residual value

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Residual value

Usually refers to the value of a lessor's property at the time the lease expires.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Residual Value

In accounting, an estimate of the value of an asset at the end of its depreciation. For example, a firm's computer depreciates each year. When it breaks down or becomes obsolete, it has a residual value; it is calculated by the best guess of the net cash inflow when it is sold at the end of its life. It will never be above the blue book value.

In price regulated industries, the residual value may be a negative value because it includes the net cash outflow in removing the asset from where it was used. For example, nuclear energy plants must store the nuclear waste at the end of their useful life. This cost is a contributing factor in the residual value. It is also called the salvage value or scrap value. See also: Absolute Physical Life, Obsolescence.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

residual value

The price at which a fixed asset is expected to be sold at the end of its useful life. Residual value is used in calculating some types of depreciation. Also called salvage value, scrap value.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

residual value


scrap value

the amount for which a FIXED ASSET can be sold at the end of its useful working life. The anticipated residual value is taken into account in calculating the amount of DEPRECIATION to be charged against PROFITS each year for the use of the asset during its life. In many cases residual values are assumed to be nil, given the small residual values of many fixed assets and the difficulties of forecasting what such values may be many years ahead.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
References in periodicals archive ?
Because the minimum lease payment, and thus the receivable, no longer includes the guaranteed residual value, the guarantee is now shifted away from the receivable balance and into the residual asset balance; as seen in the sidebar, An Example of R&R Equiment Lease Accounting by the Lessor, this will result in a higher portion of the gross profit being deferred.
In this period, owners have residual value at their disposal (established via assets-based or income-based methods).
Sporty: The Audi TT Roadster is top of the league for holding its residual value.
According to historic costs, the residual value can be defined as being the estimated value of the product in dollars, at the present value of the dollars (without taking in consideration the inflation), at the end of the life-cycle of the product.
Organizations that worked with Converge and its IT asset disposition services division NextPhase recovered more than $28 million in residual value from their remarketed electronic equipment, according to the company.
Under the new system, the company will examine the second-hand car market and other data more thoroughly to estimate the reasonable residual value, according to Toyota Finance.
Illustrations 8-9: Illustration 8 is a leasing transaction in which the tax consequences depend on whether the leased property is reasonably expected to have a residual value of 15% of its value at the beginning of the lease.
Under the relevant tax law, the tax consequences of a leasing transaction depend on whether the property to be leased is reasonably expected to have a residual value of 15 percent of its value at the beginning of the lease.
IFRS makes constant reference to value: recoverable value, residual value, fair value, useful value. will offer a suite of risk management tools to aid aircraft and aircraft component manufacturers, aircraft leasing companies, and financial institutions in the analysis and measurement of risk related to asset and residual value guarantees, aircraft leasing, securities, and manufacturer-contingent liability portfolios.
They are life cycle cost, present value, residual value, benchmark, evaluation criteria, terms and conditions, order of precedence, lease versus purchase, fixed price options and unbalanced proposal guidance.
That's the difference between the residual value (what the car is worth at lease end) and the net capitalized cost (what you pay for the car).