It stands for fair value less cost to sell; a type of net recoverable amount where the value of an asset is defined as the difference between its fair value and the costs an entity incurs on disposal of that asset (cost to sell).

This measure of value is a key component in the formula used to determine an asset’s recoverable amount, which is used in turn to establish whether an asset is impaired or not (by setting it compared with its carrying amount or book value). In other words, impairment loss is calculated as the amount by which the carrying amount (book value) of an asset (or a cash generating unit, CGU) exceeds its recoverable amount. Impairment loss arises when the carrying amount drops below the amount that can be recovered from selling or disposing of the asset (which results in the removal of the asset from an entity’s balance sheet).

This amount is also known as fair value less costs of disposal.