yasaswi gomes (My grammar is 💯 good I) 15 January 2021
Determination of residual value of an asset is normally a difficult matter. If such value is considered as insignificant, it is normally regarded as nil. On the contrary, if the residual value is likely to be significant, it is estimated at the time of acquisition/installation, or at the time of subsequent revaluation of the asset. One of the bases for determining the residual value would be the realisable value of similar assets which have reached the end of their useful lives and have operated under conditions similar to those in which the asset will be used.
the above is gap and you can understand the uncertainties involved in calculating the residual value.
While the schedule 2 of company acts has a detailed list of estimated useful life and from I found out today, residual value is added to the retained earnings. It’s not written off, interesting!! Maybe it’s carrying or NRV on disposal. I didn’t have time to investigate this.
From the date this Schedule comes into effect, the carrying amount of the asset as
on that date—
(a) shall be depreciated over the remaining useful life of the asset as per this
(b) after retaining the residual value, shall be recognised in the opening balance
of retained earnings where the remaining useful life of an asset is nil.
Ill get back with formulas, after completing my lunch