Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @
Review date: 2025-08-20
Next review date: 2026-08-20
This policy applies to all fixed assets owned by Easyterms that are to be retired, sold, scrapped, or removed from service, regardless of their current net book value or condition.
To establish clear guidelines for the identification, approval, and accounting treatment required for the disposal of fixed assets, ensuring proper control and accurate recognition of any resulting gains or losses.
This policy applies to all fixed assets owned by Easyterms that are to be retired, sold, scrapped, or removed from service, regardless of their current net book value or condition.
The Administrative Department is responsible for identifying assets that meet any of the following disposal criteria:
Obsolete assets.
Assets damaged beyond repair.
Completely used assets (junk).
Assets subject to mysterious disappearance (e.g., loss).
Assets subject to involuntary conversion (e.g., theft or casualty).
Removal of Net Book Value: Disposing of a fixed asset requires its Net Book Value to be removed from the accounting records. This involves simultaneously removing the asset’s Original Cost (from the Fixed Assets account) and the corresponding Accumulated Depreciation (from the Accumulated Depreciation account).
Gain or Loss Recognition: Any difference between the proceeds received (if sold) and the asset's Net Book Value at the date of disposal must be recognized as a Gain or Loss on Disposal of Fixed Assets.
Profit and Loss Impact: This gain or loss shall be recognized in the Company's Profit and Loss statement for the year in which the asset was officially removed from service.
The approval hierarchy for fixed asset disposal is based on the historical cost of the asset:
Historical Cost | Required Approval | Notes |
Below $5,000 BSD | Department Manager and CFO | Requires recommendation from the appointed internal disposal committee. |
$5,000 BSD to $10,000 BSD | CEO | Requires nomination and recommendation from a dedicated, multi-department committee (as defined in the SOP). |
Above $10,000 BSD | Board of Directors | Final approval must be obtained from the Board of Directors. |
Administrative Department: Primary responsibility for identifying assets for disposal, initiating the approval process, and executing the physical disposal.
Chief Executive Officer (CEO): Responsible for nominating disposal committees and providing final approval for disposals between $5,000 and $10,000 BSD.
Chief Financial Officer (CFO): Responsible for reviewing the disposal request and subsequent disposition report, and serving on disposal committees.
Board of Directors: Responsible for providing mandatory final approval for disposals exceeding $10,000 BSD historical cost.
This policy will be reviewed and updated annually, or sooner if there are significant changes to regulatory requirements or internal control requirements.