What does recoverable amount of an asset mean?
Recoverable amount: the higher of an asset’s fair value less costs of disposal* (sometimes called net selling price) and its value in use. * Prior to consequential amendments made by IFRS 13 Fair Value Measurement, this was referred to as ‘fair value less costs to sell’.
How recoverable amount of an asset is calculated?
First, the anticipated return on selling the asset, minus costs to sell. Second, what present and future cash flow do the asset produce when it is in use. When calculated, the higher of these two values is the recoverable amount.
What is recoverable amount depreciation?
Recoverable amount is the higher of fair value less costs to sell (FVLCTS) and value in use. The carrying value of a fixed asset is compared with recoverable amount to find out impairment loss, if any. Recoverable amount is the concept introduced by IAS 36 Impairment of Assets.
What is recoverable amount and how it is calculate?
The recoverable amount of an asset refers to the present value of the expected cash flows that are to arise from the sale or use of the asset. It is calculated as the greater of the two amounts, namely, the asset’s fair value as reduced by the related selling costs and value in the use of such assets.
What affects recoverable amount?
The recoverable amount of other assets is assessed only when there is an indication that the asset may be impaired. Recoverable amount is the higher of (a) fair value less costs to sell and (b) value in use.
What if recoverable amount is higher than carrying amount?
If the carrying amount exceeds the recoverable amount, the asset is described as impaired. The entity must reduce the carrying amount of the asset to its recoverable amount, and recognise an impairment loss.
What is the recoverable amount of an asset quizlet?
Recoverable amount is the higher of an asset’s value in use and fair value less costs of disposal.
How do you calculate deprival value of an asset?
Deprival value equals the lower of replacement cost and recoverable amount; and. Recoverable amount is the higher of net selling price and value in use.
Which statement is correct in determining recoverable amount?
Which statement is correct determining recoverable amount? B. If fair value less costs of disposal cannot be determined, then recoverable amount is value in use.
Is a fall in the value of an asset so that its recoverable amount is now less than its carrying amount in the statement of financial position?
If the asset’s recoverable amount is lower than its carrying amount, then an entity must recognize an impairment loss as a difference between these 2 amounts. An impairment loss shall be recognized to profit or loss or as a revaluation decrease if the asset is carried at revalued amount in line with other IFRS.
What is the deprival value of an asset?
Deprival value is based on the premise that the value of an asset is equivalent to the loss that the owner of an asset would sustain if deprived of that asset. It builds on the insight that often the owner of an asset can use an asset to derive greater value than that which would be obtained from an immediate sale.