Recoverable amount is the HIGHER of the:

• Fair value less those expenses relating to the disposal/sale of the asset and
• Value in use of an asset

A simple illustration:

Company XYZ has a plant & machinery which has a fair value of $100,000 and estimate that the costs to dispose of the asset should be $ 15,000. If the company decides to continue to use the asset the present value of the net cash flow from the asset is estimated to be $70,000

To calculate the recoverable amount, it is the higher of:

(a) Fair value less costs to sell viz: $100,000-$15,000=$85,000 and

(b) Value in use of the asset viz: $70,000

which in this case is the fair value less costs to sell i.e. $85,000

The profits of a company after tax are distributed or appropriated as decided by its directors. Not all the profits after tax will be distributed. The profits that are not distributed or appropriated are known as “retained profits”.