Jäävväärtus

Jäävväärtus, a Finnish term, translates to "residual value" or "salvage value" in English. It refers to the estimated worth of an asset at the end of its useful life. This concept is crucial in accounting, finance, and asset management.

In accounting, the residual value is used when calculating depreciation. Depreciation is the systematic allocation of the cost of an asset over its useful life. To determine the depreciable amount, the residual value is subtracted from the asset's original cost. The formula for depreciation is typically (Original Cost - Residual Value) / Useful Life. A higher residual value results in lower annual depreciation expenses, while a lower residual value leads to higher depreciation expenses.

In finance and leasing, residual value is a key factor in determining lease payments. For a lease agreement, the lessor estimates the asset's value at the end of the lease term. The lessee's payments are calculated based on the difference between the asset's initial cost and its projected residual value, plus other costs and profit. A higher residual value generally leads to lower lease payments.

The estimation of residual value can be complex and involves considering factors such as market demand for used assets, the asset's expected condition, technological obsolescence, and economic trends. It is an educated projection rather than a precise figure, and actual resale prices may vary. Accurate residual value estimation helps businesses make better investment decisions, manage their assets effectively, and ensure accurate financial reporting.