Financial Reporting (Ind AS)MCQQuestion 5889 of 507
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Under Ind AS 36, 'Impairment of Assets', the 'Recoverable Amount' of an asset or Cash-Generating Unit (CGU) is defined as the:

Select Your Answer (Keyboard: A, B, C, D)
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Correct Answer

✅ Option B — Higher of its fair value less costs of disposal and its value in use

All Options:

  • ALower of its fair value less costs of disposal and its value in use
  • BHigher of its fair value less costs of disposal and its value in use ✓
  • CPresent value of estimated future cash flows discounted at the risk-free rate
  • DNet realizable value less replacement cost

Detailed Solution & Explanation

Determination of Recoverable Amount under Ind AS 36:
1. **Definition (Para 18)**:
Recoverable Amount=max⁡(Fair Value Less Costs of Disposal,Value in Use)Recoverable Amount=max⁡\displaystyle \text{Recoverable Amount} = \max(Fair Value Less Costs of Disposal\displaystyle \text{Fair Value Less Costs of Disposal}, Value in Use\displaystyle \text{Value in Use})
2. **Impairment Rule**: If the carrying amount of an asset exceeds its recoverable amount, the carrying amount shall be reduced to its recoverable amount, and an impairment loss shall be recognized immediately in profit or loss.
Hence, **Option B** is the correct answer.

More Questions from Financial Reporting (Ind AS)

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Reliance Industries Ltd. has equipment of cost ₹4,000,000. Book depreciation is ₹800,000 and tax depreciation is ₹1,400,000. Corporate tax rate is 25%. Under Ind AS 12, what is the Deferred Tax Liability (DTL)?

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