posted on 06-06-2019

Above Water

Updated August 7, 2020

What is Above Water?

Above water is a term to describe being financially stable. In accounting, the term often refers to assets whose market value is higher than book value.

How Does Above Water Work?

For instance, let's say John Doe has $30,000 of credit card debt and has no savings. He gets a better job that pays him twice as much, enabling him to pay off his credit cards and start a retirement account. Finally, John is above water.

Similarly, let's say Company XYZ buys a robot for $10,000. It records the value of the asset as $10,000 on its balance sheet, and then it depreciates that asset by $1,000 a year. By the end of two years, the book value of the asset is therefore $8,000. However, the demand for these robots has skyrocketed and they are in short supply. Company XYZ could actually sell its two-year-old robot for $15,000 -- far more than its recorded value. The robot is above water.

Why Does Above Water Matter?

Above water is usually a good place to be. The phrase denotes financial stability. Its opposites are "underwater" or "treading water."