why would the book value of a company's identifiable net assets differ from it's market value?

Expert Solution

A company records its assets at its cost of acquisition (subject to revalutation). Such cost is generally depreciated over the life of the asset. The depreciated value at the end of each year or at the time of sale, as the case may be, is called the book value of the asset.

Net identifiable assets are assets whose value can be identified at any time and the benefit derived from it can be easily recognised. It is generally used with respect to business combinations, mergers and acquisitions. In most cases, there is a difference between the book value of the identifiable net assets and its fair value or market value. The difference is due to the goodwill that accumulates over the period of business. Goodwill is an intangible asset that is recorded when we buy a group of assets or a business. The payment over and above the book value is considered as goodwill the company had earned over the years. However, the payment can be lesser than the book value too. In such cases, it is treated as capital reserve.

ekkarill92 answered 1 year ago

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