CMA Final · Corporate Financial Reporting · Property, Plant and Equipment (Ind AS 16)
Ind AS 16 defines recoverable amount as the higher of fair value less costs of disposal and value in use. An item of plant has a carrying amount of Rs 40,00,000, a fair value of Rs 38,00,000, estimated costs of disposal of Rs 1,50,000, and a value in use of Rs 36,00,000. What is its recoverable amount?
Recoverable amount is Rs 36,50,000. Fair value less costs of disposal is 38,00,000 minus 1,50,000, which is Rs 36,50,000, and this exceeds the value in use of Rs 36,00,000. Recoverable amount is the higher of the two.
- ARs 38,00,000
- BRs 36,50,000Correct
- CRs 36,00,000
- DRs 40,00,000
Explanation
Fair value less costs of disposal = 38,00,000 - 1,50,000 = Rs 36,50,000. Value in use is Rs 36,00,000. The higher is Rs 36,50,000. Using gross fair value of Rs 38,00,000 ignores disposal costs.
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