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Impairment is asset’s recoverable amount is being less than its carrying amount. But i think it contradicts with the revaluation in ias 16. Because there it is mentioned that when revaluation is conducted, and asset’s fair value is less than cv, it is downward revaluation and a loss should be recognised. But why don’t a situation occur like fair value is less but value in use is more than carrying amount (means there is no impairment but there is scope for downward revaluation) what to do in this situation. is impairment different from downward revaluation in ias 16?
Hi,
There isn’t a contradiction and the standard is merely reflecting the best possible use of the asset. We take the higher of the value in use and fair value less costs to sell as that is what we would decide to do with the asset, regardless if the other amount is less than the carrying value of the asset.
If the value in use was the higher of the two then we would continue to use it to bring economic benefit to the entity. If the FVLCTS was higher then we would be looking to sell the asset as that would bring the most benefit to the entity.
Thanks
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