Disposal of capital assets should occur only after proper authorization has been given.
General:
Control over the disposition of property should be maintained not only to preserve the accuracy of the records but also to ensure that assets are safeguarded, improper disposal is avoided, and the best possible terms are received for disposal.
Responsibility
Action
Responsible Department
Complete a Disposal Form for all disposals.
The Department head will review the Disposal Form.
Accounting Department
Review the Disposal Form to verify the retirement/disposal is properly approved and documented.
Remove the cost from the appropriate asset account; the related accumulated depreciation, including depreciation to date of the disposal; and the profit or loss, adjusted for the cost of removal, should be recorded as an income (gain) or expense (loss) item.
When the disposal is via a trade-in of a similar asset, the acquired asset should be recorded at the book value of the trade-in asset plus any additional cash paid. In no instance should the cost exceed the fair market value for the new asset.
Fully depreciated assets should remain on the property records with the related accumulated depreciation as long as the property is still in use.
