The impairment loss is recognised as the difference between which two figures?

The impairment loss is recognised as the difference between which two figures?

• A. Recoverable amount and carrying value
• B. Fair value less costs to sell and value in use
• C. Carrying value and original cost
• D. Current fair value and expected future cash flows

Answer: (A)

The amount recognised as impairment is the excess of the asset’s carrying amount over its recoverable amount. Recoverable amount is defined as the higher of value in use and fair value less costs to dispose. So, if the carrying amount is greater than recoverable amount, the impairment loss equals carrying amount minus recoverable amount and reduces the asset’s carrying amount accordingly. If recoverable amount is higher, no impairment is recognised. This reflects that impairment depends on what the asset can be recovered for, not on its original cost or on separate measures like current fair value versus expected cash flows.

The amount recognised as impairment is the excess of the asset’s carrying amount over its recoverable amount. Recoverable amount is defined as the higher of value in use and fair value less costs to dispose. So, if the carrying amount is greater than recoverable amount, the impairment loss equals carrying amount minus recoverable amount and reduces the asset’s carrying amount accordingly. If recoverable amount is higher, no impairment is recognised. This reflects that impairment depends on what the asset can be recovered for, not on its original cost or on separate measures like current fair value versus expected cash flows.