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CA Final · Financial Reporting · Ind AS 16 Property, Plant and Equipment

Kaveri Engineering Ltd has an asset with a carrying amount of Rs 90 lakh. Its fair value less costs of disposal is Rs 72 lakh and its value in use is Rs 80 lakh. Under the definitions in Ind AS 16 read with the concept of recoverable amount, what is the recoverable amount of the asset?

The recoverable amount is Rs 80 lakh. It is defined as the higher of fair value less costs of disposal, here Rs 72 lakh, and value in use, here Rs 80 lakh. Carrying amount and averages play no part in the determination.

  1. ARs 72 lakh
  2. BRs 80 lakhCorrect
  3. CRs 76 lakh
  4. DRs 90 lakh

Explanation

Recoverable amount is the higher of fair value less costs of disposal (Rs 72 lakh) and value in use (Rs 80 lakh), which is Rs 80 lakh. Choosing Rs 72 lakh uses the lower figure. Rs 76 lakh is a simple average, which is not the method. The carrying amount is not relevant to determining recoverable amount.

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