Asset Disposal

Asset Disposal is any activity or activities necessary to dispose of unwanted, unserviceable and/or decommissioned assets. There are two distinct aspects to asset disposals; the physical disposal process, and the associated accounting treatment.

Costs of Disposal

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.

The cost of disposing of an asset is sometimes included in the replacement cost of an asset built in its place. Where no new asset is constructed this is obviously impossible and the only obvious alternative is to expense the disposal cost.

Physical Disposal

The physical disposal of assets can be by resale or donation to another organisation, or to a waste management facility of one type or another.

Accounting Treatment

The value of assets no longer owned by Council (whether sold, lost or having deteriorated to an unserviceable condition), needs to be removed from Councils books. The accounting treatment associated with this removal is known as an asset disposal.

Usually the accounting treatment has a very obvious physical procedure associated with it, e.g. the sale of a vehicle, but in some cases things are less clear. Road seals are a common example that can cause confusion. Sprayed seals have a life of about 10 to 15 years, after which time a new seal is typically applied over the top of the old seal if the road pavement is still in good condition. The old seal is not physically removed, but it needs to be disposed of from an accounting perspective, or the replacement value of the road recorded in the asset register, will be higher than it should be - When the road is finally reconstructed, the pavement and the three, four or five seals it has had over its lifetime will be replaced (in the normal course of events) by a new pavement and a single sprayed seal.

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External Links & References

  1. AASB Glossary of Defined Terms
  2. International Infrastructure Management Manual
  3. Google Search
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