Written-Down Value (WDV)

Definition

Written-down value (WDV), also called book value or net book value, is an asset’s carrying amount on the balance sheet after subtracting accumulated depreciation (for tangible assets) or accumulated amortization (for intangible assets) from its original cost.

WDV = Original cost − Accumulated depreciation (or amortization)

Why WDV matters

• Reflects an asset’s current accounting value, not necessarily its market value.
• Helps match expense recognition with the periods that benefit from the asset.
• Serves as a baseline when pricing asset disposals and calculating taxable gains or losses.
• Indicates when an asset is near the end of its useful life and may need replacement.

How WDV is calculated

1. Record the asset at its original cost (purchase price plus any capitalizable costs).
2. Apply a depreciation or amortization method to allocate cost over the asset’s useful life.
3. Accumulate the periodic depreciation/amortization to date.
4. Subtract accumulated amounts from original cost to get WDV.

Example:
* Original cost = $10,000
Accumulated depreciation = $4,000
WDV = $10,000 − $4,000 = $6,000

Common depreciation and amortization methods

Straight-line depreciation (simple, widely used)

Annual depreciation = (Cost − Salvage value) / Useful life
Same expense each period.

Example: Cost $10,000, salvage $1,000, useful life 3 years → annual depreciation = (10,000−1,000)/3 = $3,000.

Diminishing (declining) balance

Applies a constant percentage to the book value each year; depreciation declines over time.
Example: Cost $10,000, rate 20% → Year 1 depreciation $2,000 (WDV $8,000); Year 2 depreciation $1,600 (WDV $6,400).

Units-of-production

Depreciation based on usage (e.g., hours, miles). Useful when wear depends on activity rather than time.

Amortization (intangible assets)

Often uses straight-line for patents, copyrights, and software. Bonds and some financial instruments may use the effective interest method. Loan balances follow repayment schedules dividing interest and principal.

Implications for sale and tax

• When an asset is sold, compare sale proceeds to WDV:
• Sale price > WDV → taxable gain (may trigger depreciation recapture rules).
• Sale price < WDV → loss (may be deductible, depending on tax rules).
• WDV provides the accounting basis for these calculations and affects reported profit or loss on disposal.

Practical considerations

• WDV is an accounting measure and may diverge from fair market value.
• Regularly review useful life and residual value; revise estimates if circumstances change.
• When WDV reaches zero, the asset remains on books only if still in use; otherwise it can be retired or replaced.

Key takeaways

• WDV = original cost − accumulated depreciation/amortization; it shows an asset’s net book value.
• Choice of depreciation/amortization method affects WDV, expense timing, and reported earnings.
• WDV is central to disposal decisions and tax calculations but is distinct from market value.