Cabair's Accounts

[UpThere+2]

Does anyone know what the Net Book Value of an account is?

[Sensible]

Yup, it's the true value of a company after deducting what the company owes and adding what is owed to it and including its stock and buildings asset value etc.

Oh and forgot to say that figures in brackets are a minus, so a company can be worth less than nothing if it lives on credit and advance payments from customers and doesn't pay it's taxes or VAT.!!!!!!

[ 02 February 2002: Message edited by: Sensible ]</p>

[PingPong]

The Net Book Value of an 'account' is really what it says it is. An 'account' is normally considered to be 'one' item in a company's accounts.

Unless one is speaking about the Net Book Value of a Company, the term Net Book Value is normally used in relation to the Fixed Assets of a company. If this is what you are referring to, then the Net Book Value of an asset, or group of assets, is the original, or revalued cost of the assets, less accumulated depreciation.

The actual depreciation charge, and method of depreciating assets over their useful life, is decided on by the company. The methodology will be found in the accounts under 'Accounting Policies' - usually Note 1.

Net Book Value, be it of a group of assets, or of the company itself usually has little to do with the actual value of the assets or company....

The crucial word here is 'Book'. The Book Value is exactly what it says it is - the Value in the Books. If an asset, eg a Freehold, was bought twenty years ago for 10,000 GBP, and is now worth 1,0000,0000 GBP, it will still show in the accounts at 10,OOO unless it has been revalued in the accounts. If so, the revaluation amount will be disclosed.

Similarly, 'Equipment' may include the cost of the new computer network. How much is this worth now? Well, that is a matter of opinion, but the Books, and accounts, will carry the original cost, and also the depreciation deemed to have occurred. One company may depreciate 100% in year one, another by 33% a year on the original cost, thereby writing it off over three years. Yet another may choose five years, and another 25% on the reducing depreciated cost. The original cost less the depreciation to date is the Net Book Value. Again, look in the 'Accounting Policies' note to find out how a particular company is dealing with these various matters.

It is always important to appreciate that accounts show 'Historical Cost' figures (ie the actual cost - regardless of the current value), unless the accounting policy notes indicate that some form of revaluation of historical figures is carried out.

There have been attempts, in the days of high inflation, to publish accounts on a Current Cost basis. However, these were never very successful, not least because shareholders found great difficulty in understanding the figures - most accountants too! They also made the accounts much more expensive to produce!

Please bear in mind too, that the value of a company often bears little relation to the actual published figures. This sometimes is due to the way accounts are prepared on a Historical Cost basis (eg a property investment company is likely to be worth far more than the Book Value), but often due to the fact that Goodwill is not reflected in the accounts. A purchaser of a Oxford Air Training will pay a premium for the name and track record, when compared with Joe Bloggs Air Training. The value of 'Guinness' as a trade mark...etc etc

Well, I have wittered on for long enough - so will end.

[UpThere+2]

Cabair's Net Book Value for Oct 2000 was just under £75000. They owed £1.79 million at that time....

[foghorn]

Yes, but what were they owed at that time?

Also don't forget that Cabair group is a web of different companies so there might be off-balance-sheet activity going on (ie. those debts might be owed to other companies within the Cabair group as a tax-minimisation exercise)

foggy.