Where the carrying amount of an asset exceeds the fair value less costs of disposal,it is necessary to calculate the value in use of the asset to determine whether it is impaired.

Question

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This statement is true. According to IAS 36 (Impairment of Assets), when the carrying amount of an asset exceeds its recoverable amount (which is the higher of fair value less costs of disposal and value in use), the asset is impaired and must be written down to its recoverable amount. To determine the value in use, an entity must estimate the future cash flows expected to be generated by the asset and use a suitable discount rate to calculate the present value of those cash flows.

Where the Carrying Amount of an Asset Exceeds the Fair