How to Find Salvage Value with the Straight-Line Method
Straight-line depreciation is a method that reduces the historical value of a fixed asset. Accountants compute depreciation for all fixed assets a company owns and uses in normal operations. One specific part of this calculation is the asset's salvage value. The salvage value represents the final asset value at the end of the item's useful life. Accountants determine salvage value by reviewing current information, looking at current guidelines or making an educated guess about the asset's final value.
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Instructions
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Research the fixed asset provider's guidelines for both useful life and salvage value. Each manufacturer of fixed assets often provides information for these two figures. Accountants can use the suggested salvage value for an asset.
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Review current generally accepted accounting principles or Internal Revenue Service guidelines for straight-line depreciation. Both GAAP and the IRS group fixed assets into specific categories. Each group includes a salvage value for assets within the category. Accountants will typically use these when available.
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Estimate the asset's salvage value based on the items useful life and potential market value. For special fixed assets, a small market often exists for these items. The absence of standard salvage values require accountants to look at what current assets sell for at the expected age of the asset. This estimate then represents the asset's salvage value.
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Tips & Warnings
Not all assets will have a salvage value. Companies that can prove they plan to use the asset until there is no value left can remove this portion of the straight-line depreciation calculation. The result is the asset will be worth no more than scrap when the company takes the asset out of operation.
