The director of the company decided to eliminate the fixed asset, which became unfit for further use. How this transaction should be registered and reflected in accounting – in the following.
Documentary registration
The fixed asset item (hereinafter - FAI) is derecognized from the balance sheet and written off in the event of disposal through sale, liquidation, donation, lack, final damage or otherwise non-asset recognition criteria (para.40 of Guidelines on accounting of fixed assets approved by the Order of the Ministry of Finance dated September 30, 2003 No. 561, hereinafter – Guidelines No. 561).
A company may decide to eliminate FA that became unfit for further use. A permanent commission is created to determine their unfitness to use, the possibility of using other enterprises, ineffectiveness or inexpediency of improvement (repair, modernization, etc.) and the registration of relevant primary documents (para.41 of Guidelines No. 561).
The responsibilities of such a commission include:
- direct inspection of the item to be written off;
- establishment of the reasons for non-compliance with the criteria of the asset;
- identification of persons responsible for the premature release of the FA from operation, making a proposal regarding their responsibility;
- determining the possibility of selling (transferring) an object to other enterprises or using separate units, parts, materials that can be obtained during dismantling, disassembly (liquidation) of the FA, determination of their quantity and value;
- drawing up and signing of acts for writing off the FA.
The act made by the commission on the write-off of the FA is reflected in the accounting after its confirmation (approval) by the head of the company.
Reflection in accounting
Details, knots, assemblies and other materials obtained during disassembly and dismantling of the FA liquidated, should be credited with the recognition of other income and the inclusion in the accounts of material inventories, among other material values and details with the contents of materials that are taken (collected) by specialized procurement (processing) enterprises.
The financial result from the release of FA items is determined by deducting from the income from the disposal of FA of their residual value, indirect taxes and expenses related to the disposal of fixed assets.
The depreciation accrual ceases starting from the month following the month of the release of the FA items.
In case of FA liquidation, the amount of accumulated depreciation is written off by carrying out: Dr 131 – Cr 10. Then write off the residual value of FA liquidated by conducting: Dr 976 “Write-off of non-current assets” - Cr 10. If the residual value of such FA is equal to “0”, then they are written off without reflection of such conduct.
As part of the cost of FA liquidation, it should be reflected not only their residual value, but also the costs associated with the elimination (disassembly, dismantling). Also, payment for the labour of the employees, the cost of stocks, services of third parties, etc. can be included in the costs associated with the FA liquidation.
