Deprival value
Deprival value estimates the loss an entity would suffer if it no longer had an asset. In the common simplified model, it is the lower of replacement cost and recoverable amount, where recoverable amount is the higher of net realisable value and value in use. If replacement is worthwhile, replacement cost limits the loss; if not, the best benefit forgone is the higher of sale proceeds and value in use. Specify the assumptions and measurement basis: this conceptual model is not automatically an IFRS carrying amount or an insurance payment.
Worked example
A machine has replacement cost $100,000, net realisable value $60,000 and value in use $80,000. Recoverable amount is $80,000, so deprival value is the lower of $100,000 and $80,000: $80,000. A replacement cost of $70,000 instead gives deprival value $70,000 on the same other assumptions.
Common mistake
Defining deprival value as insurance compensation, taking the highest of all three figures, or assuming it automatically equals the amount recognised under IFRS.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FM | Supporting | September 2026–June 2027 |