Definition: A measure of the lowest value that an asset can be written to.
Assets do have constant values, but they also depreciate in value over time due to age and use. The residual value of an asset is found after an assessment of what its value will be at the time that it is no longer being used.
In accounting, the residual value of an asset will eventually be deducted depreciation.
Finding the residual value
An asset's residual value is dependant on numerous factors. First, it is assessed based on the likelihood that there is an active market for the asset at the end of its useful life.
Buildings, for example, are usually able to maintain a high residual value. Specialized machinary however often has a low residual value – because it depreciates in value very quickly.
Generally speaking, the more times that an asset can be used, the higher residual value it will have.
The residual value in e-conomic
In the e-conomic accounting application, the residual value is applicable when working with fixed assets.