The residual value (salvage value) of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Residual value is the value remaining in the asset at the point in time when the asset has deteriorated to a point that it must either be closed or renewed, and is therefore not usually the same as scrap value. The Australian Accounting Standards Board recognises that the renewal of an asset represents the disposal of the existing asset and the creation of a new asset with a new Useful Life.
Alternate Definitions
The IIMM defines "Residual Value" as "the net market value which would be realised from disposal of an asset or facility at the end of its life.
The DVC defined "residual value" as "the net amount which an entity expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal.
Notes
Section 54 of AASB 116 states that the residual value of an asset may increase to an amount equal to or greater than the asset's carrying amount. If it does, the asset's depreciation charge is zero unless and until its residual value subsequently decreases to an amount below the assets carrying amount.
