CMA Study Group

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  • 1.  Question on Investment decision

    Posted 10-15-2019 08:16 AM
    Would salvage value be considered while calculating depreciation? I heard not to consider salvage value but the questions in wiley has salvage value. Help please.

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    Ananthu Sajeev
    Student
    Ernakulam
    India
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  • 2.  RE: Question on Investment decision

    Posted 10-15-2019 09:14 AM
    You need a depreciable base for calculating the depreciation. Except double declining method, salvage value is used for calculating the depreciable base.

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    Arpit Amar
    Controller
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  • 3.  RE: Question on Investment decision

    Posted 10-16-2019 08:55 AM
    Can you provide the full question? As Arpit said, for calculating GAAP depreciation expense, you use salvage value unless you're using a declining balance method. For US Tax purposes, however, salvage doesn't exist. And as far as "investment decisions" go, these should ideally be based on discounted cash flows, not GAAP earnings.

    The specific nature of the question will help us clear up your confusion.

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    David Barrett
    Academic
    University of Maine
    Hampden ME
    United States
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