Carrying amount
AccountingWhat an asset is recorded at on the balance sheet today, being its original cost less accumulated depreciation and any impairment.
Also written: carrying value, net book value, book carrying amount
The carrying amount is an accounting measurement, not a valuation. For most tangible assets it is historical cost less everything charged against it since, which means it reflects a purchase price set years ago and a depreciation schedule chosen by management rather than what the asset would fetch today.
It matters because it is the reference point for two common questions. An impairment is recognised when the recoverable amount falls below the carrying amount, and a gain or loss on disposal is the difference between the proceeds and the carrying amount at the date of sale. Both questions are unanswerable without it.
The gap between carrying amount and market value is one of the more useful things to be able to say out loud. Property carried at cost less depreciation for thirty years is usually worth far more than the balance sheet shows, while a specialist machine may be worth far less than its unamortised cost the moment it is second hand.
IFRS offers a revaluation model for property, plant and equipment under IAS 16, where an asset class is carried at fair value with the movement going through other comprehensive income. It is used sparingly outside property, and US GAAP does not permit it at all, which is why cross border comparisons of asset bases need care.
Worked example
A machine cost 800 and has accumulated depreciation of 650, so its carrying amount is 150.
Sold for 200, it produces a gain on disposal of 50. Sold for 100, it produces a loss of 50. Neither figure has anything to do with what the machine originally cost, only with what remains recorded against it.