Carrying Value Explained: Key Insights into Its Legal Definition
Definition & Meaning
Carrying value, often referred to as book value, represents the value of an asset or a company as recorded on its balance sheet. For individual assets, this value is calculated by taking the original purchase cost and subtracting any accumulated depreciation, amortization, or impairment charges. When assessing a company's carrying value, it is determined by subtracting intangible assets and total liabilities, such as debts, from its total assets. This figure provides a clear view of the net worth of the company or the specific asset in question.
Legal Use & context
Carrying value is commonly used in various legal and financial contexts, particularly in corporate law, tax law, and financial reporting. It plays a crucial role in:
- Determining the value of assets during mergers and acquisitions.
- Assessing a company's financial health in bankruptcy proceedings.
- Calculating tax liabilities based on asset values.
Users can manage related forms and documents through resources like US Legal Forms, which provide templates for financial disclosures and asset valuations.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company purchases a piece of machinery for $100,000. After three years, the machinery has depreciated by $30,000. The carrying value of the machinery would be $70,000 ($100,000 - $30,000).
Example 2: A corporation has total assets of $500,000, intangible assets worth $100,000, and liabilities totaling $300,000. The carrying value of the company would be $100,000 ($500,000 - $100,000 - $300,000). (hypothetical example)