There comes a time when certain assets of the enterprise due to their significant depreciation are liquidated. So now let’s talk about how to reflect such disposal of fixed assets from assets.
Documentation of transactions
Before proceeding with the liquidation of fixed assets (hereinafter – FA), you must first determine which assets are subject to liquidation. To determine the unsuitability of the FA for further use, the head of the enterprise creates a permanent commission (item 41 of Recommendations No. 561). Such a commission, after receiving instructions from the head of the enterprise, must carry out a direct inspection of the object to be written off and make a decision on its liquidation (items 41 and 43 of Recommendations No. 561), as well as
- establish the reasons for non-compliance with the criteria of the asset;
- determine the persons due to whose fault the premature disposal of fixed assets from operation, to make proposals for their liability;
- determine the possibility of sale (transfer) of the object to other enterprises, organizations and institutions or the use of individual components, parts, materials that can be obtained as a result of dismantling, disassembly (liquidation) of fixed assets, to establish their quantity and cost.
Based on the FA inspection, the commission must draw up acts for write-off. Usually this decision is documented as:
- Act of writing off of fixed assets;
- An act on the write-off of vehicles.
Today there are valid forms of such acts, approved by Order of the Ministry of Finance No. 818 of September 13, 2016. But one can develop own acts for write-off. They must contain all the mandatory details of the primary document listed in item 2 of Art. 9 of Law of Ukraine “On Accounting and Financial Reporting in Ukraine” No. 996-XIV of July 16, 1999.
The act is drawn up by the commission in two copies:
- the first copy is sent to the accounting department to transfer information to the accounting registers, which is noted;
- the second – remains with the financially responsible person and is the basis for the transfer to the warehouse of spare parts remaining after liquidation, as well as various materials, components, parts and other waste.
On the basis of the received act, the accounting department makes appropriate records on the liquidation of the FA in the Inventory card of the FA.
In addition, you will need an order (instruction) from the head of the liquidation of the FA.
Accounting
The fixed asset, that the commission found unfit for use, and the head of the enterprise agreed with it, should be written off of the balance sheet (item 33 of NAS 7).
For this purpose, on the basis of the act on write-off of FA, accounting carries out the following transactions:
1) cease to accrue depreciation from the month following the month of liquidation of the FA (item 29 of NAS 7). If the production method was used – from the date following the date of liquidation of the FA;
2) write off the accrued depreciation for the period of use of FA by drawing up Dt 13 – Ct 10;
3) write off the residual value of FA for other expenses in the period in which the liquidation of the FA took place, by conducting Dt 976 – Ct 10;
4) all costs associated with the liquidation of FA (salaries of personnel engaged in the dismantling of FA, accrued a single social contribution to their salary, materials used during dismantling or disassembly of FA, services of third parties, etc.) are written off to other costs of the period by cinducting Dt 976 – Ct 66, 65, 631, 20, 22, etc.;
5) if after disassembly or dismantling of the FA the inventory was formed (spare parts, building materials, etc.), they are posted to the balance sheet. In this case, if:
- the company plans to sell them, the inventories are posted at net realizable value;
- the company plans to use them in its business activities, then such assets are posted at the price of possible use.
There are two approaches to posting inventories from liquidation:
1) by recognizing the value of received income reserves (Dt 20, 22, 28 – Ct 746):
2) by separating from the value of the liquidated FA, inventory before the liquidation of FA (Dt 20, 22, 28 – Ct 10).
