- This topic has 5 replies, 2 voices, and was last updated 3 years ago by
.
- Posts
How do we know we need to use the current replacement cost, instead of the recoverable amount to compare with the carrying amount of an asset to calculate the impairment?
And do we need to depreciate the current replacement cost of an asset?
You need to take any figure that approximates to the cash recoverable from the asset(s). Greater of value in use and FVCOD.
Keep it simple. 🙂
I found a very old question which has current replacement cost in it
“On 1 December 2006, Blackcutt opened a school at a cost of $5 million. The estimated useful life of the school 25 years. On 30 November 2012, the school was closed because numbers using the school declined unexpectedly due to a population shift caused by the closure of a major employer in the area. The school is to be converted for use as a library, and there is no expectation that numbers using the school will increase in the future and thus the building will not be reopened for use as a school. The current replacement cost for a library of equivalent size to the school is $2.1 million. Because of the nature of the non-current asset, value in use and net selling price are unrealistic estimates of the value af the school. The change in use would have no effect on the estimated life of the building.”
The answer given shows that we need to depreciate the current replacement cost. Is there any rule with regards to the depreciation of current replacement cost? I could not find any info about current replacement cost on the internet
Given the data, all that we can use is some form of replacement cost.
We used to teach depreciated replacement cost until about 1992 and I probably threw my notes away then! But it is logical – what is the cost of a new asset in today’s money………….then depreciate it to ‘sort of’ get the cost of an old asset in today’s money.
- The topic ‘Current replacement cost – IAS 36’ is closed to new replies.