What does Book Value measure in relation to depreciation adjustments?

Book value measures the value of an asset after accounting for accumulated depreciation, reflecting its current valuation on the balance sheet. When depreciation is applied, it reduces the asset's original cost over time, representing the gradual wear and tear or usage of the asset. By deducting the accumulated depreciation from the asset's original cost, book value provides a more accurate representation of what the asset is worth to the company at a given point in time.

This concept is key for businesses as it influences asset management decisions and helps in assessing the remaining useful life of assets. Knowing the book value allows companies to make informed decisions about further investments, sales, or disposals of assets. Understanding book value is also vital for financial reporting, where stakeholders analyze the health and performance of a company based on its reported financial position.