09 March 2009
The following terms are used in this Standard with the meanings specified: 1.Recoverable amount is the higher of an asset’s net selling price and its value in use. 2 Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Provided that in the context of Small and Medium Sized Companies (SMCs), as defined in the Notification, the definition of the term ‘value in use’ would read as follows: “Value in use is thepresentvalue of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life, or a reasonable estimate thereof”. Explanation: The definition of the term ‘value in use’ in the proviso implies that instead of using the present value technique, a reasonable estimate of the ‘value in use’ can be made. Consequently, if an SMC chooses to measure the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an SMC. 3 Net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. 4 Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense. 5 An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. 496 AS 28 6 Carrying amount is the amount at which an asset is recognised in the balance sheet after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon. 7 Depreciation (Amortisation) is a systematic allocation of the depreciable amount of an asset over its useful life.2 8 Depreciable amount is the cost of an asset, or other amount substituted for cost in the financial statements, less its residual value. 9 Useful life is either: (a) the period of time over which an asset is expected to be used by the enterprise; or (b) the number of production or similar units expected to be obtained from the asset by the enterprise. 10 A cash generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets. 11 Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units. 12 An active market is a market where all the following conditions exist : (a) the items traded within the market are homogeneous; (b) willing buyers and sellers can normally be found at any time; and (c) prices are available to the public.
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