Whilst we have discussed the term ‘residual value’, we haven’t really approached the matter of this being changed.
An asset’s residual value is an estimate the management makes using it’s best knowledge of the asset, it’s condition, it’s possible market at the end of it’s useful life, how extensively it will be used and so on. It’s not just the value the management believes they can get for the asset, but the conditions and inputs for determining the price. Continue reading