Fair value less costs of disposal
Under IAS 36, compare it with value in use; recoverable amount is the higher of the two. Fair value reflects an orderly market-participant transaction at the measurement date, while disposal costs include qualifying incremental direct costs. Do not deduct finance costs or income tax expense as disposal costs. A different standard may define and apply a similar measure in its own context.
Worked example
An asset could be sold in an orderly market transaction for $90,000 and direct selling costs are $5,000. Fair value less costs of disposal is $85,000; compare this with value in use to calculate recoverable amount.
Common mistake
Using sales proceeds without subtracting qualifying disposal costs or automatically selecting this measure as recoverable amount when value in use is higher.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |