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

Which of the following best matches the definition of the residual value of an asset in Ind AS 16?

Residual value is the amount an entity would currently obtain from disposing of the asset, after deducting estimated disposal costs, as if the asset were already as old and worn as expected at the end of its useful life.

  1. AThe estimated amount an entity would currently obtain from disposal, after deducting estimated disposal costs, if the asset were already of the age and condition expected at the end of its useful lifeCorrect
  2. BThe higher of fair value less costs of disposal and value in use at the reporting date
  3. CThe original cost of the asset less accumulated depreciation at the reporting date
  4. DThe estimated disposal proceeds at the end of useful life, before deducting disposal costs, at expected future prices

Explanation

The standard defines residual value as the amount currently obtainable from disposal net of estimated disposal costs, assuming the asset is already of the age and condition expected at the end of its life. Option 2 is recoverable amount. Option 3 is carrying amount. Option 4 ignores disposal costs and uses future prices.

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