Why book value is different from resale value
- Topic
- Equipment valuations
- Reading time
- 3 minutes
- Last reviewed
On this page
Book value is an accounting figure. Resale value concerns what an asset may realise in a particular sale. They can differ substantially without either number being a simple mistake.
Do not use the amount in the fixed asset register as an automatic asking price. Equally, do not change the register yourself because a buyer has made a different offer. Give the accountant and sale adviser the information they need for their separate jobs.
A fictional example
Imagine the records for a machine show the following. The figures are invented and the accounting treatment is assumed for illustration.
| Record or estimate | Amount | What it describes |
|---|---|---|
| Original purchase cost | £20,000 | The recorded acquisition amount in this example |
| Accumulated accounting depreciation | £12,000 | The depreciation recorded under the business's accounting approach |
| Remaining carrying amount | £8,000 | £20,000 less £12,000 in these assumed records |
| Current sale estimate | £6,000 | An illustrative opinion for a specified sale scenario |
The £2,000 difference between carrying amount and the example sale estimate does not explain why buyers would pay £6,000. It only shows that the two measures differ. A market assessment needs its own evidence.
There could also be a buyer willing to pay more than the carrying amount. An old asset that has a low accounting figure can still be useful to another business. Avoid treating written down as a synonym for worthless.
What belongs in the sale discussion?
The sale adviser needs the actual asset, condition, included items, evidence and constraints. Purchase history may provide useful context, but a buyer is making a current decision about the offer available now.
Use the equipment valuation guide to understand that process. When comparing apparent market evidence, distinguish advertised prices from confirmed sale evidence. A high asking price for a superficially similar machine is not proof that the accounting figure is wrong.
Replacement cost introduces another question
The cost of obtaining a replacement is also different from what someone might pay for the existing asset. Replacement may involve a modern equivalent, new condition and a different service package. Read the replacement-cost comparison before using a new-machine quotation to argue for a particular used selling price.
When several figures appear in a meeting, label them explicitly: original cost, carrying amount, replacement quotation, sale estimate and actual offer. Add the date and scope beside each one. This small step can prevent a long discussion in which everyone is using the word value differently.
Give the accountant the outcome
After the sale, send the transaction document handover with the asset references and actual proceeds. HMRC's capital allowances guidance identifies disposal-related tax questions, but those calculations are not interchangeable with accounting book value.
If you need a current equipment-sale opinion, discuss the asset and intended use of the figure with UK Auction Group. Keep the accounting record available as context without asking the market estimate to reproduce it.
Explore the valuations guides.
Professional reference: RICS.
Sources
This guide gives general information. Equipment-specific, legal, tax and safety decisions may need a qualified adviser or competent specialist. The guides do not promise sale prices, fees or results.