Abandonment

Abandonment occurs when an entity elects to not claim an interest in an asset. By doing so, the entity no longer maintains the asset or pays any form of taxes on it. The asset may then be claimed by another entity or the government. Abandonment does not release the owning entity from any liabilities associated with the asset.

Abandonment occurs either when a business terminates its operations or when the asset is no longer profitable to operate. When the act of abandonment occurs, the entity writes off the asset balance and any associated accumulated depreciation in its accounting records.

The term also refers to the inaction of an option holder in not exercising the option. Instead, the option is allowed to expire. This occurs when the market price of the underlying shares is lower than the exercise price of the option.