What is Value?

Value is the worth of an asset or liability, measured in monetary terms. The most accurate derivations of value use the market price that can be obtained to acquire an asset or dispose of a liability, assuming the presence of independent third party buyers and sellers, where there is no pressure to enter into a sale or purchase arrangement.

Changes in Value

The value of an asset can change. For example, a tractor will experience a reduced value over time as it incurs wear and tear through daily use. Conversely, the value of a painting may increase over time as collectors gain a better appreciation of the collection of works created by the painter.

Book Value

Book value is the recorded cost of an asset in an organization’s accounting records. Book value tends to decline over time because of ongoing depreciation charges, unless assets are replaced by new ones at regular intervals. If an asset is deemed to be impaired, then its book value will be reduced by the amount of the impairment charge.

Marketing Value

The value concept is different in marketing, where it represents the extent to which goods and services are perceived by customers as fulfilling their needs. A customer is more likely to pay an increased amount when the perceived level of value is higher. Thus, value can be related to the perceived quality of a product, the number and type of features incorporated into it, the ability of the seller to deliver and service it, the satisfaction gained by using it, and so forth.