Guaranteed Residual Value (by the Lessee)

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Guaranteed Residual Value (by the Lessee) refers to a commitment by the lessee to ensure that the lessor receives a specified residual value for the leased asset at the end of the lease term. This residual value guarantee reduces the lessor’s risk by assuring a minimum asset value recovery. It is a critical component in lease accounting, impacting both the lessee’s and lessor’s financial statements.

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