2025 Price Guide: Fully Depreciated Assets Explained with Examples

Adam Hayes, Ph.D., CFA, brings over 15 years of Wall Street experience as a derivatives trader and is a specialist in economics and behavioral finance. Holding advanced degrees from The New School for Social Research and University of Wisconsin-Madison, Adam also teaches economic sociology at Hebrew University in Jerusalem.

What Is a Fully Depreciated Asset in 2024?

A fully depreciated asset refers to property, plant, or equipment (PP&E) that has reached the end of its accounting useful life. At this point, the asset’s book value equals its salvage value, and no further depreciation expenses are recorded. This status helps companies accurately reflect the cost of using their assets over time while maintaining precise financial records.

Key Insights:

• Fully depreciated assets have exhausted their allocated depreciation, retaining only salvage value on the books.
• Salvage value represents the estimated residual worth after the asset’s useful life.
• These assets remain on the balance sheet at salvage value until disposal.

How Assets Become Fully Depreciated

Assets reach full depreciation either by the passage of their estimated useful life or through impairment charges that reduce their book value. Depreciation methods such as straight-line or accelerated approaches spread the asset’s initial cost over time. When accumulated depreciation equals the original purchase price minus salvage value, the asset is considered fully depreciated.

Since predicting an asset’s exact lifespan is challenging, companies often adopt conservative depreciation schedules to recognize expenses sooner. This strategy minimizes unexpected losses if assets wear out faster than anticipated. Despite being fully depreciated, many assets continue to function effectively and contribute value beyond their accounting life.

Accounting Implications of Fully Depreciated Assets

When an asset is fully depreciated but still in use, no additional depreciation expense is recorded. The balance sheet shows the asset at its original cost offset by accumulated depreciation, resulting in the salvage value. This situation can improve operating profit figures under GAAP, as depreciation expenses cease. Upon disposal, the asset and accumulated depreciation accounts are adjusted to remove the asset from company records.

Practical Example: Depreciating a Company Vehicle in 2024

Imagine a company purchases a sales car for $50,000 with a 10-year useful life and an expected salvage value of $5,000. Using the straight-line depreciation method, annual depreciation equals ($50,000 - $5,000) divided by 10, resulting in $4,500 per year. After 10 years, the car’s book value is reduced to its $5,000 salvage value, marking it as fully depreciated.

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