In the case of an intangible asset with an indefinite useful life It is also

In the case of an intangible asset with an indefinite

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In the case of an intangible asset with an indefinite useful life It is also possible to use the most recent detailed calculation of recoverable amount made in a preceding year. This is possible if all the following criteria are met: - For the intangible asset, if tested as part of a cash-generating unit, the other assets and liabilities in the unit have not changed significantly; - In the preceding year's calculation, the difference between the carrying amount and recoverable amount was substantial; - An analysis of all evidence relating to events affecting the asset suggests that the likelihood of the recoverable amount being less than carrying amount is remote. 15.3.1 Calculating fair value less costs of disposal . Two parts in this calculation: - Fair value; - Costs of disposal. FV = Fair value is defined as an exit price and can be measured using a number of valuation techniques using various observable or unobservable inputs. Costs of disposal = IAS 36 provides the following examples of costs of disposal: legal costs, stamp duty and similar transaction taxes, costs of removing the asset, and direct incremental costs to bring the asset into condition for sale. Costs must be directly associated with either the sale of the asset or getting the asset ready for sale. Any costs arising after the sale of the asset, even if arising as a result of the sale, are not regarded as costs of disposal. 15.3.2. Calculating value in use . Value in use = present value of future cash flows relating to the asset being measured. These should be discounted at an appropriate rate that takes account of the risks inherent in future cash flows from the asset. Fair value differs from value in use because of factors that are likely to be specific to the entity: - additional value derived from the grouping of assets (such as the creation of a portfolio of investment properties in different locations); - Synergies between the asset being measured and other assets; - Legal rights or legal restrictions that are specific only to the current owner of the asset; - Tax benefits or tax burdens that are specific to the current owner of the asset. In order to determine value in use, you need take the following elements into account : - An estimate of the future cash flows the entity expects to derive from the asset. - Expectations about possible variations in the amount or timing of those future cash flows. - The time value of money, represented by the current market risk-free rate of interest.
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- The price for bearing the uncertainty inherent in the asset. - Other factors, such as illiquidity, that market participants would reflect in pricing the future cash flows the entity expects to derive from the asset. Step 1: Estimate future cash flows . IAS 36 provide guidance in measuring future cash flows. Some important guidelines are: When you measure value in use, you shall always base your cash flow projections on: - Reasonable and supportable assumptions that represent management’s best estimate of the economic conditions that will exist over the remaining useful life of the asset.
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