Understanding Written Down Value: A Key to Accurate Asset Valuation
Definition & Meaning
The written down value (WDV) of an asset refers to its current net value, which is calculated by taking the original cost and subtracting accumulated depreciation and amortization. This figure is also known as the net book value. The written down value is adjusted periodically to better reflect the asset's fair market value, considering changes in the economic environment. Companies typically review and adjust the written down value of their assets at least once a year to ensure accurate financial reporting.
Legal Use & context
Written down value is commonly used in financial reporting and accounting, which are essential in various legal contexts, including corporate law and tax law. Accurate reporting of an asset's written down value can impact a company's financial statements and tax obligations. Users may manage their asset valuations and depreciation schedules using legal templates provided by US Legal Forms, ensuring compliance with relevant regulations.
Real-world examples
Here are a couple of examples of abatement:
For instance, a company purchases machinery for $100,000. After three years, with annual depreciation of $20,000, the written down value would be $40,000. This value is critical for financial statements and tax calculations.
(Hypothetical example) A business buys a vehicle for $30,000. After two years of depreciation totaling $10,000, the written down value is adjusted to $20,000, reflecting its current market value.