Fixed Asset Disposal (SOP) | Policies and Procedures

Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @
Review date: 2025-08-20
Next review date: 2026-08-20

This SOP applies to the Administrative Department, the Financial Department (Accountant and CFO), the CEO, and the Disposal Committees.

1. Purpose

To detail the step-by-step procedures required for the proper authorization, documentation, and accounting of fixed asset disposals, ensuring all transactions comply with the Fixed Asset Disposal Policy (FIN-007).

2. Scope

This SOP applies to the Administrative Department, the Financial Department (Accountant and CFO), the CEO, and the Disposal Committees.

3. Related Policies

Fixed Asset Capitalization Policy (FIN-005)
Fixed Asset Depreciation Policy (FIN-006)
Fixed Asset Disposal Policy (FIN-007)

4. Roles and Responsibilities

Administrative Department: Initiates the request, manages the physical disposal, and updates the Fixed Assets Register.
CFO: Reviews requests, approves entries, and serves on disposal committees.
Accountant: Records the final journal entry and files documentation.
Disposal Committee: Inspects the asset, recommends the method of disposal, and prepares a formal report.

5. Procedure: Disposal Approval and Execution

5.1. Initiation of Disposal Request

Step	Action	Responsible Party	Documentation / Notes
5.1.1	Complete Disposal Form	Administrative Dept.	Completes the appropriate form, ensuring it is signed by the asset user.
5.1.2	Obtain Manager Approval	Administrative Dept.	Obtains approval signature from the relevant Department Manager.
5.1.3	Submission to CFO	Administrative Dept.	Submits the approved form to the Financial Department (CFO).

5.2. Committee Review and Financial Authorization

Based on the asset's historical cost, the following steps are mandatory:

Historical Cost	Committee / Approval Action	Responsible Party	Notes
All Disposals	CFO Review: CFO reviews the request and determines the appropriate next step based on the cost limits.	CFO	Submits to Committee or for final approval.
<$5,000 BSD	Internal Committee: CFO forms a simple committee (CFO, Admin Employee, User Dept. Employee). Committee prepares report and recommends action.	CFO / Committee	CFO grants final approval.
$5,000 - $10,000 BSD	CEO-Nominated Committee: CEO nominates a committee (CFO, CEO, General Manager, related Professional Staff). Committee prepares report and recommendation.	CEO / Committee	CEO grants final approval.
>$10,000 BSD	Board Approval: The request must be escalated to and approved by the Board of Directors (BoD) after committee review.	CEO / BoD	BoD approval is mandatory.

5.3. Disposal Committee Report

The appointed Committee must prepare and sign a formal report detailing:

Status and identification of the asset.
Reason for disposition.
Suggested disposition method (sale, scrap, etc.).
Prospective gains or losses.
The Committee's final recommendation.

5.4. Execution and Documentation

Step	Action	Responsible Party	Documentation / Notes
5.4.1	Execution of Disposal	Administrative Dept.	Physically disposes of the asset based on the Committee's recommendation and the final approval (CFO/CEO/BoD).
5.4.2	Prepare Disposition Report	Administrative Dept.	Prepares a Fixed Asset Disposition Report once the transaction is complete (including sale proceeds, if any).
5.4.3	Report Approval	CFO	Reviews and approves the final Disposition Report.

6. Procedure: Accounting for Disposal

Step	Action	Responsible Party	Documentation / Notes
6.1	Record Disposition	Accountant	Makes the necessary journal entry based on the approved Disposition Report:
	Disposition through Sale – Gain: Debit Cash, Debit Accumulated Depreciation, Credit Fixed Assets, Credit Gain on sale of fixed assets.	Accountant
	Disposition through Sale – Loss: Debit Cash, Debit Accumulated Depreciation, Debit Loss on sale of fixed assets, Credit Fixed Assets.	Accountant
	Disposition (Non-Cash/Write-Off): Debit Accumulated Depreciation, Debit Loss on Disposal of FA, Credit Fixed Asset.	Accountant
6.2	Post & Final Approval	Accountant & CFO	Posts the journal entry, attaches the approved Disposition Report to the voucher, and submits to the CFO for final review and sign-off.
6.3	Filing	Accountant	Files the complete voucher package in the journal vouchers accounting file.
6.4	Register Update	Administrative Dept.	Ensures the disposition is accurately reflected in the Fixed Assets Register. (See the Recording of Fixed Assets into Assets Register Procedures).

7. Review and Revision

This SOP will be reviewed annually by the Finance and Administrative Departments to ensure continued efficiency and adherence to the Fixed Asset Disposal Policy.