The depreciable life and salvage rate of fixed assets is an important concept in corporate financial management, which involves the useful life and amortization of the value of the assets. The depreciable life of fixed assets varies according to their nature and use, including 20 years for houses and buildings, 10 years for production equipment such as airplanes and trains, 5 years for appliances and tools, 4 years for means of transportation, and 3 years for electronic equipment. The estimated net residual value, once determined, cannot be changed at will and it plays a key role in calculating depreciation.
The salvage rate is an important ratio for assessing the residual value of fixed assets, and is presented as a percentage by comparing the present value of the asset with the initial purchase price. For fixed assets that can no longer be used or need to be accounted for, the calculation of the salvage rate helps companies understand the recovery of their value. Assets, including cash, physical assets, intangible assets and investments, are only accounted for if they are resources that can bring economic benefits to the business.
Liabilities, on the other hand, are debts that need to be repaid by the enterprise in the future, such as short-term and long-term borrowings, and the difference lies in the time of repayment. Owners' equity, on the other hand, represents the interest of the owners in the net assets of the enterprise, and its changes are closely related to the operating results of the enterprise. Revenue and expenses are the core indicators of business operations, the former is the cash inflow, the latter is the cost of consumption, the relationship between them determines the profit of the enterprise.
Fixed assets, especially equipment used for a long period of time, need to be cleaned up when they reach the end of their useful life, and the resulting clean-up income is determined by calculating the salvage value rate. The purpose of depreciation is to amortize the initial cost of fixed assets evenly over their useful lives, which is consistent with the accrual principle and avoids inaccurate estimation of profits. However, companies need to pay attention to the specific depreciation scope, impairment provision and the rules for dealing with depreciation across years when dealing with fixed assets.
Overall, understanding and accurately dealing with fixed asset depreciation lives and salvage rates is key to financial planning and tax planning, helping to ensure that the value of assets is reasonably allocated and corporate profits are accurately reflected.