Salvage value — called residual value under IFRS — is your best estimate of what an asset will be worth when you stop using it, after the costs of disposing of it. It is subtracted from cost to find the amount to depreciate.
Example
Van cost $40,000; expected resale after 5 years $10,000, less $500 to prepare and sell it → salvage value $9,500.
Depreciable base = $40,000 − $9,500 = $30,500 → $6,100 a year straight-line.
Why it matters
Too high a salvage value understates depreciation and overstates profit; too low overstates depreciation. Many organizations use zero for IT and other assets with little resale value. Residual values should be reviewed periodically, and changes applied going forward.
In Asetavo
Salvage value can be set per asset or as a category default and is used by every depreciation method.