Posted in Finance, Accounting and Economics Terms, Total Reads: 554
Abandonment can be used in many instances but the core meaning which is self evident from the word is forfeiting the claim on any asset. It can e used with regards to both tangible assets and intangible assets. Tangible assets such as land, car and intangible one such as patents and lease. It can be used in derivative market if the option is not worthwhile to exercise then the option holder lets the option to expire voluntarily.
This happens when the option is out-of-money on the exercise date. The clause of abandonment adds value to the contract and provides flexibility to both the trading parties when the contract proves unprofitable. It can also happen in forward contract where one party withdraws from the contract before the due date. Companies can withdraw from projects which they deem to be unprofitable. It can also be used in broader terms with one responsibity towards ones family.
Abandonment differs from surrender where the owner looses the property i.e. unintentional loss of property. Simply leaving the property will not be termed as abandonment, one has to fulfil the legal terms before abandoning ones property.