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CMA Final · Corporate Financial Reporting · Property, Plant and Equipment (Ind AS 16)

Under Ind AS 16, which of the following correctly describes the recoverable amount of an asset, as used in the standard's definitions?

Recoverable amount is the higher of an asset's fair value less costs of disposal and its value in use. It is not the lower figure, nor the carrying amount, and the end-of-life disposal estimate net of costs is the residual value.

  1. AThe higher of the asset's fair value less costs of disposal and its value in useCorrect
  2. BThe lower of the asset's fair value less costs of disposal and its value in use
  3. CThe asset's carrying amount less accumulated depreciation and impairment losses
  4. DThe estimated amount obtainable on disposal at the end of its useful life, net of disposal costs

Explanation

Ind AS 16 defines recoverable amount as the higher of fair value less costs of disposal and value in use. The 'lower of' option reverses the rule. The last option describes residual value, not recoverable amount.

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