
Asset disposal is a critical process for effectively managing an organization’s physical assets. Whether dealing with office equipment, industrial machinery, or vehicles, proper disposal can yield significant benefits, including cost savings and mitigating risks associated with obsolete or unusable assets.
What is physical asset disposal?
Physical asset disposal refers to the removal of material assets that are no longer needed or functional for an organization. This process may include selling, donating, recycling, or destroying these assets. The primary objective of disposal is to free up space and resources while minimizing costs related to maintaining and storing assets that no longer provide value.
The importance of physical asset disposal
Asset disposal is vital for several reasons:
- Operational efficiency: Removing unused equipment helps optimize workspace and improves operational flow.
- Cost reduction: Retaining unused assets can incur maintenance and storage costs, which disposal helps reduce.
- Legal compliance: Adhering to waste management and environmental protection regulations is crucial for avoiding fines and penalties.
- Data security: For IT equipment, proper disposal ensures the destruction of sensitive data, preventing information leaks.
The asset disposal process
- Asset inventory: The first step in asset disposal is conducting a thorough inventory of existing assets. This involves identifying and recording each piece of equipment, machinery, or vehicle slated for disposal, along with details such as the asset’s condition, market value, and location.
- Evaluation and disposal decision: After the inventory, the next step is evaluating each asset to determine if it should be disposed of. The evaluation should consider factors like:
- Technical condition: Prioritize assets that are faulty or require costly repairs for disposal.
- Utility: If an asset is no longer needed for current operations, it may be marked for disposal.
- Market value: Some assets may be sold or donated if they still hold market value.
- Choosing the disposal method: several disposal methods can be employed, each with specific advantages:
- Sale: Selling disposed assets can generate additional revenue. Sales can be conducted through auctions, direct sales, or online platforms.
- Donation: Functional assets can be donated to charitable organizations or other entities that can make use of them.
- Recycling: For equipment that can no longer be used, recycling is an environmentally responsible option.
- Destruction: When assets have no value or cannot be recycled, destruction is the last resort.
- Documenting the disposal process: Detailed documentation is essential to ensure traceability and legal compliance. This includes creating reports and records that confirm the disposal of each asset, along with the methods used for elimination.
- Updating accounting records: Once the disposal process is complete, it is important to update the organization’s accounting records to reflect the removal of disposed assets. This involves adjusting the asset’s book value and removing it from the company’s balance sheet.
Benefits of proper asset disposal
Disposing of physical assets correctly provides numerous benefits for organizations, such as:
- Risk reduction: Eliminating outdated or non-functional equipment reduces the risks of workplace accidents or critical failures.
- Enhanced security: Disposing of old IT equipment ensures the destruction of sensitive data, safeguarding confidential information.
- Resource optimization: Freeing up space and resources allows for better allocation towards current and future operations.
- Environmental compliance: Proper disposal and recycling of equipment help protect the environment by reducing waste and recovering valuable materials.
What are fixed assets in accounting terms?
Fixed assets are long-term assets used in a company’s operations that provide financial benefits over time. These assets have a useful life exceeding one year and are classified as tangible fixed assets. Key characteristics of fixed assets include:
- Life span: Fixed assets have a lifespan of more than one year.
- Depreciation: They depreciate over time.
- Use in operations: Fixed assets are used in business operations and bring long-term financial benefits.
- Not for sale: Fixed assets are not intended for resale.
Fixed asset value and depreciation
From a tax perspective, assets that meet certain conditions and have an entry value equal to or greater than 2,500 lei must be depreciated over a set period as stipulated by law.
Categories of fixed assets
The fixed asset catalog is an essential tool for companies, helping to correctly identify and classify fixed assets into three main categories: buildings, technical installations, transportation, animals, and plantations, and furniture, office equipment, human and material protection systems, and other tangible assets. The catalog also specifies their normal useful life, allowing companies to determine the appropriate depreciation period for each asset based on the catalog.
The classification of a fixed asset into a specific category is determined by the accountant and administrator. In cases where classification is unclear, a technical expert may assist.
How to dispose of fixed assets
From a fiscal perspective, disposal is deductible if asset components are recovered or intended for recovery. For example, a fixed asset can be disposed of by offering it to a collection center or selling it at a low price. If the asset is discarded without recovery, the Fiscal Code does not permit the deduction of potential losses from the remaining value of the asset.
A disposal report is required to verify that the asset is depreciated and no longer usable. The proposal for removal from use is made by the administrator or those responsible for asset management and must be approved by the disposal committee.
Legislation regarding asset disposal
- Article 28 of the Fiscal Code (Law No. 227/2015)
- Instruction No. 167/2009 on the Decommissioning, Recovery, and Disposal of Assets in the Ministry of Administration and Interior
- Article 7 of the Accounting Law No. 82/1991 (republished)
- Order of the Ministry of Public Finance No. 2634/2015 regarding financial-accounting documents.
Disposal and environmental tax
Disposing of assets through a waste management company is subject to environmental taxes. The environmental tax, representing a 3% contribution on the revenue generated from selling waste, is retained by the waste management company and must be transferred to the Environmental Fund according to Article 9(1) of Emergency Ordinance No. 196/2005.
Documentation proving asset destruction must include records of the quantity-value of the disposed assets, the technology used for destruction, and inventory lists prepared according to OMFP 2861/2009.
Removal of non-salable inventory from accounting records
Expenses incurred for removing degraded goods from accounting records are tax-deductible when calculating corporate income tax.
VAT adjustment for non-salable inventory
According to current legislation, services paid to a recycling company for the destruction of goods are fiscally deductible.
Integrated waste management
We offer comprehensive and specialized solutions for the collection, disposal, and destruction of expired, damaged, counterfeit, confiscated, non-compliant, or specially regulated products.
Collection of electrical and electronic equipment
We provide integrated solutions for the efficient management of household and electronic waste, ensuring specific treatment for each category.
Why Choose Kaputt Sekuro
Disposing of physical assets is a complex but essential process for the efficient management of an organization’s resources. By following clearly defined steps—such as inventorying, evaluating, selecting the disposal method, and documenting the process—organizations can ensure responsible and compliant management of their assets. Proper disposal brings numerous benefits, including financial savings, risk reduction, enhanced safety, and environmental protection, all contributing to the long-term success of any organization.
With 15 years of experience in the sustainability industry, Kaputt Sekuro provides comprehensive management of fixed assets through secure destruction, preventing resale and safeguarding brand reputation.
At Kaputt Sekuro, the work we do is more than just a job. It’s a commitment and responsibility towards the environment and our clients, who understand the importance of protecting their brand and consumers.
All of Kaputt Sekuro’s processes adhere to ISO 9001 and ISO 14001 certification standards, as well as international factory production certification standards, ensuring that our secure destruction services are thoroughly monitored, both internally and by independent third-party auditors.