What does ACV mean in Accounting?
This page is about the meanings of the acronym/abbreviation/shorthand ACV in the Business field in general and in the Accounting terminology in particular.
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What does ACV mean?
- Actual cash value
- In the property and casualty insurance industry, Actual Cash Value is a method of valuing insured property. Actual Cash Value is computed by subtracting depreciation from the replacement cost. The depreciation is usually calculated by establishing a useful life of the item and determining what percentage of that life remains. This percentage times the replacement cost gives the ACV. As an example: a man purchased a television set for $2,000 five years ago and it was destroyed in a hurricane. His insurance company says that all televisions have a useful life of 10 years. A similar television today costs $2,500. The destroyed television had 50% of its life remaining. The ACV equals $2,500 times 50% or $1,250. This concept is different from the book value used by accountants in financial statements or for tax purposes. Accountants use the purchase price and subtract the accumulated depreciation in order to value the item on a balance sheet. ACV uses the current replacement cost of a new item.