Depreciation is the draw-down of an asset’s value over its economic lifetime for tax and accounting purposes. Conventional accounting practices draw the value of an asset to zero over a predetermined period. Buildings, machinery, equipment and vehicles are all assets that can be depreciated for tax deduction purposes.
Understandably, this is not intended to be a measure of “actual” asset value at any time after purchase. Most assets retain some value in the market well after their accounting lifetime has expired.
There is an opportunity to capture the actual value of products, components and materials after their first (accounting) life. Integrating real market values for these assets in discounted cash flows and pro forma creates a more informative model for basing financial decisions.