Fully depreciated asset,
Definition of Fully depreciated asset:
A point in asset valuation for accounting purposes whereby the remaining value is equal to its salvage value. At this point, the asset is considered to have exhausted its useful life.
A fully depreciated asset is a property, plant or piece of equipment (PP&E) which, for accounting purposes, is worth only its salvage value. Whenever an asset is capitalized, its cost is depreciated over several years according to a depreciation schedule. Theoretically, this provides a more accurate estimate of the true expenses of maintaining the company's operations each year.
An asset can reach full depreciation when its useful life expires or if an impairment charge is incurred against the original cost, though this is less common. If a company takes a full impairment charge against the asset, the asset immediately becomes fully depreciated, leaving only its salvage value (also known as terminal value or residual value). The depreciation method can take the form of straight-line or accelerated (double-declining-balance or sum-of-year), and when accumulated depreciation matches the original cost, the asset is now fully depreciated on the company's books.
How to use Fully depreciated asset in a sentence?
- A fully depreciated asset is one which has experienced its full useful life and its remaining value is just its salvage value.
- Salvage value is the book value of an asset after all depreciation has been fully expensed.
- A fully depreciated asset on a firm's balance sheet will remain at its salvage value each year after its useful life unless it is disposed of.
Meaning of Fully depreciated asset & Fully depreciated asset Definition