Like when you lie about how much money you have when you go out for an evening and then end up having to borrow from a buddy when it's your turn to buy a round of drinks. It's also a way to measure the value of insurance companies.
Certain businesses are hard to value. Financial institutions, like banks and brokerages, present some problems. Insurance companies even more so. That's because the whole business of an insurance company is to take on other people's risk, meaning they have a large amount of potential future obligations that are complicated to define in present-day dollar terms.
The details of figuring out adjusted net worth are something only an accountant could love. Just to paraphrase the formula provided by an industry organization called the Institutional Risk Management Institute:
Adjusted Net Worth = estimated value for a book of business + unrealized capital gains - (less potential income tax on the gains) + (capital surplus + voluntary reserves of an insurer). The IRMI then adds "other adjustments are frequently made as well." So best get your big boy (or big girl) accounting pants on before figuring that one.
Related or Semi-related Video
Finance: What are Hidden Assets?2 Views
Finance allah shmoop what are hidden assets Come and listen
to a story about a man named did poor mountaineer
Barely kept family Remember them Beverly hillbillies never watched nick
at nite Well ask your parents Yes So jet owned
forty acres and a mule and had been farming well
forever Then one day he was shooting at a raccoon
You think that's what that is When up from the
ground came a bubbling crude oil that is texas tea
black gold You know the song So yeah jed stumbled
on an oil or a goldmine and hundreds of millions
of dollars later that hidden asset like the oil was
hidden from his farm He just didn't know it was
there that he was shooting at a coon and gave
him a really nice swimming hole in nine o two
one oh seriously great hidden assets happen all the time
in corporate america as well A patent for flying robot
cars that the company didn't realize it had which suddenly
became relevant when you know tracking drones became like a
thing Broadcast rights attached to a tv station acquisition where
new technology lets cell phone spectrum clamp on and produce
Extremely clear phone calls while that asset was hidden No
not so much Well a change in tax law such
that the huge tax losses in the bankrupt company and
wired for scrap are now suddenly age enormous tax deduction
The acquirer won't pay taxes now for two years because
of it well asset don't remain hidden very long Usually
companies have to disclose where they find value if for
no other reason than that it usually goose is their
stock price and everyone likes being rich right Okay so
some people's idea of riches having eighty acres and two
mules But you know that's just jet good and listen
to a story about a man named shmoop over mountains 00:01:49.471 --> [endTime] and never never mind
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