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    Question

    As per the accounting standards, impairment loss on an

    asset occurs when recoverable amount is less than the carrying amount. Which of the following correctly describes the carrying value of an asset?
    A Price received upon selling the asset Correct Answer Incorrect Answer
    B Cost of asset less its residual value Correct Answer Incorrect Answer
    C Cost of asset less its depreciation for the year Correct Answer Incorrect Answer
    D Cost of asset less accumulated depreciation Correct Answer Incorrect Answer
    E Price received upon selling the asset less expected costs of disposal Correct Answer Incorrect Answer

    Solution

    Impairment occurs when the recoverable amount is less than the carrying amount. The difference is recognized as an impairment loss. For determining the impairment loss, the various costs associated are as follows: ā€¢ Carrying value ā€“ amount at which an asset is recognized after deducting the accumulated depreciation (or amortization) and accumulated impairment losses (if any) ā€¢ Fair value ā€“ the price that would be received to sell the asset between market participants at the measurement date ā€¢ Recoverable value - the higher of its fair value less costs of disposal and its value in use. ā€¢ Depreciable value ā€“ cost of asset less its residual value

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