Test your understanding 1
Recoverable amount
A company owns a car that was involved in an accident at the year end. It is barely useable, so the value in use is estimated at $1,000. However, the car is a classic and there is a demand for the parts. This results in a fair value less costs to sell of $3,000. The opening carrying value was $8,000 and the car was estimated to have a life of eight years from the start of the year.
Identify the recoverable amount of the car and any impairment required.
Test your understanding 2
An entity owns a property which was originally purchased for $300,000. The property has been revalued to $500,000 with the revaluation of $200,000 being recognised as other comprehensive income and recorded in the revaluation reserve. The property has a current carrying vafue of $460,000 but the recoverable amount of the property has just been estimated at only $200,000.
What is the amount of impairment and how should this be treated in the financial statements?
Example 1 - Recoverable amount
The following information relates to three assets:
Carrying value Net realisable value Value in use
A
$000 100 110 120
$000 150 125 130
c
$000 120 100 90
What is the recoverable amount of each asset?