What is considered the recoverable amount under IFRS?

The recoverable amount under IFRS is defined as the higher of an asset's fair value less costs to sell and its value in use. The option that presents the concept of fair value less costs to sell aligns with this definition. This valuation provides an assessment of what the asset could be sold for in the market after deducting any associated selling costs, reflecting a realistic measure of recoverability based on current market conditions.

In accounting terms, using fair value less costs to sell helps ensure that an asset is not carried at more than its recoverable amount, promoting accurate financial reporting and preventing overstatement of asset values on the balance sheet. By focusing on real-world market scenarios, this approach allows for higher relevance and reliability in financial statements.

Other choices, such as the carrying amount, original purchase price, and net book value, do not accurately represent the recoverable amount as defined by IFRS. These values can often misrepresent the current worth of an asset, especially if the market conditions have changed since the asset was acquired or since its last valuation.