Time to say goodbye

Disposal and Replacement

This is the final cog in the wheel of the asset life cycle when it comes time to say goodbye. It helps us to determine what the asset’s remaining economic value is.

Disposal and Replacement – Index Options

We have identified six options that we need to consider regarding Asset Disposal and Replacement Costs

• Scrap or Dispose
• Review replacement options
• Purchasing requirements
• Funding
• Long term projections
• Management information reporting

Disposal and Replacement – Asset Disposal Policy

To replace long-term assets, based on depreciation, at an agreed point in time.

The sale of the asset will be the salvage or residual value.

Asset disposal is the act of selling an asset, usually a long-term asset that has been depreciated over its long-term life.

Disposal and Replacement – Disposal

Asset Disposal

The disposal will consist of any activities necessary to dispose of assets that are:

• Unwanted
• Unserviceable
• Abandoned
• Decommissioned

There are two distinct aspects to asset disposals

• PHYSICAL disposal process
• COST of disposal

Disposal and Replacement – Physical Disposal

The Physical Disposal could result from a Resale or a Donation to another organization or through a Waste Management Facility, depending on the type of asset and/or its historical product production.

Hopefully, using a more professional company than the one illustrated here.

Costs of Disposal

The costs involved could be for the transport and removal of the asset or the hazard disposal costs if necessary, or the costs for a Specialised Disposal Company

Disposal and Replacement – Replacement

The Replacement of the Asset will occur at the end of the asset life span, which will be:

• A Preplanned event due to depreciation or a
• Mothballed asset for appropriate reasons, or it could a
• Premature or Management Decision again due to relevant circumstances, which would be an Unplanned activity

Disposal and Replacement – Replacement

Replacement Costs of the asset can be researched and obtained from several different sources, such as

• Research Corporate Database
• Research Industrial Databases
• Research Manufacturers Databases
• Management Information Reporting

Disposal and Replacement – Summary

The Asset Replacement cost is the full cost of replacing an asset in its current operating environment. Operation plus Maintenance plus Renewal plus Decommissioning, Less any scrap or resale value item to be replaced.

By now, we should know how to say goodbye to some of our assets, having worked through the areas of Replacement Costing, Asset Valuation, and Disposal and Replacement.

For more information, email us at info@strobe-al.co.za or visit www.strobe-al.co.za