Generators, uninterruptible power supply systems (UPS), battery packs, and inverters are more than just equipment. For businesses, they are full-fledged production assets that ensure business continuity amid unstable power supply. Intensive use of such equipment inevitably leads over time to physical wear, reduced technical performance, or complete loss of functionality.
In these situations, the key issue for a business is proper write-off — supported by sound technical and documentary justification and correctly reflected in accounting and tax records.
UHY Prostir specializes in comprehensive accounting support for businesses. We work with companies of various sizes and help manage fixed assets professionally. Our practical experience enables us to handle write-offs in a structured, transparent way and with minimal regulatory risk.
When a Business Needs to Write Off Backup Power Equipment
In UHY Prostir’s practice, we most often see the following reasons for writing off such equipment:
- physical wear, breakdown, and uneconomical repair;
- obsolescence and replacement with modern solutions;
- damage caused by fire, flooding, shelling, or other force majeure events;
- shortages identified during inventory;
- decommissioning during relocation or reorganization.
Type of Asset Being Written Off
Before starting the write-off process, it is important to determine how the item is classified in accounting records, because this affects the documentation requirements and accounting treatment.
If the equipment is recorded as a fixed asset, the write-off is formalized based on the decision of a commission and a fixed asset write-off act. The documents must contain well-grounded reasons for disposal — physical wear, technical unfitness, or economic impracticality of further use.
For low-value non-current tangible assets (LVNTA) or low-value items, the procedure is simpler, but still requires justification.
In practice, it is also common to write off not the entire asset, but a separate unit/module. In the case of partial write-off, it is important to correctly determine the value of the component being dismantled and to document the write-off with a clear indication of the faulty part.
Regulatory Logic and the Principle of Evidentiary Support
A proper fixed asset write-off procedure is built on these key elements:
- conducting an inventory count to confirm the actual existence and condition of the asset;
- work of a commission that inspects the equipment and assesses the feasibility of further operation;
- documentary confirmation of the reasons for disposal, including the economic impracticality of repairs.
This is why a fixed asset write-off commission is created at the company: it inspects the asset and prepares a reasoned conclusion. This conclusion becomes the basis for further documentation and accounting entries.
UHY Prostir tip: evidentiary strength is not about the number of documents, but their substance. For example, it is crucial that documents clearly state that repair is economically unjustified (e.g., repair costs exceed the value of a comparable used unit or approach the cost of a new one).
Step-by-Step Algorithm for Writing Off Equipment
In practice, the procedure typically includes the following sequence:
- Request from the department. Initiation by the responsible person with a brief description of the reasons—wear, malfunction, or economic impracticality of repair.
- Management order to establish a commission. The manager launches the procedure and defines the members of the write-off commission. It should include technical specialists and accounting representatives.
- Inspection and defect identification. Physical inspection of the asset, documentation of technical condition and identified defects.
- Reconciliation with accounting records. Verification that actual characteristics match the information in accounting registers.
- Write-off act. Preparation of a write-off act confirming the fact and grounds for disposal.
- Decision on residual components. Determining the further fate of components, materials, or scrap (disposal, internal use, sale).
- Accounting recognition. Recording the relevant accounting transactions.
- Compilation of a complete document package for internal control and potential audits. Gathering all supporting documentation mentioned above.
Accounting and VAT: Key Points
In accounting, a write-off means simultaneously removing the asset from the balance sheet and recognizing the related expenses.
During write-off, the initial cost of the asset and accumulated depreciation are written off (Dr 13 Cr 10), and the net book value, if any, is written off (Dr 976 Cr 10). The net book value is recognized as an expense of the reporting period.
Special attention should be paid to VAT consequences. If the asset is liquidated due to unfitness for its original intended use and this is supported by properly prepared documents (commission acts, defect reports, technical conclusions, photo evidence), the company may avoid accruing VAT liabilities. In such cases, it is necessary to submit to the tax authority an appropriate fixed asset write-off document confirming destruction, dismantling, or other transformation that makes the asset unusable for its original purpose.
If the write-off is performed without sufficient documentary confirmation of unfitness or only based on a management decision, the tax authority may treat the transaction as a deemed supply. In this case, the company must accrue VAT liabilities based on ordinary prices, but not lower than the asset’s book value.
It is also important to consider the subsequent treatment of components from dismantled equipment. Materials, units, or spare parts obtained from dismantling must be valued and recognized at fair/market value. Their subsequent use in operations or sale results in separate accounting and tax implications.
Common Mistakes
- writing off assets without proper justification;
- absence of a commission’s work and conclusion;
- ignoring VAT implications;
- lack of linkage to business activity;
- lack of evidence of disposal of hazardous waste;
- inconsistencies between documents and accounting entries.
What a Turnkey Fixed Asset Write-Off Looks Like with UHY Prostir
Our write-off support includes:
- situation analysis;
- preparation of orders and forms;
- methodological support;
- advisory support regarding tax risks;
- formation of an audit-ready documentation package.
What We Need from the Client
- a list of assets with inventory numbers;
- accounting data on accumulated depreciation, net book value, and other relevant figures;
- purchase and commissioning documentation;
- description of the reasons for write-off;
- decisions regarding residual components.
Transparency and Responsibility
The write-off of backup power equipment requires not only correct accounting treatment, but also transparent allocation of roles and responsibilities.
Within the support process:
- the client makes management decisions regarding feasibility of write-off, treatment of residual components, and appointment of responsible persons;
- the UHY Prostir team ensures methodological and accounting correctness of decisions and their proper reflection in accounting records.
UHY Prostir operates on a principle of full transparency: the client understands what actions are taken, on what documents they are based, and what accounting consequences follow. We do not replace the client’s management decisions, but we ensure their professional documentation and defensible accounting treatment.
Request a Consultation
If you are planning to write off backup power supply equipment or want to assess accounting and tax implications in advance, the UHY Prostir team is ready to help. To receive a consultation and pricing, call the phone numbers listed in the “Contacts” section or email the address provided there.
