BCZ21 Some argue that value in use is the only appropriate measurement for the recoverable amount of an asset because:

(a) financial statements are prepared under a going concern assumption. BCZ22 Therefore, no consideration should be given to an alternative measurement that reflects a disposal, unless this reflects the enterprise’s intentions.

(b) assets should not be carried at amounts higher than their service potential from use by the enterprise. Unlike value in use, a market value does not necessarily reflect the service potential of an asset.

 Few commentators on E55 supported this view.

BCZ22 IASC rejected this proposal because:

(a) if an asset’s net selling price is higher than its value in use, a rational enterprise will dispose of the asset. In this situation, it is logical to base recoverable amount on the asset’s net selling price to avoid recognising an impairment loss that is unrelated to economic reality.

(b) if an asset’s net selling price is greater than its value in use, but management decides to keep the asset, the extra loss (the difference between net selling price and value in use) properly falls in later periods because it results from management’s decision in these later periods to keep the asset.