ACCA FR · Chapter 3 · Question 5 of 12
Under IAS 36 Impairment of Assets, how is an asset's recoverable amount defined?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The higher of fair value less costs of disposal and value in use
Explanation
Recoverable amount is the higher of fair value less costs of disposal and value in use. An asset is impaired when its carrying amount is higher than its recoverable amount. The 'higher of' rule reflects that a rational entity would either sell the asset or keep using it, whichever gives more benefit.
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