Fair Value less Costs to Sell is best described as:

Fair Value less Costs to Sell is best described as:

• A. The amount obtainable from the sale of an asset at arm's length between knowledgeable, willing parties, less costs of disposal
• B. The present value of future cash flows from using the asset
• C. The asset's carrying amount
• D. The asset's replacement cost

Answer: (A)

Fair value less costs to sell measures the net amount an entity would receive from selling the asset in an orderly market, after deducting costs of disposal. This is the component used in impairment calculations to determine recoverable amount—the higher of fair value less costs to sell and value in use. The reason this statement is the best description is that it directly matches the definition: the price from a sale between knowledgeable, willing parties at arm's length, minus the costs to dispose. It is not the present value of future cash flows from using the asset (that is value in use), not the asset's carrying amount, and not the replacement cost.

Fair value less costs to sell measures the net amount an entity would receive from selling the asset in an orderly market, after deducting costs of disposal. This is the component used in impairment calculations to determine recoverable amount—the higher of fair value less costs to sell and value in use. The reason this statement is the best description is that it directly matches the definition: the price from a sale between knowledgeable, willing parties at arm's length, minus the costs to dispose. It is not the present value of future cash flows from using the asset (that is value in use), not the asset's carrying amount, and not the replacement cost.