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Chapter 6

Impairment

2.1 Indications of impairment

An asset may be impaired if its recoverable amount is less than its carrying value in
the financial statements.

Indications that an asset may be impaired include:

 obvious damage

 obsolescence

 lack of use, so that it is not creating value for the entity.

The recoverable amount of an asset represents the best use of the
assets and it is taken to be the higher of:

 net selling price (fair value less costs to sell) or

 value in use (normally given in the question).

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