- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 6. Depreciation Methods
CFA Practice Question
The book value of an asset is designed to closely approximate its market value. True or False?
Correct Answer: False
The book value of an asset is acquisition cost minus accumulated depreciation. The accumulated depreciation measures the portion of the asset's acquisition cost allocated to previous periods, reflecting its use. The market value is what a seller would be willing to pay for the asset.
User Contributed Comments 3
| User | Comment |
|---|---|
| cong | Discern the differences between BV, NRV, MV. |
| johntan1979 | Book value is more rigid and declines over time, whereas market value is subject to the whims of irrational market participants. |
| houstcarr | well at one point in time the historical cost / book value was the market value, so with your logic that value isn't rational either |