Every capital asset that is bought has a fixed life and generally some resale value at the end of its life. And the depreciation amount should factor in the expected resale value before hand itself.
However in Modano, I am not able to figure out how and where to put assumptions for resale value of the capital asset at the end of tenure and have that built in the depreciation and cash inflows workings properly.
Any suggestions.
Please advise
Thank you
Sonabh
Hi Sonabh,
The assets modules provided on the Modano website assume that assets are nor revalued, sold or written off - i.e. they assume that assets are depreciated throughout their useful life down to zero.
In many financial models, this is sufficient for forecasting purposes because the uncertainty and complexities associated with modeling revaluations, sales and write-offs more than offset the value it provides.
As I'm sure you're discovered, modeling asset revaluations, sales and write-offs is complicated because the calculations need to take into account adjustments to remaining depreciation whenever a revaluation, sale or write-off takes place, which can get very messy. It also involves adding line items to the financial statements - such as profit/loss on asset sales to the income statement and/or an assets revaluation reserve to the balance sheet. So it's not a simple task.
I don't currently have an example I can provide to the forum, but this is something our support team regularly assist user with, so one option is to request support via the Support section of your Modano account (www.modano.com/account/support) and have one of the team assist you.
M.