How is Net Book Value (NBV) defined?

How is Net Book Value (NBV) defined?

• A. Market value minus impairment
• B. Original cost minus salvage value
• C. Cost minus accumulated depreciation
• D. Replacement cost minus accumulated amortization

Answer: (C)

Net book value is the asset’s carrying amount on the balance sheet, representing the historical cost that has not yet been expensed through depreciation (for tangible assets) or amortization (for intangible assets). In simple terms, you start with what the asset originally cost and subtract the depreciation that has accumulated over time. This reflects how much of the asset’s value remains to be reported in the books. It’s not based on current market value, so market value minus impairment isn’t NBV. It’s not original cost minus salvage value, because salvage doesn’t reduce NBV in the ongoing accounting process. It isn’t replacement cost minus accumulated amortization, since replacement cost is a different concept used for planning or revaluation, not the standard carrying amount. Example: an asset cost 1,000 with 200 of depreciation recorded to date has a net book value of 800. If impairment were recognized, NBV would be adjusted further, but the basic NBV calculation relies on cost minus accumulated depreciation (or amortization for intangibles).

Net book value is the asset’s carrying amount on the balance sheet, representing the historical cost that has not yet been expensed through depreciation (for tangible assets) or amortization (for intangible assets). In simple terms, you start with what the asset originally cost and subtract the depreciation that has accumulated over time. This reflects how much of the asset’s value remains to be reported in the books.

It’s not based on current market value, so market value minus impairment isn’t NBV. It’s not original cost minus salvage value, because salvage doesn’t reduce NBV in the ongoing accounting process. It isn’t replacement cost minus accumulated amortization, since replacement cost is a different concept used for planning or revaluation, not the standard carrying amount.

Example: an asset cost 1,000 with 200 of depreciation recorded to date has a net book value of 800. If impairment were recognized, NBV would be adjusted further, but the basic NBV calculation relies on cost minus accumulated depreciation (or amortization for intangibles).