How to Calculate Recoverable Amount, Value in Use and Fair Value Less Cost of Disposal

Running head: CORPORATE ACCOUNTING AND REPORTING
Corporate accounting and reporting
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CORPORATE ACCOUNTING AND REPORTING
How to calculate recoverable amount, value in use and fair value less cost of
disposal
The recoverable amount of a given asset is treated to be greater of its fair
value after deducting costs to sell as well as its value in use. In order to measure
these impairment of asset, the carrying amount of an asset is needed for comparing
it with the recoverable amount (Sellhorn and Stier 2017). However, the recoverable
amount can be easily obtained for each of the individual assets at a time. The
recoverable amount of various types of intangible assets can be easily measured on
annual basis and it need to be taken into consideration as to whether or not there is
any signal that it need to be impaired for given period of time. In most of the cases, it
can be seen that recent detail calculation of recoverable amount can be made during
initial period and it need to be used in the impairment test for treatment of given
asset for present time frame. Proper detailed explanation can be found in IAS 36.10.
Calculation of recoverable amount can be done for an intangible assets with an
indefinite life of useful assets, an intangible assets that is not yet available,
acquisition of goodwill as needed in business combination.
Value in use refers to the present value of the expected future cash flows that
need to be obtained from an asset or in that case other cash generating units. It is
mentioned in IAS 36 about Impairment of Assets that help in understanding whether
asset of given business entity are carried out at more than their recoverable amount
or not (Kabir, Rahman and Su 2017). This actually means higher of fair value after
deducting costs of disposal as well as value in use at the same time. Calculation of
value in use can be done and it had to show various components and it include an
estimation of future cash flows where the business can expect the amount that can
be derived from given asset. In addition to that, calculation will be done for the