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Unguaranteed Residual Value Definition The financial accounting term unguaranteed residual value refers to the worth of a lease property at the end of the agreement's term that is not the responsibility of the lessee.
Unguaranteed Residual Value has been defined 3 different ways in documents like 2010 Handbook of International Public Sector Accounting Pronouncements, Glossary of Defined Terms, Glossary of Defined Terms.
In short, residual value is the estimated fair value of the leased asset at the end of the lease, and can be either guaranteed or unguaranteed by the lessee. Guaranteed residual values are usually included in the minimum lease payments.
The residual value may be unguaranteed or guaranteed by the lessee. Sometimes the lessee agrees to make up any deficiency below a stated amount that the lessor realizes in residual value at the end of the lease term.
unguaranteed residual value - noun the residual value of a leased asset that a company is not sure it will ever be in a position to sell What is unguaranteed residual value? Definition and meaning - InvestorGuide.com
When the residual value is not guaranteed, the lessor must reduce the sales revenue and cost of goods sold by the present value of the unguaranteed residual value.
Residual value can be either unguaranteed or guaranteed by the lessee or a party related to the lessee. By means of a residual value guarantee, the lessee is held liable for any difference between a leased asset’s residual value and a lower salvage value realized by a lessor at the end of the lease.
Guaranteed residual values are financial commitments made by the lessee, and factor into the calculation of the minimum lease payment. Explanation. As part of a lease agreement, the lessee may provide the lessor with what is referred to as a guaranteed residual value.
unguaranteed residual value. Complex 30–40 P21-11 Lessee computations and entries; capital lease with unguaranteed residual value. Complex 30–40 P21-12 Basic lessee accounting with difficult PV calculation. Moderate 40–50 P21-13 Lessor computations and entries; sales-type lease with guaranteed residual value. Complex 30–40
From the lessee's viewpoint, an unguaranteed residual value is the same as no residual value in terms of computing the minimum lease payments. t The lessor will recover a greater net investment if the residual value is guaranteed instead of unguaranteed.