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Editorial Board on Accounts and Audit
  • Impairment of Asset

    by Chirag on Friday, October 26, 2018 at 07:52 PM

    Dear Sir, A company recognised impairment loss in 2011 of Rs 0.75 cr. In 2013, it wants to REVERSE the amount of impairment loss. Carrying amt. of Asset after recognising impairment loss in 2011 is 3.40 crores.Depreciation for 2 yrs is 0.40. So, carrying amt. in 2013 is 3.00. The CARRYING AMT. OF ASSET HAD THERE BEEN NO IMPAIRMENT IN 2013 IS 3.75. RECOVERABLE AMT. IN 2013 is 3.40 cr. Query- Pls tell the amount of Reversal to be recognised as per AS-28 in 2013 ?? Pls clarify in detail sir.

    Replied byEditorial Board Thursday, November 01, 2018 at 05:58 PM

    As per AS 28, if the existing conditions indicate that impairment losses recognised on an asset previously may no longer exist or may have decreased then the impairment losses should be reversed and added to the carrying amount of the asset. But, reversal shall not increase the carrying amount of the asset more than the carrying amount (net of depreciation or amortization) of the asset had no impairment loss has been provided for the asset in prior periods.

    In your case, assuming the conditions are exist for reversal, you can reverse the earlier recognised impairment loss to the extent of Rs. 0.40 cr. The carrying amount at the end of year 2013 of the asset had no impairment loss has been recognised in year 2011, is Rs. 3.75 cr. But, the recoverable amount is Rs. 3.40 cr. So, the carrying amount couldn’t exceed Rs. 3.40 cr because the carrying amount after reversal cannot exceed the Recoverable amount.

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