How To Calculate Carrying Value

Carrying Value Formula:

\[ \text{Carrying Value} = \text{Face Value} + \text{Unamortized Premium} - \text{Unamortized Discount} \]

Carrying Value:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Carrying Value?

Carrying Value represents the current book value of a bond or other financial instrument on a company's balance sheet. It is calculated as the face value plus any unamortized premium minus any unamortized discount.

2. How Does the Calculator Work?

The calculator uses the carrying value formula:

\[ \text{Carrying Value} = \text{Face Value} + \text{Unamortized Premium} - \text{Unamortized Discount} \]

Where:

Face Value — The nominal value of the financial instrument
Unamortized Premium — The remaining premium amount not yet amortized
Unamortized Discount — The remaining discount amount not yet amortized

Explanation: This calculation adjusts the face value of an instrument to reflect its current accounting value after considering premium or discount amortization.

3. Importance of Carrying Value Calculation

Details: Accurate carrying value calculation is essential for proper financial reporting, bond valuation, and understanding the true value of financial instruments on a company's balance sheet.

4. Using the Calculator

Tips: Enter the face value, unamortized premium, and unamortized discount amounts in currency units. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between carrying value and market value?
A: Carrying value is the accounting value on the balance sheet, while market value is the current price at which the instrument would trade in the market.

Q2: When does a bond have a premium or discount?
A: A bond sells at a premium when its coupon rate is higher than market rates, and at a discount when its coupon rate is lower than market rates.

Q3: How is premium/discount amortized over time?
A: Premium or discount is typically amortized using the effective interest method over the life of the instrument.

Q4: Does carrying value change over time?
A: Yes, as premium or discount is amortized, the carrying value approaches the face value as the instrument nears maturity.

Q5: Is carrying value the same as book value?
A: For bonds and similar instruments, carrying value is essentially the book value that appears on the balance sheet.