Disposing of a Capital Asset

If you only read one thing Disposal removes the asset from the books entirely, with any gain or loss recognized based on what it was actually worth on the books versus what was received for it.

Builds on FM6.2 and FM6.3 An asset arrives at acquisition, wears down through depreciation, and eventually leaves the books through disposal. This is the last stage.

Why This Matters

This is the step people forget most often, an old vehicle or piece of equipment gets sold or scrapped, and nobody removes it from the books, leaving a district’s asset records overstated indefinitely.

What’s Actually Going On

When a capital asset is sold, scrapped, or otherwise retired, it’s removed from the books entirely, both the original cost and any accumulated depreciation against it. Whatever’s received in return, cash from a sale, or nothing at all if it’s scrapped, gets compared to the asset’s remaining book value.

If the district gets more than the remaining book value, that’s a gain. If less, a loss. Both get recognized at the government-wide level at the point of disposal.

How This Applies

When equipment or vehicles are retired, make sure disposal actually gets recorded, not just physically removed from a building or lot. An asset that’s gone in reality but still sitting on the books overstates what the district actually owns.