In this guide
This guide explains how depreciation is calculated, how secondary-market value is determined, and how to use both numbers to make better equipment-management decisions.
Depreciation Models
The two most common depreciation models applied to medical equipment are straight-line and accelerated depreciation. Each produces a different book value at any given point in the asset’s life.
- Straight-line depreciation: cost minus salvage value divided by useful life in years — a consistent annual reduction in book value.
- Accelerated depreciation: larger deductions in early years, smaller later. Common for tax purposes and rapid early obsolescence.
- Sum-of-years-digits and double-declining-balance are variants of accelerated depreciation used in some health-system frameworks.
Most hospitals apply useful-life assumptions of five to ten years for major equipment — which means equipment is often fully depreciated to salvage value while still carrying significant secondary-market value.
How Facilities Track Depreciation
Depreciation is typically tracked in the fixed-asset ledger maintained by finance. Supply chain teams access the data through asset-management software or finance reports. At disposal, the difference between net book value and actual sale proceeds is recognized as a gain or loss.
For fully depreciated equipment, any sale proceeds represent a gain on the income statement — relevant to not-for-profit facilities and those subject to specific revenue-recognition requirements.
Impact on Equipment Decisions
- Fully depreciated equipment still generates real recovery value in the secondary market.
- Book value is not a useful proxy for sale price in either direction.
- Equipment with high OEM demand may hold value far above book.
- Equipment in fast technology cycles may sell below book before full depreciation.
- Timing of sale relative to OEM support status significantly affects recovery.
FMV and Valuation
Fair market value is the standard for non-arm’s-length transactions — transfers between related entities, donations, and transactions subject to Stark Law or Anti-Kickback review. It represents the price a willing, knowledgeable buyer and seller would agree to in an open market.
Liquidation value is lower than FMV because it assumes a time-constrained sale. Using liquidation value where FMV is required creates audit exposure; using FMV for a time-constrained disposal creates unrealistic recovery expectations.
Get a Valuation
Surgical Liquidations provides market-based valuations grounded in actual secondary-market transaction data. If you need an accurate FMV or liquidation value for planning, compliance, or sale purposes, contact us to request a written assessment.