Fixed Asset Retirement and Disposal

Companies often remove fixed assets from service when those assets become obsolete because of physical (deterioration) or economic (technological innovation) factors. Assets can also be sold (disposed of) to another company:

  • The remaining gross PP&E and accumulated depreciation of a sold asset are removed from the balance sheet.

  • “Gain/loss on disposal of an asset” is recorded pretax on the income statement.

  • Recall that gain/loss on asset sales is considered part of nonrecurring items (“infrequent or unusual items” category).

Exhibit 6.7. Accounting Treatments at Different Phases of a Fixed Asset’s Life
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