How to Calculate the Carrying Amount of an Asset

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An asset's carrying value is the historical cost less any depreciation or impairments against the item. Companies record this information on their balance sheet. For impairments, a company may release disclosures that relate to specific transactions against the asset. Stakeholders have an interest in asset carrying values because assets typically increase the company's equity. Fortunately, stakeholders can determine the asset carrying value by reviewing the balance sheet and making a few basic calculations. Stakeholders can do this for each asset reported by a company.

  • Review the balance sheet. Identify all fixed assets reported under long-term assets.

  • Look for any accumulated amortization or depreciation listed next to the assets.

  • Subtract related accumulated amortization or depreciation from the fixed asset's historical cost.

  • Read any financial disclosure released by the company. Look for impairments made against reported fixed assets.

  • Deduct any impairment costs against the related fixed asset from the figure in Step 3. This final figure is the asset's carrying cost.

Tips & Warnings

  • When reading the released statements from a publicly held firm, you may find a section specifically relating to fixed assets and their carrying costs. This removes the need for calculating individual asset amounts for fixed assets.

References

  • "Intermediate Accounting"; David Spiceland, et al.; 2007
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