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Chapter 10
4.3 Disposals
An item of property, plant and equipment should be eliminated from the statement of
financial position on disposal or when the asset is permanently withdrawn from use.
Gain/(loss) on disposal = Net disposal proceeds – Carrying amount
Gains or losses on disposal should be recorded in the statement of profit or loss in an
appropriate expense category. If we have a loss on disposal this will increase the
expense and a profit will reduce the expense. The double entry for disposals was
covered in detail in CIMA paper BA3.
4.4 Disposal of revalued assets
When a previously revalued asset is disposed of the gain on disposal is measured as
the difference between the carrying amount on the SOFP and the proceeds received.
However, if the asset has been revalued in the past, it will have an unrealised gain in
the revaluation reserve that must now be removed.
The amount should be transferred from the revaluation reserve to retained earnings.
This movement will be seen in the SOCIE and will not affect this year's profit.
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