2.8 Assets That Provide No Future Benefit
An entity may determine that a specific asset within a larger asset
group has no future benefit (e.g., when the asset is destroyed [as opposed to
damaged], becomes obsolete, or is lost). Even if the asset group is determined to be
recoverable as a whole, the entity would need to write off an asset that has no
future benefit.
Example 2-4
Entity A provides ground delivery services
to its customers through a fleet of trucks. Entity A has
appropriately determined that its ground delivery business
represents a “lowest level” for which identifiable cash
flows are largely independent of the cash flows of other
assets and liabilities. One truck in its delivery fleet has
been destroyed in an accident. Entity A can continue to
provide ground delivery services at the same level by using
the remaining trucks in its fleet in such a way that the
destroyed truck is not expected to be replaced. Although A
expects no adverse change in expected cash flows as a result
of the loss of the truck, A must write off the asset that
was destroyed.
An entity often maintains insurance to mitigate losses in the event
of property damage or casualty losses. Even if an asset is insured, the entity would
recognize a loss to write off the damaged asset and separately recognize any
recovery. The recognized loss to write off an asset and any associated recovery
proceeds (through insurance proceeds or other sources of recovery) is treated as two
separate events and therefore two separate units of account. The principle
underlying this separation is derived from the involuntary conversion guidance
codified in ASC 610-30-25-2.