Under IAS 36, impairment is measured as recoverable amount, which is the higher of value in use and fair value less costs of disposal.

Under IAS 36, impairment is measured as recoverable amount, which is the higher of value in use and fair value less costs of disposal.

• A. Carrying amount.
• B. Basis is strictly market value.
• C. Recoverable amount equals higher of value in use and fair value less costs of disposal.
• D. Only external auditor opinion determines impairment.

Answer: (C)

Impairment under IAS 36 is measured by recoverable amount, defined as the higher of value in use and fair value less costs of disposal. Value in use represents the present value of the future cash flows the asset is expected to generate to the entity, reflecting its use and ultimately disposal. Fair value less costs of disposal reflects the price that would be obtained from selling the asset in an orderly transaction, minus costs of disposal. Taking the higher of these two ensures the asset is carried at no more than the amount that could be recovered either through continued use or through sale. If the carrying amount exceeds this recoverable amount, an impairment loss is recognized. The other options don’t fit because carrying amount is simply the asset’s current recognized amount, not the measure used to test impairment. Impairment isn’t determined by market value alone—they compare the carrying amount to the recoverable amount, which may rely on value in use rather than just market-based value. And impairment recognition is a management decision supported by audit, not something determined solely by the external auditor’s opinion.

Impairment under IAS 36 is measured by recoverable amount, defined as the higher of value in use and fair value less costs of disposal. Value in use represents the present value of the future cash flows the asset is expected to generate to the entity, reflecting its use and ultimately disposal. Fair value less costs of disposal reflects the price that would be obtained from selling the asset in an orderly transaction, minus costs of disposal. Taking the higher of these two ensures the asset is carried at no more than the amount that could be recovered either through continued use or through sale. If the carrying amount exceeds this recoverable amount, an impairment loss is recognized.

The other options don’t fit because carrying amount is simply the asset’s current recognized amount, not the measure used to test impairment. Impairment isn’t determined by market value alone—they compare the carrying amount to the recoverable amount, which may rely on value in use rather than just market-based value. And impairment recognition is a management decision supported by audit, not something determined solely by the external auditor’s opinion.