Net book value (NBV) is the number finance uses to say what an asset is "worth" on the balance sheet. It drives the fixed-asset total, the gain or loss when you sell something, and the value of anything written off after an audit. It is also widely misunderstood — especially by people who assume it is what the asset would sell for.
This article explains what NBV is, how it is calculated, how it changes over an asset's life, and how to use it correctly for disposals, write-offs and insurance.
The definition
Net book value = Original cost − Accumulated depreciation − Accumulated impairment losses
- Original cost is what was capitalized when the asset was acquired, including directly attributable costs such as delivery and installation.
- Accumulated depreciation is the total depreciation charged since the asset was placed in service.
- Accumulated impairment is any extra write-down recognized because the asset's value dropped suddenly (damage, obsolescence).
NBV is also called carrying amount, carrying value or written-down value, depending on the country and the accounting framework.
A worked example
Illustrative numbers.
A laptop is bought for $1,500, placed in service on 1 January 2025, with a salvage value of $300 and a useful life of 3 years, depreciated straight-line monthly.
- Depreciable base: $1,500 − $300 = $1,200
- Annual depreciation: $1,200 ÷ 3 = $400
- Monthly depreciation: $400 ÷ 12 = $33.33 (rounded)
| Date | Months in service | Accumulated depreciation | NBV |
|---|---|---|---|
| 1 Jan 2025 | 0 | $0 | $1,500 |
| 31 Dec 2025 | 12 | $400 | $1,100 |
| 30 Jun 2026 | 18 | $600 | $900 |
| 31 Dec 2026 | 24 | $800 | $700 |
| 31 Dec 2027 | 36 | $1,200 | $300 |
After 36 months the laptop is fully depreciated: its NBV equals its salvage value, $300, and depreciation stops — even if the laptop is still in daily use.
NBV is not market value
NBV is an accounting allocation, not a valuation. It tells you how much of the original cost has not yet been expensed. It says nothing directly about:
- Market value — what someone would pay for the asset today.
- Replacement cost — what it would cost to buy an equivalent new asset.
- Insured value — which is usually based on replacement cost, not NBV.
A well-maintained machine may sell for much more than its NBV. A three-month-old laptop dropped in a river is worth nothing, whatever its NBV says. This is why insurance schedules and disposal decisions should not rely on NBV alone.
Using NBV when you dispose of an asset
When an asset is sold, scrapped or donated, you:
- Charge depreciation up to the disposal date (according to your convention).
- Remove the asset's cost and accumulated depreciation from the books.
- Recognize a gain or loss on disposal = Proceeds − NBV at disposal.
Continuing the example: the laptop is sold on 30 June 2026 for $700. NBV at that date is $900.
Gain/(loss) = $700 − $900 = ($200) — a loss of $200.
If it had been sold for $1,000 instead, the result would be $1,000 − $900 = $100 gain. If it is scrapped for nothing, the loss equals the full NBV, $900.
Using NBV for audit write-offs
When a physical audit confirms that an asset is genuinely missing, it is written off. The loss recognized is its NBV at the write-off date. That is why reconciliation reports usually show missing assets at NBV, not at cost — it is the figure that will actually hit the income statement. See asset reconciliation for the process.
It is also why ghost assets — recorded but no longer present — matter. Until they are written off, they overstate NBV on the balance sheet and continue to attract depreciation.
Impairment
Sometimes an asset loses value faster than depreciation reflects: a machine is damaged, a technology becomes obsolete, or a site closes. Accounting frameworks require an impairment write-down when the asset's carrying amount exceeds what can be recovered from it. The exact test differs between frameworks (for example, IFRS and US GAAP use different approaches), so involve your accountant.
Illustrative example: a machine with cost $50,000 and accumulated depreciation $20,000 has an NBV of $30,000. After damage, its recoverable amount is assessed at $18,000. An impairment loss of $30,000 − $18,000 = $12,000 is recognized, and NBV becomes $18,000. Future depreciation is then based on the new $18,000 carrying amount over the remaining useful life.
Book NBV vs tax NBV
Many organizations depreciate the same asset twice: once for the financial statements (book) and once under tax rules. Because the methods and lives differ, the asset has two different NBVs at any moment — the tax figure is often called the tax written-down value or tax basis. The difference between them feeds deferred tax calculations. The key operational point is to keep both schedules against the same asset record, so they never drift apart in scope.
Why NBV goes wrong
- Disposals not recorded — NBV stays on the books for assets that are gone.
- Additions capitalized late — depreciation starts in the wrong period.
- Wrong in-service date — depreciation starts from invoice date instead of when the asset was actually ready for use.
- Spreadsheet formula drift — a copied formula, a hard-coded value, a deleted row.
- Book and tax mixed up — one schedule overwriting the other.
Every one of these is an operational problem before it is an accounting one. It starts with a register that matches reality.
NBV in Asetavo
In Asetavo, every capitalized asset in the register carries its cost, salvage value, useful life and method, and the depreciation module keeps NBV correct: compute runs are drafts that do not change NBV until posted, and only the book profile changes NBV — the tax profile is report-only with its own running total. Disposals record gain or loss against NBV, and valuation reports export to CSV or PDF for your accounting system.
Next: compare methods in straight-line vs declining-balance depreciation, or try the depreciation calculator.