Recoverable amount is the HIGHER of the:
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 |