Depreciable Basis

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 18, 2023

Depreciable Basis: Definition

Depreciable basis is the asset acquisition cost less its estimated residual value.

Depreciable Basis: Explanation

The total amount of depreciation that should be recorded in an asset's life is called its depreciable basis. The amount is the difference between the value of the asset at the beginning of its life (cost) and its estimated value at the end of its life (salvage value).

The use of estimated salvage value is not well established in practice. In fact, a major survey revealed that 59% of companies simply assume a salvage value of zero.

Three reasons cited for this assumption were the lack of materiality, the inability to estimate salvage value with reliability, and the fact that salvage value can usually be ignored for tax purposes.

If an estimate needs to be made, information concerning its amount is available from the firm's prior experience, manufacturers, or trade associations of users.

Depreciable Basis FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.