8/9/2019 Accounting for Impairment of Assets

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Accounting forImpairment of Assets

2012 13, Term VI

CA K.P.Rajenran

!prajen"gmai#.com

mailto:kprajen@gmail.commailto:kprajen@gmail.com

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Impairment of Assets

Impairment of an asset (whethertangible or intangible) is the fall invalue of an asset, so that itsrecoverable amount is now less thanits carrying value in the statement offinancial position.

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Impairment of Assets

An entity shall assess at the end ofeach reporting period whether thereis any indication that an asset may beimpaired. If any such indicationexists, the entity shall estimate therecoverable amount of the asset.

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Impairment of Assets

An entity shall also test an intangibleasset with an indefinite useful life oran intangible asset not yet availablefor use for impairment annually bycomparing its carrying amount withits recoverable amount.

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Impairment of Assets

An asset is said to be impaired if itscarrying amount is less than itsrecoverable amount.

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Impairment of Assets

arrying amount is the amount atwhich an asset is recogni!ed afterdeducting any accumulateddepreciation (amorti!ation) andaccumulated impairment lossesthereon.

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Impairment of Assets

"he recoverable amount of an asset isthe higher of# the asset$s fair value less cost to sell%

and

its value in use.

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Impairment of Assets

&air value less cost to sell is theamount obtainable from the sale ofan asset (that is its mar'et price lesscost to sell).

ost to sell is the cost of disposal ofan asset including legal expenses,

bro'erage and other transactioncosts.

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Impairment of Assets

"he discount rate used fordetermining the present value of theexpected future cash flow would bethe appropriate discount rate for theentity after considering the ris'.

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Impairment of Assets

If the recoverable amount of anasset is less than its carrying amount,the carrying amount of the asset shallbe reduced to its recoverable amount."hat reduction is an impairment loss.

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Impairment of Assets

An impairment loss shall be treatedust li'e a revaluation loss.

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Impairment of Assets

"he impairment loss shall normally berecognised immediately in profit orloss

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Impairment of Assets

*ut if there is any revaluation surplusrelating to that asset, then theimpairment loss can be reduced fromthat revaluation surplus.

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Impairment of Assets

Any reversal of an impairment lossfor an asset shall be credited to profitand loss account.

*ut any reversal of impairment lossfor a revalued asset should be treatedas a revaluation surplus.

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Impairment of Assets

"he only exception is goodwill. Animpairment loss recognised forgoodwill shall not be reversed in asubse+uent period.