Writing Resources
How to calculate Recoverable amount Value in use Fair value less cost of disposal Recoverable Amount Recoverable amount of an assets is the greater of its fair value less cost of disposal and its value in use The concept of recoverable amount mainly focuses on the greatest value that can be obtained from the assets after selling or using of it The recoverable amount is measured by following formula as Recoverable amount Fair Value Cost of Disposal Recoverable amount Value in Use The companies need to record their carrying amount of assets if it exceeds the recoverable amount on balance sheet according to the accounting principles For example if the assets of the is impaired by any means or expected to be damaged there has to be formal estimation of the recoverable amount IAS 36 states guidance for recoverable amount as 1 If the fair value less cost of use cant be calculated than the value in use is equal to the recoverable amount of asset 2 If the asset is to be sold than the recoverable amount is calculated as fair value less cost of use If the fair value of an asset less cost of disposal or value in use of asset seems to higher than the carrying amount of the assets then recoverable amount should not necessarily be calculated as the assets is not really impaired Value in Use
