Salvage value

Salvage estimates the net recovery after the asset's service ends. Support the gross proceeds and expected removal or selling costs separately. When disposal costs consume all expected proceeds, the net estimate is zero.

Because cost less salvage is allocated, the estimate moves each period's expense. A higher estimate lowers depreciation and raises the amount carried during the asset's life. It can also reduce a later gain or increase a later loss. Repeated disposal losses can therefore justify a review of earlier salvage estimates.

Salvage is also the estimate most often set to zero without argument. Zero is frequently right, and it still needs to be a conclusion rather than a default.

Support the net amount and its date

Document the expected disposal channel, condition, gross proceeds, removal and selling costs, estimate date, and evidence owner. A zero amount is valid when the supported net recovery is zero; it is not an empty spreadsheet default. Keep current fair value and end-of-service salvage as different measurements.

ASC 360-10-35-4 frames depreciation as cost allocation across the expected service period. A particular asset's salvage estimate comes from its disposal evidence.

Use the method and component example to see how a $5,000 floor changes every schedule. Then use shared-input practice to distinguish a floor from an annual subtraction.

Compare the estimate with the outcome

At disposal, separate the supported proceeds and disposal costs from the prior salvage estimate. The difference can inform later estimates for similar assets, but one unexpected sale does not prove that the original estimate was an error. Ask what information existed when the estimate was made and what changed later.

Do not revise prior depreciation merely to force carrying amount to equal sale proceeds. Apply a supported estimate change prospectively and preserve the original evidence, approval date, and remaining allocation base.