What is ‘Above Water’
1. Refers to the condition of a company’s asset when its actual value is higher than the book value used in its financials.
Explaining ‘Above Water’
1. Generally, the book value of an asset listed in a company’s balance sheet cannot be adjusted according to Generally Accepted Accounting Principles (GAAP). Should the asset appreciate, its market value would be “above water”. A company with above water assets tends to attract value investors. This is because of the hidden value that most investors won’t discover if they don’t look beyond the financials. For example, if a company purchased a piece of land for $100,000 and the company later discovered an oil reserve on the property, the market value of the land would increase and be above water, because the book value would remain at $100,000.
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