Impairment and disposals

Two kinds of events end (or shorten) an asset's life on the books: impairment (write-down because the asset is worth less than its carrying value) and disposal (the asset leaves the books entirely — sold, scrapped, lost, donated). Each has its own posting and its own evidentiary requirements; both attract auditor attention because the workspace's discretion is largest here.

TL;DR — Impairment lives in Fixed Assets → Impairment reviews. Trigger a review on the asset → assess → if write-down warranted, post the adjustment + the new depreciation schedule. Disposal lives on the asset record → Dispose action. Pick disposal type (sale / scrap / loss / donation), enter proceeds (if any), the gain/loss posts automatically.

Impairment indicators

Impairment isn't run on every asset every period — you assess when indicators suggest the carrying value may not be recoverable.

Run an impairment review

1. 1

   Open Fixed Assets → Impairment reviews → New review

   Or open the asset record → Trigger impairment review.

2. 2

   Document the indicator

   Pick the indicator + write the supporting rationale. The indicator is the basis for triggering; the rationale is what an auditor reads first.

3. 3

   Step 1 — Recoverability test

   Compare undiscounted expected future cash flows against the asset's carrying value. If cash flows exceed carrying value, no impairment is required; document and close.

4. 4

   Step 2 — Measure the impairment

   If recoverability fails: impairment = carrying value − fair value. Fair value comes from market quotes, comparable sales, or discounted cash flows. Document the method + the source.

5. 5

   Step 3 — Post the impairment

   The journal reduces the asset's net book value to the fair value + charges impairment expense. Depreciation thereafter is on the new, lower carrying value over the remaining useful life.

6. 6

   Step 4 — Close the review

   The review attaches to the asset's history. If the workspace's policy requires committee approval for impairments above a threshold, the review routes accordingly.

Held for sale

When the workspace commits to selling an asset and the sale is expected within a reasonable window, the asset reclassifies as held for sale. Depreciation stops; the asset is carried at lower-of-cost-or-fair-value-less-costs-to-sell.

1. 1

   Open the asset → Held for sale

   The reclassification form opens.

2. 2

   Confirm the criteria

   Management committed to the plan; asset is available for immediate sale in its current condition; active program started to locate a buyer; sale is probable within ~12 months; price is reasonable; plan is unlikely to change.

3. 3

   Reclassify

   Depreciation halts. The asset moves to the held-for-sale classification.

4. 4

   Adjust to lower-of-cost-or-fair-value-less-costs-to-sell

   If fair value less costs to sell is below carrying value, record the impairment.

5. 5

   Complete the sale

   When the sale closes, run the disposal flow with the actual proceeds. Held-for-sale → disposed.

Dispose an asset

1. 1

   Open the asset → Dispose

   The disposal form opens.

2. 2

   Pick the disposal type

   Sale (proceeds received), Scrap / abandonment (no proceeds), Loss / casualty (insurance proceeds possible), Donation (charitable; document the fair value at disposal), Trade-in (proceeds + cost of replacement asset acquired).

3. 3

   Enter proceeds (if applicable)

   Cash received from a sale, insurance proceeds for a casualty, fair value transferred on a trade-in.

4. 4

   Enter the disposal date

   Typically today; can be a documented prior date for late recordings (e.g. discovered scrapping).

5. 5

   Capture the supporting documents

   Bill of sale, donation receipt, scrap-yard tag, insurance claim, etc. Each is hashed on upload.

6. 6

   Post the disposal

   The journal: remove the asset's cost + accumulated depreciation; record proceeds (if any); record gain or loss as the plug. The asset moves to Disposed state.

Gain / loss on disposal

The gain or loss is the plug of the disposal journal.

Partial disposals + componentization

For assets that have components (e.g. a building with HVAC, roof, elevators as separately depreciated parts), a partial disposal is the disposal of a component while the rest of the asset continues. The component's cost + accumulated depreciation are removed; the remainder continues.

The new component (e.g. a replacement roof) is acquired as its own asset, often with a useful life shorter than the building's.

Every field, explained

Common gotchas

• "Asset is sitting unused but we haven't impaired it." Idle isn't impaired. Run the recoverability test; if expected redeployment cash flows exceed carrying value, no impairment is required. Document the recoverability conclusion regardless.
• "Auditor is questioning the fair value method." Document the method, the data sources, and the assumptions. Fair value is judgment; defensible documentation is the defense.
• "Asset was scrapped months ago but never disposed in the system." Record now with the actual disposal date. The catch-up adjustment posts in the current period with a note on the late recording.
• "Trade-in is being treated like a sale." Functionally similar but bookkeeping differs — the proceeds are the fair value of the new asset, and the new asset's basis is its fair value (not the cash portion). Use the trade-in disposal type so both sides post correctly.
• "Insurance hasn't paid yet on a casualty loss." Record the loss when the casualty happens; record proceeds when received. The intervening period reflects the open receivable for expected proceeds.

Troubleshooting

How this is recorded

Impairment reviews + disposals write to the asset's history ledger

• the close ledger. Each step — indicator, test, measurement, posting — is signed off + timestamped. Supporting documents are hashed; integrity violations are flagged. The asset record stays in the register (in Disposed state) for the retention period; deletion is governed by the workspace's audit-log retention FINANCE floor.