The process that involves the removal of a financial asset or financial liability or generally any element (that was already recognized in an entity’s accounts) from the statement of financial position. For example, an asset (tangible or fixed asset) is derecognized when it is disposed of or is not expected to produce any future economic benefits from its use or disposal. This would result in its removal from the financial statements. At the time of sale or disposal, the asset value will be decreased by its carrying amount at that time. Fixed assets, which are by nature long-lived (e.g., property, plant, and equipment) are always depreciated and tested for impairment, unless their carrying amount is zero.

On the sale of a fixed asset, the gain or loss is the sales proceed less the carrying amount of the asset at the time of sale. The gain or loss is recorded in the statement of income, either as a part of other income or in a separate line item, if its amount is material.