reversal?, page-8

Book values can be very, very, deceptive. Intangibles are often hard for an accountant to get their mind around and accounting often depreciates assets at different rates to actual depreciation of the value of the asset. Company auditors are accountants further removed from the company activities and sometimes reality and their thinking are miles apart. The most dangerous aspect to share pricing is to rely on book values when investing.

Take a car as an example. The day you buy it the price paid is the book value. It is no longer worth that amount. At the end of the depreciation period it may have very little book value but you will still ask a much higher price if you wish to sell it.