[wishiwasaCPA]

So, I was thinking about this today. I work in public accounting and obviously I’ve testing fixed assets. When I look at fixed assets additions or a roll forward I never see any “salvage value”. I’ve never had the client say “hey, this asset was purchased for $20k and we have a $5k salvage value on that that’s why this invoice doesn’t tie to our additions schedule”.

Does anyone practicing ever see salvage value? Isn’t salvage value basically how much you can sell it for when you are done with it? I mean, if I buy a truck and decide the “salvage value” is $5k and it cost me $20k so I journalize it for $15k and then never sell it wouldn’t that just be a very effective way of understating depreciation expense especially if I kept it on the books for 20 years and its still running but there is no way I could sell it for $5k? Furthermore, if the “salvage value” is $5k and I actually get it for $3k where is that “loss” recognized? Impairment?

Depreciation is so easy to calculate in itself but the whole salvage value is a mystery to me. It almost sounds like there is a mysterious junk yard that sets a value for each asset that’s ever existed and will take it from you at that value no matter what so therefore you can journalize it however you want.