The recoverable amount is the higher of an asset's fair value less costs of disposal and its value in use, representing the maximum value expected to be recovered from using or selling the asset. It is a critical metric in impairment testing, ensuring that assets are not carried at more than their recoverable amount on the balance sheet.

Recoverable Amount

recoverable amount

Fair Value is a financial measurement that estimates the price at which an asset or liability would change hands between willing parties in an orderly transaction. It is often used in accounting and finance to provide a more accurate reflection of an asset's current market conditions than historical cost accounting.

fair value

costs of disposal

Value in Use refers to the perceived worth of a product or service based on its ability to fulfill a specific need or solve a problem for the user, beyond its monetary price. It emphasizes the subjective experience and utility derived by the consumer, which can vary widely depending on individual circumstances and preferences.

value in use

maximum value expected

Impairment testing is an accounting process used to determine if the carrying value of an asset exceeds its recoverable amount, indicating that the asset may be overvalued on the balance sheet. This process ensures that assets are not recorded at more than their fair value, maintaining the accuracy and reliability of financial statements.

impairment testing

A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time, detailing its assets, liabilities, and shareholders' equity. It is crucial for assessing the financial health, liquidity, and capital structure of a business, allowing stakeholders to make informed decisions.

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