latter, which have been used for many years, are difficult to assess.

With regard to working capital, as a rule, there are no problems, but fixed assets that have been used for many years are difficult to assess.

For this purpose, accountants refer to the term "book value". By this, accountants understand the value of long-term assets that have been entered into the balance sheet and noted in the corresponding statement of the company. Long-term assets include the objects of the firm, or rather, their value.

The balance valuation of fixed assets is visible at the initial cost, from which the total depreciation is calculated. And the initial cost itself is expressed in the costs that were incurred for the construction (delivery, installation, construction costs).

The carrying amount may be reduced by the amount of depreciation rates. If borrowed funds were spent on the acquisition, then the interest on the loan must be taken into account in the calculations.

In order not to create confusion, the value of the company on the balance sheet is assessed annually. This figure can vary due to many factors. Expenses for repairs and reconstruction, maintenance, etc. Numerous nuances sometimes make the process of counting an unbearable burden, so only accounting professionals can accurately calculate such a balance.

Cost difference

As mentioned above, the balance sheet and enterprises almost always differ. Often the second is many times greater than the first. This is due to the following.

If the book value is estimated solely from a material point of view, by the number of assets, then the market value includes the balance sheet and material parts. So, for example, the presence of a wide customer base, popularity and recognition of the brand or brand are also taken into account when determining the market price of the enterprise. This explains the significant difference in numbers.

The book value is useful if an organization needs to take a loan secured by property. In this case, lenders will be guided only by the value of fixed assets, and not by the brand as a whole. Also, the indicator becomes important when closing a company and dividing capital for distribution among the founders or payments to creditors.

The concept of book (book, residual) value is used in accounting to account for the impact of depreciation on the value of assets. Non-depreciable assets are shown in financial statements at their initial cost, while depreciable assets, such as buildings and equipment, decrease in value over time due to their depreciation (wear and tear). The asset in the financial statements is still shown at cost, and the depreciation amount is indicated on a separate line. To calculate the carrying amount of an asset, simply subtract the amount of depreciation from the initial cost of the asset.

Steps

Part 1

Understanding Book Value

Determination of book value. The carrying amount of an asset is the difference between its initial cost and the amount of depreciation. According to the rules of financial reporting, assets are always displayed at initial cost, which allows you to unify accounting. But the value of large assets, such as factory equipment, decreases over time, so depreciation (wear and tear) must be taken into account. By subtracting the depreciation from the initial cost of an asset, you get its book value.

Determine the initial cost of the asset. It is necessary to know it in order to correctly calculate the book value. The initial cost of an asset is the amount paid to acquire it. The initial value of the asset is displayed in the general ledger.

Determine the depreciation of the asset. Having found out the initial cost of the asset, find the amount of its depreciation (as of the current date). This amount is displayed in the general ledger in the line (or section) "Cumulative depreciation". However, as a rule, the depreciation of each asset is not displayed, so find the depreciation schedule for the asset you are interested in.

Part 2

Depreciation calculation

Decide on the depreciation method. Depreciation of fixed assets is the gradual write-off of the cost of an asset into annual expenses. Depreciation can be calculated in several ways. The most common method is the straight-line depreciation method, but there are other methods in use such as the declining balance method and the sum of numbers (years) method. The choice of method depends on the asset.

Use the straight-line depreciation method. In this case, the amount of depreciation will be constant throughout the life of the asset. For example, if the equipment was purchased for 1,000,000 rubles, and its service life is 10 years, then the annual depreciation amount will be 10% of 1,000,000 rubles, that is, 100,000 rubles.

Use the declining balance method. This is an accelerated depreciation method in which the amount of depreciation is greater at the beginning of the asset's life (compared to the amount at the end of that life). In this case, you must use the straight-line depreciation percentage. For example, the percentage of depreciation that doubles the balance of an asset that has a life of 10 years is 2 x 10% = 20%. This means that the new book value of the asset at the end of the reporting period will be 20% less than the previous value. In our example, for the first year of operation of the asset, depreciation will be 200,000 rubles (20% of 1,000,000 rubles).
- To further explain this method, we calculate the depreciation of the asset for the second year of its operation. To begin with, let's determine the book value of the asset at the end of the first year of its operation: 1,000,000 - 200,000 = 800,000 rubles. For the second year of operation of the asset, depreciation will be 160,000 rubles (20% of 800,000 rubles), and the book value of the asset at the end of the second year of its operation will be 800,000 - 160,000 = 640,000 rubles.
Use the sum of numbers (years) method. This method is based on a calculation algorithm (formula) very similar to the algorithm used in the declining balance method, but different quantities are used here. The formula looks like this: A = (N S − L S) ∗ (n n + (n − 1) + (n − 2) . . .) (\displaystyle A=(NS-LS)*((\frac (n)(n+(n-1 )+(n-2)...))))

Determine the accumulated depreciation of the asset. This is the balance displayed in the Accumulated Depreciation section. Let's use the above example and the straight-line depreciation method. Suppose you want to know the amount of depreciation after 6 years. Since the annual depreciation amount is 100,000 rubles, the accumulated depreciation will be equal to 600,000 rubles. For other depreciation methods, repeat the process for each year until you reach the year you want.
Subtract the accumulated depreciation from the cost of the asset. To calculate the carrying amount of an asset, simply subtract the amount of depreciation (as of today) from the cost of the asset. In our example, the book value of the asset after 6 years will be: (1,000,000 - 600,000) = 400,000 rubles.
- Note that the book value of an asset cannot be less than its salvage value, even if the asset has been in operation for such a long time that the calculation results in the asset's book value being less than its salvage value. In this case, the asset's carrying amount is equated to its salvage value until the asset is sold (at which point its value becomes zero).

Part 3

Use of book value

The difference between the book value and the market value of an asset. The book value is not an accurate estimate of the price of an asset, that is, this value does not reflect the true market value of the asset. The book value determines the percentage of the initial cost of the asset that can be expensed (due to depreciation of the asset).
- The market value of an asset is the price a potential buyer of an asset is willing to pay. For example, factory equipment was purchased for 1,000,000 rubles, and the depreciation amount for 4 years was 400,000 rubles. At the moment, the carrying value of the asset is 600,000 rubles. But this equipment is obsolete (thanks to new technologies), so buyers are willing to pay only 200,000 rubles for it.
- The market value of some assets, such as complex large machines, is significantly higher than their book value. This means that even if an asset has been in use for a long time and therefore its depreciation is quite high, it still functions properly and is in demand.

Reading 8 min. Views 70 Published on 09.12.2018

There are many economic indicators that are used to assess the financial health of a company. As a rule, all property belonging to the company is analyzed for this purpose. When compiling such calculations, various scenarios are used, the choice of which depends on the purpose of the process under consideration. Such a goal may be the reflection of received assets in financial or tax reporting, as well as the transfer of property to the balance sheet of the enterprise. All assets owned by the company are expressed in monetary units. Within the framework of this article, we propose to consider the question of what the book value of fixed assets is and how this indicator is calculated.

The book value of fixed assets is the value of these assets on the company's balance sheet

What is the book value of fixed assets

The economic activity of each company is provided by various labor means. This category includes production equipment, machine tools, real estate and vehicles. . All labor resources are part of the company's fixed assets. These funds have a number of features, among which are:

The cost is over forty thousand rubles.
Long service life exceeding twelve months.

It is important to note that the results of the company's activities cannot be considered as fixed assets. This fact is explained by the fact that the OS is not consumed during the production cycle. Each asset belonging to this group has the ability to generate economic profit. The carrying value of such assets is calculated based on several important factors. The carrying amount of an asset may be the original or residual value of a particular item. The difference between these concepts will be discussed below.

The term "book value" is used to refer to the total value of all property items owned by a particular company. This property is recorded on the balance sheet of the company. This indicator is the sum of current and non-current assets. Non-current assets include fixed assets owned by the company and those assets that are intangible in nature. Such assets are carried on the balance sheet at their book value. This means that accumulated depreciation is deducted from the original cost of assets.

Working capital includes property used in production activities. This category includes financial resources, inventories and receivables. In addition to direct current assets, there is also indirect property. This category includes short-term investments and VAT on purchased goods. The use of this indicator allows you to determine the current financial position of the company. Based on this indicator, the efficiency of economic activity is calculated.

Such calculations allow you to find out about the profitability of property owned by the company. This indicator clearly reflects the level of income of the company from each ruble spent on the purchase of equipment. In addition, the calculation of the book value of assets allows you to determine the turnover ratio of fixed assets. This indicator is used to indicate the efficiency of a company's use of resources. In the event that the calculation of the above indicators is due to the need to assess the financial activities of the company, special methods for compiling calculations are applied. Based on the foregoing, it can be concluded that the information obtained as a result of these calculations is used in determining the scale of the transaction concluded by the company.

A major transaction is a contract for the sale of a company's property, the value of which exceeds twenty-five percent of the total value of all the firm's assets. In order to determine the scale of the forthcoming transaction, it is necessary to make calculations of the book value of assets in advance. Based on these calculations, a specific asset is valued. In order to conclude such a deal, it is necessary to first hold a meeting of the company's participants.

It should be noted that if the calculations are made incorrectly, the concluded contract may lose its legal force.

The book value almost never matches the market-driven value of the property, as the mechanisms for determining it vary widely.

Characteristics of the book value

In order to assess the financial condition of the company, you need to carefully analyze all fixed assets and identify the sources of their formation. The need for such an analysis may be due to the need to charge taxes, prepare financial statements or record new assets on the balance sheet of the enterprise. Below we propose to consider the basic rules for assessing the book value of fixed assets.

Initial

When crediting assets to the company's balance sheet, the initial cost of the property is taken into account. This amount does not include VAT and other refundable tax payments. The procedure for making calculations depends on the methods used to obtain the assets. In the case of the acquisition of fixed assets, the value of the property itself is taken into account, which is reflected in the contract concluded with the sellers. To this amount, you can add the costs of transportation and installation of equipment, payment of customs duties and state duties and taxes. In addition, the initial cost of objects includes the costs of paying for the services of intermediary companies.

In the case when the company independently manufactures fixed assets, the actual costs associated with the manufacture of the product are invested in the initial cost of the asset. Often there are situations in which it is almost impossible to assess the value of the received property. As a rule, such a situation arises when an asset is received as a gift or when a barter contract is concluded. In this case, the market value of this object or its closest analogues is calculated. The initial book value of fixed assets is calculated only once. An exception to this rule is the reconstruction of immovable objects, the modernization of production equipment or the partial change of an asset.

The procedure for revaluation of assets deserves special attention. Such events can only be held once a year. When making calculations, the current or replacement price of assets is taken into account. Carrying out these activities can lead to cheaper or more expensive OS. When compiling recalculations, the indexing method is used. In other situations, it is more advisable to focus on current market prices, confirmed by relevant documents.

Residual

The residual book value is used in the valuation of property that is already in use by the company. This indicator can be calculated in several ways. As a rule, accumulated depreciation is deducted from the initial cost of the object to determine this value. In the event that a particular asset has been revalued, a slightly different methodology is used. In this situation, the accrued depreciation is deducted from the replacement price of the property.

Methods for determining the amount of accumulated depreciation are set out in the current legislation. One of the simplest methods for compiling calculations is the linear method. During the transfer of the acquired property to accounting for each object, the duration of the useful life is calculated. During these calculations, each object is assigned to a specific depreciation group. For this purpose, the classifier of fixed assets is used.

Depreciation begins to accrue only from the next month after the start of use of the object. It is important to note that current laws prohibit depreciation on natural resources.. The list of natural resources that cannot be used in such calculations is given in Article 256 of the Tax Code. Many experts in the financial sector recommend studying the innovations in current laws before making calculations. The procedure for accounting for fixed assets is regulated by accounting rules and tax legislation.

The book value of the property is formed by adding up all the actual costs incurred by the company for the construction, acquisition or manufacture of property objects

Book value of property, plant and equipment

The book value of property, plant and equipment is the residual value of an asset. In order to calculate this indicator, it is necessary to subtract the amount of accumulated depreciation from the initial price of a particular asset.
Accounting for fixed assets at revalued cost deserves special attention. In this case, the value of the indicator under consideration is the result of subtracting the accumulated depreciation from the restored property price.

Book value of property (equipment)

Quite interesting is the fact that the book price may differ from the prices dictated by the market. This difference is explained by the difference in pricing mechanisms. In market conditions, it is necessary to take into account the amount of competition in a particular direction. In the case of the book price, all costs associated with the manufacture or purchase of property values are taken into account.

To determine the balance price of equipment, it is necessary to obtain a number of initial data. To make correct calculations, you will need information about the initial price of the object and the amount of accrued depreciation. When calculating the last indicator, the duration of the operational life of the object is taken into account. Depreciation is charged only on those objects that are used to make a profit. One of the important conditions is the ownership of the equipment. It should also be noted that equipment can be classified as depreciable assets only if its cost is more than one hundred thousand rubles. This rule is enshrined in the two hundred and fifty-sixth article of the Tax Code.

Book value of the enterprise

From a business point of view, each company is an independent asset that can be sold. In order to assess the effectiveness of the financial activities of the enterprise, a special form is drawn up. This form lists all property owned by the company. Based on this report, the book value of the organization is calculated. For this purpose, the formula is applied: "CHA - NA", where:

"CHA"- net assets.
« ON THE"- intangible resources.

Rules for calculating the average annual book value of fixed assets

Based on the statement that the book price of the OO is their residual value, when making calculations, you can use the formula: "The initial price of the object - depreciation accrued over the operational period." Today, there are two different methods for calculating the average annual book price of fixed assets. The choice of a specific methodology depends on the purpose of the calculations.

In order to evaluate the financial performance of the company, information taken from the balance sheet is used. The average calculation method involves adding up the book price of assets at the beginning and end of the year. The result obtained must be divided by two.

When calculating the amount of taxation, it is recommended to use the calculation procedure set out in the three hundred and seventy-sixth article of the Tax Code. To do this, add together the residual price of assets for each month of the reporting period. The result obtained must be divided by thirteen.

Determining the book value of the company itself is necessary to assess the effectiveness of its economic activities.

Essentially, the book value- is the price of property on a specific date, reflected in the balance sheet of the company.

Usually, if we are talking about the book value, then we mean the initial and (or) residual. Residual value has the most practical application. Now let's take a closer look at these concepts.

BOOK VALUE- the cost of such property as fixed assets and intangible assets, according to which they are accepted for accounting. The initial cost of fixed assets of the enterprise and intangible assets purchased for cash.

The carrying amount includes the amounts actually incurred for:

acquisition or manufacture (construction) of property;
t transportation (including transportation costs);
construction and installation works (installation, adjustment of equipment and machinery, foundation ...) and other works related to their commissioning;
the cost of loading and unloading;
state fees;
as well as the amounts paid by organizations for consulting and information services caused by the purchase of fixed assets and intangible assets;
fees paid for property registration;
and other similar payments, with the exception of property value added tax and other reimbursable payments (except as prescribed by the legislation of the Russian Federation).

Fixed assets in the balance of the enterprise are evaluated and concepts such as initial, replacement and inventory value are used.

The replacement book value of fixed assets of an enterprise is the cost of acquisition, reproduction, i.e., construction or repair on a certain date and at market prices for this number, at which they are accepted for accounting. accounting. This cost can be determined by an expert based on existing market prices or using inflation rates. The replacement value is also considered to be the value calculated as a result of the revaluation of fixed assets and carried out by decision of the Government of the Russian Federation.

Valuation of fixed assets

For a more accurate accounting of the book value, the concept of depreciation is used:

1. Property and other valuables can be accepted into the company's balance sheet at their original and replacement cost. The initial carrying amount will include expenses for the acquisition, construction, commissioning of new production or non-production premises and other assets.

2. Replacement cost means the purchase price of the property at current market prices on a certain date. If the amount of the original cost is determined as the sum of the costs, then the replacement cost is calculated taking into account the average market prices. The replacement cost needs to be adjusted more frequently as a result of the revaluation.

3. The book value is regularly adjusted and specified, due to the fact that the property of the company wears out, i.e. its depreciation is recalculated

4. In joint-stock companies there is a need to determine the book value of property. If a transaction related to the transfer or acquisition of valuables is more than 25% of the value of the company's balance sheet property, it is considered a major one. In such a transaction, the decision is made at a meeting of directors or a general meeting of shareholders. The transaction may be considered invalid if the book value is incorrectly determined.

5. It should be taken into account that the book value of the company's assets should be assigned on the date of the transaction. In joint-stock companies, it is usually quite difficult to draw up a balance sheet for an interim date, because. most transactions are made at the end of the reporting period. Therefore, the legislation of the Russian Federation provides, in order to decide on the size of the transaction, the determination of the book value of assets as of the last reporting date (month or quarter).

How to calculate book value?

The property is entered on the company's balance sheet at original and replacement cost, which includes all costs for the acquisition, construction, repair and commissioning of assets, both production and non-production. Sum up all the already known expenses and add your additional calculations to them.
Include in the replacement cost the costs incurred to acquire the property for the price found on the market in a certain period of time. Update the completed report periodically.
The replacement cost is determined both expertly based on market prices and using inflation rates. The cost is recognized as replacement if it is determined as a result of revaluation of funds, which must be carried out by decision of the Government of the Russian Federation. Use the services of professional accountants if required, or regularly monitor market prices that relate to your company's field of activity.
Do not forget to specify the book value taking into account the depreciation of the company's property (depreciation). The value of assets is calculated as the difference between the original cost of the property and the amount of depreciation shown on the balance sheet.
Remember that the book value is calculated on the date of the transaction, this is especially true for JSCs, in which the bulk of transactions are made at the end of the reporting period, which complicates the balance sheet. The legislation of the Russian Federation provides for fixing the balance sheet value of assets based on the purposes of making decisions on the size of the transaction as of the latest reporting date.