Residual value

Residual value is the amount an entity expects to recover from an asset at the end of its useful life, deducted from cost to give the depreciable amount used in every depreciation formula.

ByHoang TruongUpdated July 11, 2026

FrameworkIAS 16

See it move

Loading infographic...

Equipment costing €50,000 is expected to fetch €5,000 after five years. The depreciable amount is cost minus residual value, €50,000 − €5,000 = €45,000, spread over five years for €9,000 of depreciation a year. The €5,000 residual value itself is never depreciated at all.

Where it fits

SubjectFinancial AccountingCoreTopicAsset Measurement & ValuationCore

The formula

LaTeX

D = \frac{C - R}{n}

Variables

$D$: Annual depreciation charge (€)
$C$: Cost of the asset (€)
$R$: Residual value (€)
$n$: Useful life (years)

Residual value reduces the amount that gets depreciated; only the depreciable amount is spread over the asset's useful life.

Check yourself

PracticeCORE

A delivery van costs €32,000. Management estimates it will be sold for €4,000 after a 4-year useful life. Using straight-line depreciation, what is the annual depreciation expense?

Select an answer to check your understanding.