Bókfærðsverð

Bókfærðsverð, a term originating from Icelandic accounting practices, translates to "booked value" or "carrying value" in English. It represents the value of an asset as it appears on a company's balance sheet. This value is typically the historical cost of the asset minus any accumulated depreciation, amortization, or impairment losses. Essentially, it's the net amount at which an item is recorded in the company's financial records.

The concept of bókfærðsverð is fundamental to understanding a company's financial position. It's not necessarily the current market value of an asset, which could be higher or lower. Instead, it reflects the accounting treatment of the asset over time. For tangible assets like buildings and machinery, depreciation is regularly deducted from the historical cost to arrive at the bókfærðsverð. For intangible assets such as patents or goodwill, amortization serves a similar purpose.

When a company acquires an asset, its initial bókfærðsverð is its acquisition cost. Over its useful life, this value is systematically reduced through accounting entries that reflect its usage and decline in value. Impairment losses are recognized when an asset's recoverable amount falls below its bókfærðsverð, necessitating a write-down to reflect this permanent reduction in value. Investors and analysts use the bókfærðsverð to assess the book value of a company's assets, which forms part of its overall net worth.