Recoverable amount of an asset is defined in IAS 36 as the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with IAS 36?
A)recognise difference as increase is asset revaluation reserve
B)recognise difference as impairment loss
C)recognise difference as gain from reinstatement of asset
D)leave asset at its carrying amount

Question

Quizplus · Accepted Answer

When an asset's carrying amount is less than its recoverable amount, it means that the asset has been impaired. In accordance with IAS 36, the difference between the carrying amount and recoverable amount should be recognized as an impairment loss. Therefore, choice B is the correct option. Choice A is incorrect because the asset revaluation reserve can only be used for revaluing assets and not for recognizing impairment losses. Choice C is incorrect because there is no such thing as gain from the reinstatement of an asset. Choice D is incorrect because it does not comply with the accounting treatment required by IAS 36.

Recoverable Amount of an Asset Is Defined in IAS 36