IAS 36Chapter 4Lesson 1
Recoverable amount: the higher of two measures
Step 1 of 9Learning objectives
Go deeper+1 deeper insight · +1 calculation · +1 journal entry · +1 point of attention
Recoverable amount is what an asset allows the entity to recover: the higher of its fair value less costs of disposal and its value in use. This lesson shows when a single measure is enough, at which level to calculate it (individual asset or cash-generating unit), which costs of disposal to deduct, and then how to derive an impairment loss and its entry.
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Learning objectives
- Explain why recoverable amount is the higher of fair value less costs of disposal and value in use.
- Recognise when a single measure is enough and when fair value less costs of disposal may be used on its own.
- Determine whether recoverable amount is estimated for the individual asset or for its cash-generating unit.
- Calculate fair value less costs of disposal by sorting deductible and excluded costs, then the impairment loss and its entry.