Appraisal Capital

OK, you bought a junker car that doesn’t run. You bought it for $75. Your mechanic appraised it as being actually worth $100. The difference of $25 will get neatly noted in your 1980s-style notebook (you’ve been watching way too much Stranger Things).

In company context, you've acquired an asset...like $5 million worth of Grid A 5 gig DRAM processors. They're a volatile asset. Their value goes up and down quickly in the marketplace. The government regulates Taiwan's DRAM plant imports into the U.S. and prices spike. Those processors that you paid $5 million for now have a market value of $8 million.

To arrive at a fair appraisal value (or "Net Value"), you have to adjust the line item to reflect "greater of book or market value" when you record the new numbers and you’ll subtract the book value from the appraisal value. The entry reflecting the gain against book value, on your balance sheet, shall henceforth be known as "appraisal capital." It will become equity.

Until Russia comes online, supplanting the Taiwanese units and market prices crash. Then you have to redo everything. Keeps accountants employed.