A lease‘s remaining carrying value after it has been fully depreciated at the end of its term. This value reflects the estimated fair value of a leased asset at the end of the lease period. The residual value may be guaranteed (GRV) or unguaranteed (URV) by the lessee. A guaranteed residual value results from a lessee’s agreement to cover any shortfall below a stated amount in the leased asset’s value at the end of the term. This value affects the lessee’s calculation of the minimum lease payments (at present value) and, as a result, the amounts to be capitalized as a leased asset and a lease obligation.

If the residual value of a leased asset turns out to be higher than the amount guaranteed by the lessee, the lessor is not obligated to make up the excess for the lessee.

The residual value, whether guaranteed or not, is assumed to be realized at the end of the lease term.