What Is the Impact of Salvage Value on Depreciation?

Factors to be considered for depreciation refer to the factors that should be taken into account when depreciating fixed assets. It mainly has: the base of depreciation. The base for calculating depreciation of fixed assets is generally the original cost of obtaining the fixed assets, that is, the original book value of the fixed assets. In some western countries, due to the consideration of the time value of money, there are also claims to calculate depreciation based on the current replacement cost of fixed assets as supplementary information in accounting statements. The new accounting system still requires the original book value of fixed assets to be used as the basis for depreciation. It should be noted that the new system stipulates that fixed assets that have been recorded in the enterprise shall not be changed intentionally except for the following cases. Reassess fixed assets in accordance with national regulations; add supplementary or improved equipment; remove a portion of fixed assets; adjust the original provisional valuation based on actual values; and find errors in the original fixed asset value. When making specific depreciation, an enterprise should take the original book value of fixed assets that can be depreciated at the beginning of the month as the basis. The fixed assets added in the current month will not be depreciated in the current month, and the fixed assets decreased in the current month will be depreciated in the same month. The net residual value of a fixed asset refers to the amount of the residual value that can be recovered when the fixed assets are discarded, after deducting the estimated cleaning costs. Because in the calculation of depreciation, the residual value of fixed assets and the cost of cleaning up can only be estimated artificially, subjectivity is inevitable. In order to avoid artificially adjusting the amount of net residual value and artificially adjusting the depreciation amount, if the actual estimated net residual value of the fixed assets of the enterprise is higher or lower than the prescribed ratio, it can also be determined by the enterprise according to the actual situation. Report to the competent financial authority for the record. The length of the fixed asset's useful life directly affects the depreciation amount that should be provided in each period. When determining the useful life of a fixed asset, it is necessary to consider not only the tangible loss of the fixed asset, but also the intangible loss of the fixed asset. Since the tangible and intangible losses of fixed assets are also difficult to estimate accurately, the useful lives of fixed assets can only be estimated. ^[1]