Average Depreciable Life

[archived_user]

Quick question:
Average Depreciable Life = Ending Gross Investment / Depreciation Expense
If the grosss investment had a salvage value, Would this salvage value be added or substracted from gross investement?

 

[archived_user]

Gross investment is total investment made to acquire long term assets till date. Its not influenced by salvage value.
Salvage value will be included in depr expense calculation..
So i think we don’t need to make any adjustments for salvage value..

 

[archived_user]

yup, salvage value does not need any adjustment … it is taken care of in depreciation and also salvage value is not depreciated so it is not relevant …
Also, Avg depreciable life is not good of a ratio, if company uses accelerated depreciation method… for SL it serves its function best …
Under FASB GAAP, no fixed asset schedule is given so we have to rely on these ratios, but under IFRS fixed asset schedule is given so the task becomes very easy…