What is the formula for Net Book Value (NBV)?

What is the formula for Net Book Value (NBV)?

• A. Net Book Value = Original Asset Cost - Accumulated Depreciation.
• B. Net Book Value = Original Asset Cost - Accumulated Depletion.
• C. Net Book Value = Original Asset Cost - Salvage Value.
• D. Net Book Value = Original Asset Cost + Accumulated Depreciation.

Answer: (A)

Net Book Value shows what an asset is worth on the books after depreciation. It’s the original cost of the asset minus the depreciation that has been recognized to date, i.e., Original Asset Cost minus Accumulated Depreciation. Depletion applies to natural resources, not typical fixed assets. Salvage value is the estimated resale value at end of life and informs how depreciation is calculated, but NBV at a given moment uses cost minus accumulated depreciation, not cost minus salvage value. Adding depreciation back in would incorrectly increase value. So the correct formula is Original Asset Cost minus Accumulated Depreciation.

Net Book Value shows what an asset is worth on the books after depreciation. It’s the original cost of the asset minus the depreciation that has been recognized to date, i.e., Original Asset Cost minus Accumulated Depreciation. Depletion applies to natural resources, not typical fixed assets. Salvage value is the estimated resale value at end of life and informs how depreciation is calculated, but NBV at a given moment uses cost minus accumulated depreciation, not cost minus salvage value. Adding depreciation back in would incorrectly increase value. So the correct formula is Original Asset Cost minus Accumulated Depreciation.