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

Rohini Logistics Ltd owns a warehouse (a single item of PPE) at a carrying amount of ₹50 lakh. The recoverable amount is defined in Ind AS 16 as which of the following?

Recoverable amount is the higher of fair value less costs of disposal and value in use. It is not the lower of the two, and the estimated end-of-life disposal amount after costs is the residual value, a different concept.

  1. AThe higher of fair value less costs of disposal and value in useCorrect
  2. BThe lower of fair value less costs of disposal and value in use
  3. CThe estimated amount obtainable on disposal at the end of useful life after disposal costs
  4. DThe higher of carrying amount and fair value

Explanation

Ind AS 16 defines recoverable amount as the higher of an asset's fair value less costs of disposal and its value in use. The lower-of option reverses the test, and the end-of-life amount describes residual value.

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