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Editorial Board on Accounts and Audit
  • Impairment of Asset

    by Chirag on Thursday, November 01, 2018 at 07:57 PM

    Dear Sir, With respect to just asked query on Impairment of Assets, Pls clarify that there is mention of---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.So,0.75 cr (3.75 -3.00) should be the reversal of impairment loss? 2)Pls clarify that why Recoverable amount of 3.40cr has role at the time of reversal of loss i.e 0.40 (3.40-3.0

    Replied byEditorial Board Tuesday, November 13, 2018 at 11:00 AM

    In last query you have mentioned that the carrying amount of the asset is Rs. 3.00 cr. and the recoverable amount of the asset is Rs. 3.40 cr. at the end of the year 2013. Now, apply provision of AS 28, according to which the carrying amount of an asset shall not exceed its recoverable amount. So, in any case the carrying amount of the asset can’t exceed Rs. 3.40 cr. Therefore, you can reverse earlier recognised impairment loss only to the extent of Rs. 0.40 cr.

    If you reverse impairment loss of Rs. 0.75 crores then the carrying amount of the asset shall become Rs. 3.75 crores with recoverable amount of only Rs. 3.40 crores. In this case, you will have to again record an impairment loss of Rs. 0.35 crores [Rs. 3.75 – Rs. 3.40]. The net effect shall be reversal of Rs. 0.40 crores [Rs. 0.75 crores – Rs. 0.35 crores].

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