When managing assets in a pool for accounting purposes, a common question arises regarding the appearance of a negative Closing Asset Value (CAV) after the disposal of one of the assets. It’s important to understand that this is not an error, but rather expected behaviour.
In a pooled asset scenario, the value of individual assets isn't tracked separately but as part of a collective pool. When one of these assets is disposed of, its disposal results in a reduction in the overall balance of the pool. This reduction is reflected as a negative impact on the final pool balance, which can result in a negative CAV for the asset in question.
Why This Happens:
Pooling Methodology: When an asset is disposed of, its value is subtracted from the pool, which affects the remaining balance.
Ongoing Impact: The disposal of one asset influences the entire pool, which is why the system reflects a reduction.
Correct Reflection: Seeing a negative CAV is the correct behaviour, as it shows the ongoing influence of the disposed asset on the overall pool balance.
In conclusion, a negative CAV in a pooled asset situation is normal and indicates proper accounting treatment of the disposal within the pool structure.