A business doesn't have to write off a fully depreciated asset because, for all intents and purposes, it has already written off that asset through accumulated depreciation. If the asset is still in service when it becomes fully depreciated, the company can leave it in service. And if the asset "dies" after it's fully depreciated, there's nothing left to write off.
Companies use depreciation to spread the cost of a capital asset over the life of that asset. If a company spent $100,000 on a new piece of equipment one year, for example, its financial statements for that year wouldn't show the full $100,000 as an expense. Instead, the company would record a percentage of the cost each year. If the equipment were expected to last 10 years, the company might take a depreciation expense of $10,000 a year.
Net Book Value
A depreciating asset remains on the company's balance sheet at its original cost, but each time the company records a depreciation expense, it adds the amount of the expense to an offsetting account, usually called "accumulated depreciation." So, after three years of $10,000 depreciation expenses on a $100,000 piece of equipment, the balance sheet would show the equipment at $100,000, plus $30,000 of accumulated depreciation. The original cost of the asset minus depreciation is the "net book value" of the asset, also called the carrying value. In this case, it would be $70,000.
Fully Depreciated Assets
Eventually, the asset becomes fully depreciated. That means that the company has claimed the maximum total depreciation expenses for the asset, and the asset's carrying value is zero. However, just because an asset is fully depreciated doesn't mean the company can't still use it. If equipment is still working after its supposed 10-year lifespan runs out, that's fine. A depreciation schedule is simply an accounting tool for distributing costs, not a binding prediction on when an asset has to go on the scrap heap.
A company "writes off" an asset when it determines that asset to be worthless. Say a company has a piece of aging equipment with a carrying value of $20,000. The equipment breaks down and can't be repaired. It's worthless. So the company claims an expense for the full remaining carrying value -- in this case, $20,000 -- and removes the asset from its balance sheet completely. That's a write-off. But when an asset has been fully depreciated, the company has already claimed the entire cost of the asset as an expense. In effect, that asset has already been written off. When the asset quits working, there is no further expense needed. All the company does is remove the asset and its accumulated depreciation from the balance sheet. Since the carrying value was already zero, there's no effect on the company's net worth.
Many times, a "worthless" piece of equipment or other asset still has some residual value. A broken-down piece of machinery can be sold for scrap, for example, or a worn-out vehicle can be sold for parts. If an asset has such a "salvage value," that will be its carrying value when fully depreciated. The same rules apply, though. The company doesn't have to write off or write down the asset when it's fully depreciated; it can use the asset as long as it likes. The only difference: When the company eventually does dispose of the asset, it will collect the salvage value. The carrying value of the asset will thus be converted to cash, and the company's net worth will remain the same. Again, no write-off is necessary.