Accounting

Book Value

By May 24, 2019September 21st, 2021No Comments

What is Book Value?

Book Value has two definitions based on the term usage.

First, Book Value is the value of anything appearing on the Balance Sheet. Traditionally, companies record their assets, liabilities and equity in a book. Therefore, the value of these items as recorded in their books is known as “Book Value”. When someone says the “Book Value of XYZ”, it means the value of XYZ on the Balance Sheet. So for example, the “Book Value of Intangible Assets” is the value of Intangible Assets on the Balance Sheet. The “Book Value of PP&E” is the value of PP&E on the Balance Sheet. This definition is based on the usage that specifies a particular item.

Second, Book Value is the value of Shareholder’s Equity on the Balance Sheet. When people use the term without specifying any particular item, they’re likely talking about the “Book Value of equity”. As an example, suppose someone says “The book value of the company is $300 million,” They’re saying that the value of Shareholder’s Equity on the Balance Sheet is $300 million. This definition is based on the usage that does not specify any particular item.

Either way, Book Value refers to a value on the Balance Sheet. It can refer to any item on the Balance Sheet, or it can refer specifically to Shareholder’s Equity. You’ll have to discern the precise meaning based on each situation’s context.

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