![]() Let us understand the meaning of these two terms. Fair value less cost to sell (abbreviated as “FVLCTS”)Īs we know, the calculation depends on FVLTS and Value in use.The recoverable amount of an asset is the higher of the following two amounts. Source: Recoverable Amount () Recoverable Amount Formula You are free to use this image on your website, templates, etc., Please provide us with an attribution link How to Provide Attribution? Article Link to be Hyperlinked The cash flows can either arise by selling the asset or by using it. read more that are expected to be obtained from the asset. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. On the other hand, the recoverable amount of an asset refers to the maximum amount of cash flows Cash Flows Cash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. The carrying value of an asset means its book value. read more of an asset is more than its recoverable amount. It is calculated for intangible assets as the actual cost less amortization expense/impairments. It provides provision for an impairment loss if the carrying value Carrying Value Carrying value is the book value of assets in a company's balance sheet, computed as the original cost less accumulated depreciation/impairments. Further, it is present in International Accounting Standard 36 (“IAS 36”). read more where the carrying amount of an asset is greater than its recoverable amount. These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. The accounting standards require the companies to report the instances in the financial statements Financial Statements Financial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). #1 – Fair Value Less Cost to Sell (“FVLCTS”).
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