Net Book Value (NBV) Explained : Formula, Calculation, and Examples

Net book value is one of the most quoted figures in fixed asset accounting, and one of the most misread. It is not what an asset would sell for, and it is not what you originally paid. This guide explains what net book value is, how to calculate it, and how it differs from the other values on your register.

Written by: John de Robeck • Published: August 27, 2026 • Updated: August 27, 2026

What is net book value?

Under the historic-cost model, net book value is the value of a fixed asset after deducting accumulated depreciation and impairment from its cost. Where a revaluation model is used, the carrying amount may also reflect revaluation adjustments. It is an accounting figure, not the amount the asset would necessarily fetch if sold.

You will also see net book value called the carrying amount or carrying value. Under the historic-cost model, it is based on cost less accumulated depreciation and impairment and will normally fall as depreciation is charged. Under a revaluation model, the carrying amount may also rise or fall when an asset is revalued. In either case, it reflects accounting policy rather than the current market price.

The net book value formula

Under the historic-cost model, net book value equals original cost minus accumulated depreciation and accumulated impairment losses. Where a revaluation model is used, the carrying amount also reflects revaluation adjustments.

Each part of the formula is straightforward. Original cost is what you paid to buy the asset and bring it into use. Accumulated depreciation is the running total of depreciation charged since the asset was acquired. Impairment, where it applies, is a one-off write-down when an asset’s recoverable amount drops below its carrying value.

How to calculate net book value (worked example)

Take a delivery van bought for £30,000 and depreciated on a straight line basis over five years with no residual value. That is £6,000 of depreciation a year. After three years, accumulated depreciation stands at £18,000, so the net book value is £30,000 minus £18,000, which is £12,000. Change the depreciation method and the path changes: under reducing balance, the early years carry a heavier charge, so the net book value falls faster at first.

Net book value vs market value

Net book value is an accounting figure based on cost and depreciation. Market value is what a buyer would pay today. The two rarely match, because depreciation follows a fixed schedule while market prices move with demand, condition, and technology.

This gap matters most at the point of sale. A three-year-old van with a £12,000 net book value might fetch £14,000 on the used market, producing a gain on disposal, or only £9,000, producing a loss. If you need the amount an asset is actually worth rather than its accounting figure, that is a question of valuation, which our guide to asset valuation methods covers.

Net book value vs gross book value vs carrying value

Three similar terms cause most of the confusion. The table below separates them.

Term	What it means
Gross book value	The original cost of the asset, before any depreciation
Net book value	Under the cost model, cost minus accumulated depreciation and impairment; under a revaluation model, it also reflects revaluation adjustments
Carrying value	Another name for net book value; the value carried on the balance sheet

Why net book value matters

It keeps the balance sheet accurate, showing their carrying amount under the applicable accounting policy.
It is the benchmark for any gain or loss when an asset is sold or scrapped.
It informs replacement decisions, showing how much cost is left to run on an asset.
It can inform financing conversations, although insurance assessments normally use reinstatement or replacement values rather than net book value.
It is the starting point for impairment testing when an asset may have lost value.

Net book value and depreciation

Net book value and depreciation move together. Every depreciation charge reduces the net book value by the same amount, so the two are simply different views of the same process. Under straight line depreciation, net book value falls in equal steps until it reaches the residual value, and it never drops below that floor. Under reducing balance, it falls quickly at first and then tapers. For a fully worked calculation, see our guide to how to calculate depreciation for IT equipment, which shows the charge and the falling net book value side by side.

Fixed asset management software can help keep net book values current by applying configured depreciation rules and recording approved adjustments. The exact treatment of changes to useful life, residual value and impairment should reflect the software’s confirmed capabilities.

Straight line vs reducing balance: the effect on net book value

The depreciation method chosen changes the net book value an asset reports at any point in its life. Take the same £30,000 van under a 40% reducing balance rate. Year one charges £12,000, leaving a net book value of £18,000. Year two charges 40% of £18,000, or £7,200, leaving £10,800. By the end of year three the net book value is around £6,480, well below the £12,000 the straight line method reports at the same age. Same asset, same age, two very different carrying values, purely because of the method.

Where net book value appears in the accounts

Net book value appears on the balance sheet, where fixed assets are shown at cost less accumulated depreciation. The depreciation charge that reduces it each year runs through the profit and loss account, so the two statements move together.

On the balance sheet, assets are usually presented as three figures: gross book value, accumulated depreciation, and the net book value that results. The annual depreciation charge sits in the profit and loss account as an expense, which is why depreciation reduces reported profit even though no cash leaves the business. That non-cash nature is also why depreciation is added back in the cash flow statement. Seeing how one figure threads through all three statements is part of reading a set of accounts with confidence.

Net book value and impairment

Impairment is the other event, besides depreciation, that reduces net book value. Where an asset’s recoverable amount falls below its carrying value, perhaps because it is damaged, underused, or overtaken by newer technology, the asset is written down to the lower figure and the difference is charged as an impairment loss. From that point, net book value reflects cost minus accumulated depreciation minus accumulated impairment. Unlike routine depreciation, impairment is a one-off assessment triggered by circumstances rather than a scheduled charge.

Net book value is one of the core figures in fixed asset management, sitting alongside depreciation and valuation on every register.

Frequently Asked Questions

Is net book value the same as book value?

In everyday use, yes. Book value usually means net book value: the asset’s cost less accumulated depreciation. Gross book value, meaning cost before depreciation, is the less common exception.

Is net book value the same as market value?

No. Net book value is an accounting figure driven by cost and depreciation, while market value is what a buyer would pay today. They can differ substantially.

Can net book value be negative?

No. Depreciation stops once an asset reaches its residual value, so net book value floors at the residual value, or at zero where no residual value is expected. It should never go below that.

What is the difference between net book value and carrying value?

The terms are often used interchangeably. Carrying amount is the amount at which an asset is recognised after depreciation and impairment and, where applicable, revaluation adjustments.

What is the difference between net book value and gross book value?

Gross book value is the original cost of an asset before any depreciation. Under the historic-cost model, net book value is that cost after accumulated depreciation and impairment have been deducted. Where the revaluation model is used, carrying value may also reflect revaluation adjustments.

Where does net book value appear in the accounts?

Net book value appears on the balance sheet, under fixed or non-current assets. It is the figure left after accumulated depreciation is deducted from cost, and it is the value used when calculating any gain or loss when the asset is later sold.

About the author

John de Robeck leads new business and partnerships at FMIS, working with organisations to understand asset and equipment maintenance requirements, software fit and related compliance considerations.

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