Carrying value is the amount at which an item is reported on the balance sheet after deducting or adding any related adjustments. It is another name for carrying amount, the term used in IFRS, which covers the concept in detail. For a fixed asset, carrying value is its cost minus accumulated depreciation and any impairment losses; for a bond liability, it is face value plus any unamortized premium or minus any unamortized discount.
How the term is used
US accountants and analysts often say carrying value, while IFRS standards use carrying amount, and the phrase book value of an asset means much the same thing in everyday use. All three refer to the accounting figure, which can differ widely from market value. A building bought for $5 million twenty years ago may have a carrying value of $2 million while being worth $9 million on the market.
Carrying value matters in several calculations. When an asset is sold, the gain or loss is the difference between the proceeds and its carrying value. When bonds are retired early, the gain or loss is measured against their carrying value. Impairment tests compare carrying value with recoverable amount or fair value, and if carrying value is higher, the asset is written down and an impairment loss recognized. Differences between carrying values for accounting and tax bases for tax purposes also give rise to deferred income taxes.