This basic accounting equation “balances” the company’s balance sheet, showing that a company’s total assets are equal to the sum of its liabilities and shareholders’ equity. If it is determined that an asset is impaired, the amount of the impairment is equal to the difference between the carrying amount of the long-lived asset and the Fair Value of the asset. Note: If the fair value of an asset less its cost of disposal, or the asset's value in use is greater than its carrying amount, then calculating a recoverable amount is not necessary since the asset is not impaired. There is an impairment loss of: How often should goodwill acquired in a business combination be tested for impairment? below for more details). ASC 360 provides general guidelines as to when an asset (asset group) should be tested for impairment. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If there is a strong indication that the recoverable amount will drop significantly, the asset impairment test must be performed. the higher of fair value less costs of disposal and value in use) for the individual asset, then determine recoverable amount for the asset's cash-generating unit (CGU). Under IAS 36, the recoverable amount is the higher of the asset’s fair value less cost to sell and its value in use. 2 (refer to the section on . cash flow. Successive revaluations. Example to the firm. The recoverable amount is the greater of the asset's value in use (present value of future values) or net realizable value. Recoverable amount is the amount of asset's fair value less net selling price or the value in use whichever is higher. The CA will generally include the ROU asset value and the lease liability. [IAS 36.66] If it is not possible to determine the recoverable amount (i.e. Recoverable amount should be determined for the individual asset, if possible. recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). 3 ’ valuation approach If the company intends to sell the asset, the recoverable amount is equal to its fair value less the cost of disposal. An asset's recoverable amount is equal to: A non-current asset held for sale should be measured at: As per IFRS 5 an entity shall measure a non-current asset (or disposal group) classified as held for sale at ., which one of the following? An asset's recoverable amount is equal to: An asset's carrying amount is £25,000. The recoverable amount of the office building is $7,270,000 because value in use (present value of expected cash flows) is higher than the fair value of $6,650,000 ($7,000,000 - … If an entity uses a ‘free . Amount (CA) and the Recoverable Amount (RA) of a CGU in an IAS 36 impairment calculation. An asset's carrying amount is SR25,000. A loss on impairment of an indefinite - life intangible asset is the difference between the asset's A. recoverable amount and the expected future net cash flows B. carrying amount and its recoverable amount O c. book value and its fair value OD. lease liabilities. The latter is the present net worth of the asset or cash-generating unit (CGU). Its fair value less costs of disposal is £15,000 and its value in use is £19,000. Impairment calculation ( asset group ) should be tested for impairment net realizable value the individual asset, the is. A business combination be tested for impairment the recoverable amount is the greater of asset! 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