UK IAS 36 - Recoverable Amount Clarification

[ArunM]

In IAS 36, What is the reason for selecting a recoverable amount as the higher of the Assets Fair value less costs to sell and Value in Use.

This seems to be a bit of inconsistency for me as it seems to me that being prudent would mean to select the lower of 2 values. Is there any special reason ?

Another reason why I feel this is an inconsistency is because IFRS 5 seems to be a direct opposite. In IFRS 5, The value of an asset held for sale is said to be the lower of the carrying amount or fair value less costs to sell.

Regards,
ArunM

 

[Triest123]

In IAS 36, What is the reason for selecting a recoverable amount as the higher of the Assets Fair value less costs to sell and Value in Use.

This seems to be a bit of inconsistency for me as it seems to me that being prudent would mean to select the lower of 2 values. Is there any special reason ?

Another reason why I feel this is an inconsistency is because IFRS 5 seems to be a direct opposite. In IFRS 5, The value of an asset held for sale is said to be the lower of the carrying amount or fair value less costs to sell.

Regards,
ArunM

Recoverable amount refer to the "best" benefit that a company would be taken from an used asset. (i.e. the best decision on whether to dispose the used asset in the market or use it continuously.) It is related to decison making (managment) rather than accounting treatment.