ASTM E2378-05
(Practice)Standard Practice for the Recognition of Impaired or Retired Personal Property
Standard Practice for the Recognition of Impaired or Retired Personal Property
SIGNIFICANCE AND USE
Systematic depreciation of property generally serves to provide a fair presentation of an entity’s property and financial records for decision makers. Keeping fully depreciated items on the asset records and property management records when they no longer are used as originally intended may be misleading to decision makers and may result in excessive operating cost. Retiring items to administrative control when appropriate improves the efficiency, lowers operating cost without significantly reducing internal controls.
SCOPE
1.1 This practice covers guidance as to the proper treatment when items are still retained, but need to be recognized as impaired or retired to administrative control. This practice is intended to be used in conjunction with Practice E 2279, which provides various principles to improve the effectiveness and efficiency of the property management functions including the concepts of materiality, best value, reasonable detail, and reasonable assurance. During the life cycle of property management, appropriate action must be taken at the appropriate time to be in conformance with these principles. The objective is to maintain property accounting records that represent the actual value of property.
1.2 This practice covers the recognition of depreciation of personal property that is critical to a fair representation of the entitys property and financial records. For instances when items for accounting or property management purposes may no longer serve the purpose that was originally intended, it may be more appropriate to recognize impairments or retire these items for record keeping purposes.
1.3 Generally, entities formally record, account, and inventory personal property that meet certain criteria, as defined by the entity, based upon acquisition cost thresholds, expendability, or useful life polices. Accordingly, entities should establish recurring depreciation cycles so that the property eligible for depreciation is fairly and consistently recorded in an entitys records in accordance with generally accepted accounting standards.
1.4 The percentage and frequency of depreciation is dependent on such factors as the nature of owned property, its useful life, and the frequency of property use in support of business-type activities of the entity.
1.5 This standard covers accepted practice as to proper record keeping actions when items are fully depreciated for accounting purposes and should be retired from the accounting as well as property management purposes when the asset no longer serves the purpose that was intended but still remains on the entities premises or continues to be under some form of control.
1.6 Entities have a responsibility to operate effectively, efficiently, and in a reasonable and responsible manner and to provide stakeholders best value as provided in public law, regulations and generally accepted accounting practices.
1.7 This standard is limited to property management functions. This standard does not purport to address tax concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate tax guidelines and to determine the applicability of regulatory or statutory requirements prior to use.
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Designation: E2378 − 05
StandardPractice for
the Recognition of Impaired or Retired Personal Property
This standard is issued under the fixed designation E2378; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope longer serves the purpose that was intended but still remains on
the entities premises or continues to be under some form of
1.1 This practice covers guidance as to the proper treatment
control.
when items are still retained, but need to be recognized as
1.6 Entities have a responsibility to operate effectively,
impaired or retired to administrative control. This practice is
intended to be used in conjunction with Practice E2279, which efficiently, and in a reasonable and responsible manner and to
provide stakeholders best value as provided in public law,
provides various principles to improve the effectiveness and
efficiency of the property management functions including the regulations and generally accepted accounting practices.
concepts of materiality, best value, reasonable detail, and
1.7 This standard is limited to property management func-
reasonable assurance. During the life cycle of property
tions. This standard does not purport to address tax concerns,
management, appropriate action must be taken at the appropri-
if any, associated with its use. It is the responsibility of the user
ate time to be in conformance with these principles. The
of this standard to establish appropriate tax guidelines and to
objective is to maintain property accounting records that
determine the applicability of regulatory or statutory require-
represent the actual value of property.
ments prior to use.
1.2 This practice covers the recognition of depreciation of
2. Referenced Documents
personal property that is critical to a fair representation of the
entity’s property and financial records. For instances when
2.1 ASTM Standards:
items for accounting or property management purposes may no
E2135 Terminology for Property and Asset Management
longer serve the purpose that was originally intended, it may be
E2219 Practice forValuation and Management of Moveable,
moreappropriatetorecognizeimpairmentsorretiretheseitems
Durable Property (Withdrawn 2009)
for record keeping purposes.
E2279 Practice for Establishing the Guiding Principles of
Property Management
1.3 Generally, entities formally record, account, and inven-
tory personal property that meet certain criteria, as defined by
3. Terminology
the entity, based upon acquisition cost thresholds,
expendability, or useful life polices. Accordingly, entities 3.1 Definitions: For definitions relating to Property and
should establish recurring depreciation cycles so that the Asset Management, refer to Terminology E2135.
property eligible for depreciation is fairly and consistently 3.2 Terms Specific to This Standard
recorded in an entity’s records in accordance with generally 3.2.1 administratively controlled items, n— items not re-
accepted accounting standards. quiring formal property control and accountability by property
management and accounting functions.
1.4 The percentage and frequency of depreciation is depen-
dent on such factors as the nature of owned property, its useful
4. Summary of Practice
life, and the frequency of property use in support of business-
4.1 Entities should implement property management sys-
type activities of the entity.
tems in accordance with Practice E2279.
1.5 This standard covers accepted practice as to proper
4.2 Property recorded in the entity’s formal property system
record keeping actions when items are fully depreciated for
should be depreciated based upon internal or external stan-
accounting purposes and should be retired from the accounting
dards.
as well as property management purposes when the asset no
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
This practice is under the jurisdiction of ASTM Committee E53 on Property contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM
Management Systems and is the direct responsibility of Subcommittee E53.03 on Standards volume information, refer to the standard’s Document Summary page on
Financial Management. the ASTM website.
Current edition approved July 1, 2005. Published July 2005. DOI: 10.1520/ The last approved version of this historical standard is referenced on
E2378-05. www.astm.org.
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E2378 − 05
4.3 The net book value of items should be fairly represented should be retained in the formal property records through the
and this includes the recognition of impairments as they occur. life of the asset, should not be used as the sole value when
Property management personnel have a vital role in the process accounting, reporting, and reconciling inventory results. Prop-
of recognition of impairments. erty acquired via means other than procurement is usually
recorded at a value based on its fair market value. Most
4.4 Because the actual drop in value of each asset may be
property assets will lose value over time because of wear and
difficult and time-consuming to compute, a standardized de-
tear, or other factors. Periodic depreciation takes into account
preciation process may be used by entities to approximate
all of these factors.
depreciations. For example, one process assumes that an asset
depreciates by an equal percentage of its original acquisition
6.3 Generally, property recorded to a formal property ac-
value for each year that it is used resulting in the same
countability system is controlled and inventoried for as long as
deduction amount every year. Another process may assume
the property remains on the entity’s property system. Property
that an asset depreciates at a larger rate in the first years and a
i
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