Hi all
What is the best way of incorporating the disposal of fixed assets into a Modano model? I have included the basic ("amounts") Capex Module which allows investment in capex, but I can't see how best to reflect disposal of fixed assets, and ideally incorporating profit / losses on sale.
Thanks
Hi Charles,
As you've probably realised the fixed assets modules provided in the Modano content libraries do not by default include asset disposals or write-offs. This is because they are not simple things to include and there is a large range of ways of doing them.
The accounting treatment might be quite simple (i.e. write down or off the asset and then book a gain or loss on sale/disposal), but the fiddliness in the modeling is deciding how the disposal or write-off assumptions will be entered, given that at any point in time the closing balance of an asset class is comprised of many different pieces of capex, each having been depreciated for a different term.
One way to do this is to enter disposal or write-off assumptions for the opening balance and each piece of capex, possibly as a % of the opening balance or capex amount, and then assume a period during which this takes place, but these assumptions might become problematic in a rolling planning model as forecast periods become historical periods over time...
Due to these complexities, our support team usually help users customise the assets modules on a case-by-case basis, keeping it as simple as possible.
Out of interest, what type of model are you looking to incorporate this functionality into - e.g. what periodicity, time frame(s), etc?
Just a simple 3 year forecast with 1 year history. There is one block of assets (of around $300k) that will be sold by the start of the second year. If need be, the proceeds can equal the book value. In this case, would it just be a case of putting a negative capex assumption equal to the NBV at disposal date?
Thanks for your prompt response.
It's not that simple Charles... You might be able to hack in a negative capex assumption, but it will be messy and your cash flow statement will be a mess.
I'd recommend adding a write-off / disposals set of assumptions to the fixed assets module, then editing the output formulas to accommodate these assumptions. If it's a sale at the asset NBV, then you'll only need to add a 'Proceeds from asset sales' cash inflow to the investing section of the cash flow statement so that the balance sheet still balances. If there's a profit or loss, you'll obviously need to put that through the income statement too.
If you're unsure of how to customize modules I reocmmend doing the learning exercises: www.modano.com/resources/learning/modano