What is the impact of rescue value on depreciation?

Rescue value is the amount of money that the company can get for an asset at the end of the item's life. This number has an impact on the depreciation process because the accountant must hand over the rescue value from the accounting value of the asset to calculate the depreciation. In most cases, national accounting standards will provide instructions on how to determine the value of the asset rescue. The most common way is to estimate what the buyer will pay for the asset on the basis of his age and the remaining life. This formula is a lower value to save the value divided by the number of useful years for asset. For example, a machine that costs $ 150,000 in the US (USD) with a rescue value of $ 25,000 has a depreciable amount of $ 125,000. If the value of the rescue is higher, the company will depreciate a smaller asset, which will lead to lower expenditure and higher net income. While is obviously not bad on the surface, inappropriate calculation can seriously increase the impact of rescue on depreciation.

Since the value of rescue is an estimate, this may lead to the company to lose calculations from the calculation of depreciation. In some cases, the accountant will place the value of rescue assets to zero. This will remove the need for what the company can sell asset in the future period. In some cases, the company may need to write off any residual value when it sells an asset. Poor estimates of the value of the rescue value may result in significant one -off costs that will reduce net income. This is particularly dangerous for companies publicly held whose stock prices may fall if investors are on the lookout of a lower net income or loss of traffic.

Auditors often pay close attention to the impact of rescue on depreciation as calculated by society. Companies often calculates the rescue values ​​based on the current market value for asset, which are similar at the expected age or lifetime. In some cases, government agencies canyytnit an asset class with predetermined rescue estimates. Auditors will need to check internal calculations or selected assets for tax purposes.

Auditors often discuss calculations with the company management and ask for any work documents related to rescue in depreciation for assets. Reports from depreciation audits will include all inappropriate calculations regarding the value of rescue and proposed repair. Most companies will have to make these repairs in the current year, so taxes are not incorrect.