Salvage value
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Estimated residual value of an asset at the end of its useful life; used to determine depreciable base.
Salvage value in plain English
Salvage value is your best guess of what a big item will still be worth at the very end of its useful life to you — the leftover scrap-or-resale value. It matters because you only spread out the cost you'll actually 'use up,' not the part you can sell later. If a delivery van costs $30,000 and you figure you can sell it for $5,000 once it's worn out, then only $25,000 gets spread across its working years as depreciation (the yearly cost of using it up). It's like buying a bike for $200 knowing you can resell it for $50 — the real cost of your years of riding is the $150 in between.
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