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What is salvage value?

In accounting, salvage value is an estimated amount that is expected to be received at the end of a plant asset's useful life. Salvage value is sometimes referred to as disposal value, residual value, terminal value, or scrap value.

The estimated salvage value is deducted from the cost of the asset in order to determine the total amount of depreciation expense that will be reported during the asset's useful life.

Accountants and income tax regulations often assume that plant assets will have no salvage value. This will result in an asset's entire cost being depreciated during the years that the asset is used in the business.