When is a loss on disposal of a non-current asset recognized?

A loss on disposal of a non-current asset is recognized when the proceeds from the disposal are less than the carrying value of the asset. The carrying value represents the value at which the asset is recorded in the company's books, which is typically the cost of the asset minus any accumulated depreciation or impairment.

When an asset is sold, if the amount received (the proceeds) is lower than this carrying value, it indicates that the asset has been disposed of for less than what was recorded on the balance sheet. This difference results in a loss, which must be recognized in the financial statements to accurately reflect the financial performance of the entity. Properly accounting for such losses ensures that the financial statements provide a truthful representation of the company's financial position and performance.

In contrast, if the proceeds were equal to or greater than the carrying value, it would either lead to no loss or potentially a gain, depending on the situation. This distinction is key in asset management and financial reporting.