Accrued depreciation refers to the total amount of depreciation that has been recorded for an asset up to a specific point in time, reflecting the reduction in value due to wear and tear, obsolescence, or other factors.
Accumulated depreciation represents the total depreciation expense that has been recorded against a fixed asset since its acquisition or establishment on the balance sheet.
An active market is characterized by frequent and high-volume transactions of assets within a particular class, providing readily available and up-to-date pricing information.
The adjusted tax basis is the value used for calculating gain or loss upon the sale or disposition of an asset, reflecting adjustments for various tax-related incentives, improvements, or expenses.
Amortized cost refers to the part of the value of an asset that has been written off due to accumulated depreciation over time. It is a key accounting concept used to allocate the cost of an asset over its useful life.
Appraisal is a method of depreciation that values an asset at the beginning of an accounting period and again at the end. Any diminution in value is charged as an expense to the profit and loss account.
Appraisal costs are associated with the valuation and inspection processes to ensure the quality of products or the fair market value of assets. They play a crucial role in both financial accounting and quality management.
The Asset Revaluation Reserve, often referred to as the Revaluation Reserve Account, represents the adjustments made to the value of a company's assets that are reflected on its balance sheet. This reserve is critical for accurately depicting the fair value of an entity's assets over time.
Asset valuation involves determining the current worth of an organization's assets, considering various valuation methods including revaluation and present value calculations.
A bargain purchase option is a provision in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease term for a price significantly lower than the expected fair market value.
Book value represents the net asset value of a company, calculated as the total assets minus intangible assets and liabilities. It provides a historical measure of value and is frequently compared to market value to gauge intangible assets' and management's effectiveness.
Break-up value represents the asset value assuming an organization discontinues its business operations. Typically calculated for assets sold piecemeal, the break-up value encompasses the asset value per share and can affect financial decision-making.
Understanding the multifaceted term 'capitalize' and the concept of capitalization, especially within various business and financial contexts. This includes asset valuation, financing capital expenditures, accounting procedures, and making economically advantageous decisions.
Capitalized value represents the value at which an asset is recorded in the balance sheet of a company or organization. It is also the capital equivalent of an asset that yields a regular income, calculated at the prevailing rate of interest.
Continuously Contemporary Accounting (CoCoA) is an accounting methodology that values assets and liabilities based on their current market conditions rather than historical costs.
A contra-asset account is used in accounting to accumulate amounts that reduce the value of a related asset account, such as accumulated depreciation being subtracted from the property, plant, and equipment asset account.
Current cost refers to a cost calculated to take into account current circumstances of cost and performance levels. It represents the amount required at current prices to purchase or manufacture an asset, possibly adjusted for inflation.
An estimation of the financial worth of a property if it were to be sold in the present-day market, factoring in current economic conditions, comparable property sales, and general real estate trends.
Current Replacement Cost refers to the expense involved in replacing an asset or the services it provides, calculated at the balance-sheet date. Determining this cost can be challenging, especially if the asset is obsolete.
Current-Cost Accounting (CCA) adjusts the value of assets and profits to account for changes in prices over time, providing a more accurate reflection of a company’s financial position.
Current-Cost Accounting (CCA) is an accounting approach focusing on the operating capability of a business, ensuring assets are valued to prevent business loss upon their deprivation. This method highlights adjustments for inflation and operational capacity, differentiating holding gains from operating profits.
Current-cost depreciation is a depreciation charge calculated on the current cost of an asset rather than its historical cost. It adjusts for changes in the value of assets over time to ensure financial statements reflect more accurate asset values.
Current-value accounting is a method that values assets based on their current market value, taking into account changes in specific prices rather than general price levels. This technique is essential for providing a more precise and timely reflection of an entity's financial situation.
The declining balance method is a commonly used depreciation technique in accounting where an asset loses value by a fixed percentage each year, reflecting the reality that assets tend to lose more value early in their useful lives.
Deemed cost represents a substituted value for the net book value of an asset when an entity transitions to a new accounting regime. This approach allows entities to treat assets as if initially recognized at this value on the specified date.
The concept of depreciable basis is essential in determining the amount that can be depreciated for tax purposes. It represents the initial cost of an asset, including certain expenditures necessary to put the asset into use.
Depreciation refers to the reduction in the value of an asset over time, particularly due to wear and tear. It is utilized in accounting to allocate the cost of a tangible asset over its useful life.
Depreciation refers to the methodical reduction in the recorded cost of a tangible fixed asset, allocated over its useful life. It is a key accounting concept employed to denote the impairment of value of assets over time due to wear and tear, age, or obsolescence.
Deprival value is an accounting concept reflecting the loss that a company would experience if an asset were deprived or removed, often aligned with current-cost accounting.
In current-cost accounting, the deprival value of an asset corresponds to the lower value between its replacement cost and its recoverable amount, which is the higher value between its net realizable value and net present value.
Discovery value accounting is a widely used method in the USA for extractive enterprises, where increases in discovered reserves elevate the value of assets and predict future earnings.
The current replacement cost of an asset, often used in current-value accounting, and compared to exit value.
Existing Use Value (EUV) refers to the price at which a property can be sold on the open market, assuming that it can only be used for its current use and that it is vacant.
Fair Market Value (FMV) refers to the price at which an asset or service would change hands between a willing buyer and a willing seller, both having adequate information about the asset or service and under no compulsion to buy or sell.
Fair Value Accounting (FVA) refers to the method of valuing assets and liabilities at prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Greater Fool Theory posits that one can make money through the purchase of overvalued assets by selling them to someone even less informed or more optimistic.
Gross estate refers to the total value of a person's assets before liabilities such as debts and taxes are deducted. It includes all types of property and accounts that the deceased owned or had an interest in.
Held-for-sale is a classification of non-current assets introduced by the International Accounting Standard 5 (IAS 5), Non-current Assets Held for Sale and Discontinued Operations. Assets classified as held-for-sale must be available for sale in their present condition and the sale is expected to be completed within one year.
A hidden asset or reserve refers to asset value that is understated on the balance sheet of a company due to accounting conventions or deliberate action by management.
The accounting principle under which assets are recorded and carried in the books of account at their original purchase cost.
A gain resulting from the length of time an asset has been held rather than its use in the operations of a business.
Impairment is an accounting principle that outlines the process of reducing the book value of an asset when its fair market value drops below the asset's carrying amount on the balance sheet. It is a critical concept in financial reporting that ensures that the value of assets is not overstated in an organization's balance sheet.
The International Valuation Standards Council (IVSC) is an independent not-for-profit organization dedicated to the development of international standards for the valuation of assets, including both tangible and intangible assets.
Mark to Market (MTM) is a financial accounting method where the value of an asset is adjusted to reflect its current market value rather than its book value. It's used in margin accounts to ensure compliance and by mutual funds to report daily net asset values.
The market approach, also known as the sales comparison approach, is a method used to value an asset based on the selling price of similar assets in the marketplace. This valuation technique is widely used in real estate and business valuation.
A modification of the historical-cost convention in which certain assets are included at revalued amounts rather than their original cost. This approach is permitted under specific regulations such as the Companies Act.
Negative equity occurs when the value of an asset falls below the outstanding balance borrowed against it, often seen in property valuations affected by economic downturns.
An asset of little or no value, often used for capital gains tax purposes. Such assets can be treated as sold and immediately reacquired at a negligible value, resulting in an allowable capital loss.
Net Book Value (NBV) represents the carrying value of an asset on a company's balance sheet, calculated by subtracting accumulated depreciation or amortization from its original cost. It reflects the current value of a company's assets for accounting and investment decision purposes.
Net Book Value (NBV) represents the value at which an asset appears in the books of an organization, accounting for depreciation since purchase or revaluation.
Net Realizable Value (NRV) represents the estimated selling price of an asset in the ordinary course of business, minus any predictable costs associated with the completion and sale of the asset. It is a critical metric in inventory valuation and accounting practices, ensuring realistic asset values are reflected in financial statements.
Net Realizable Value (NRV) is the net amount that an entity expects to realize from the sale of an asset after deducting any costs involved in its sale or disposal.
Net residual value is an important assessment in accounting, business valuation, and asset management, representing the final estimated value of an asset after accounting for depreciation and other expenses.
An observation test involves physical and visual verification by inspection of financial statement items or activities. The external auditor observes and evaluates how company employees conduct various accounting-related tasks such as documenting the existence and valuation of assets, safeguarding assets, approving expense accounts, and counting inventory.
OMV refers to the value of an asset or property in the open market, where a willing buyer and a willing seller, both knowledgeable about the item, complete a transaction without undue pressure.
Open Market Value (OMV), also known as Market Value, refers to the estimated price at which an asset or property would trade in a competitive auction setting, where the conditions for a fair sale are met, and the parties involved are well-informed and willing.
Paper profit refers to an increase in the value of an asset that is recorded in the books but has not been realized through a sale. It's a theoretical gain that can fluctuate greatly before any actual profit is recognized.
A Professional Valuation is an assessment of the value of an asset by a professionally qualified individual, utilized in a balance sheet or prospectus of a company.
Replacement cost is the cost of replacing an asset, either in its present physical form or as the cost of obtaining equivalent services. This valuation method helps companies determine the expense of acquiring new or similar assets.
Replacement Cost Accounting is an accounting method allowing for additional depreciation on a part of the difference between the original cost and the current replacement cost of a depreciable asset.
Revaluation involves increasing the value of an asset to reflect its current market value, where the asset cost account is debited and the revaluation reserve is credited.
A method of determining the depreciation charge on a fixed asset against profits for an accounting period by revaluing the asset each year and writing off the fall in value.
The net residual value of an asset at the end of its useful life, when it is no longer suitable for its original use. Fixed assets, inventory, or waste arising from a production process can all have a salvage value.
Service potential refers to the extent to which an asset helps an entity achieve its objectives, especially in non-cash generating contexts. This term is commonly used in the public sector and not-for-profit organizations.
The sum-of-the-digits method is a technique for calculating the depreciation of a fixed asset, where the majority of the depreciation is recognized in the early years of the asset's life.
Sunk costs are previous expenditures that cannot be recovered and are typically irrelevant to future decision-making.
A fall in the value of an asset that is expected to be temporary. Under historical-cost accounting, no adjustments are made for temporary diminutions unless they become permanent.
Tobin's Q Ratio, devised by US economic analyst James Tobin, measures the impact of intangible assets on business value by comparing the market value of a business to the replacement cost of its assets.
The unamortized cost is the historical cost of a fixed asset minus the total depreciation or amortization applied to it up to a specified date. It represents the current book value of the asset in financial accounting.
The balance of an item of expenditure that has not yet been written off to the profit and loss account, representing the value of goods or services that will provide future economic benefits.
Unrealized depreciation refers to the excess of the adjusted basis of an asset over its fair market value, for determining losses on the sale or other disposition of the asset.
Unrealized profit/loss refers to the profit or loss that exists on paper due to holding assets, rather than actually selling or otherwise disposing them to capture the gain or loss in cash.
The useful economic life, or useful life, is the period for which the present owner of an asset will derive economic benefits from its use.
Valuation risk refers to the uncertainties and potential errors that arise when determining the fair value of an asset, liability, or business. This risk can occur in various scenarios, such as during the acquisition of a business or the valuation of over-the-counter market options.
Value represents the worth of all the rights arising from ownership, commonly referring to the quantity of one thing that will be exchanged for another.
Value in use is the present value of an asset's future cash flows derived from its continued use and eventual disposal, used primarily in impairment testing and asset valuation assessments.
A wasting asset is an asset that has a finite life span and steadily declines in value over time, typically due to physical wear and tear or obsolescence.
Wear and tear refers to the reduction in value of a fixed asset as a result of its regular usage and the inevitable damage it sustains over its working life. It is one of the primary reasons behind asset depreciation.
The act of reducing the value of an asset or a debt to zero in a balance sheet, often due to obsolescence, expiration, or uncollectibility.
A write-down is a reduction in the book value of an asset on a company's financial statements, typically due to a decline in the asset's market value. This accounting procedure adjusts the carrying value of an asset to reflect its current estimated recoverable amount.
Written-Down Value (WDV) refers to the depreciated value of an asset after accounting for depreciation or amortization up to a specific date. It represents the current book value of an asset in the financial statements.
