Value to the Owner

Posted in Finance, Accounting and Economics Terms, Total Reads: 664

Definition: Value to the Owner

Value to the owner is an accounting technique to evaluate the value of an asset to the business or owner. It is also known as ‘value to the business’ or ‘deprived value’.

The value to the owner is defined as its deprival value, i.e. by how much the company would be worse off if it were to be deprived of the asset. In other words, how much the entity is "better off" because it holds the asset.

It is based on a premise that the value of an asset can be measured in terms of the loss or damage that the owner would incur if deprived of that asset.

The deprival value of any asset is lower of below two values:

(i) Replacement cost (its value in exchange in the market in which the company can purchase the item)

(ii) Recoverable value

Recoverable amount is whichever higher of two values: the net selling price or use value. Use value is the present value of the benefits company receives by holding the asset.

Value to the owner is asset's minimum assessable value.



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