How to determine the carrying amount

The property can be made on the balance sheet at cost and at replacement. The initial carrying value will include the cost of acquisition, construction, commissioning of new production or non-production assets.

Replacement cost means the cost of acquisition of property at market prices on a certain date. If the amount of the original value is defined as the set of costs, the replacement cost is calculated based on the analysis of the average market price. Replacement cost is often corrected as a result of revaluation.

The carrying amount is constantly being updated, due to the fact that the assets of the company wears off, ie, take into account its depreciation. Therefore, the carrying amount of an asset is determined as the difference between the initial value adopted for the balance of the property and the amount of accrued depreciation.

The need to determine book value takes place in joint-stock companies. If the transaction is associated with disposal or acquisition of property is more than 25 percent of the cost of carrying the property, it is considered large. The decision on such transaction is adopted by the Board of Directors or the General meeting of shareholders. In case of wrong definition of book value in this case, the transaction may be considered void.

It must be remembered that the carrying amount of the assets of the company shall be determined on the date of the transaction. In joint-stock companies quite difficult to get the balance at the interim date, because most of the action takes place at the end of the reporting period. Therefore, the Russian legislation provides for the determination of book value of assets for the purposes of making decisions about the size of the transaction, as of the last reporting date (month or quarter).