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Advanced Accounting · AS 28 Impairment of Assets

Recognition and Measurement of Impairment Loss under AS 28

Updated 4 October 2026 · Fact-checked

Under AS 28, an impairment loss is the excess of an asset's carrying amount over its recoverable amount, which is the higher of net selling price and value in use. Charge it to profit and loss immediately. For a revalued asset, set it against revaluation surplus first. Then depreciate the revised carrying amount over the remaining life.

Understand Recognition and Measurement of Impairment Loss

An asset should never be carried in the books at more than you can recover from it. Recoverable amount is the higher of the asset's net selling price and its value in use. If the carrying amount is more than this, the asset is impaired and you must write it down.

The write-down is the impairment loss. It equals carrying amount minus recoverable amount. Carrying amount means cost (or revalued amount) less accumulated depreciation and any earlier impairment losses. Do not start from cost alone.

The normal treatment is simple. Recognise the loss immediately as an expense in the statement of profit and loss. The exception is an asset carried at a revalued amount. There, the loss is treated as a revaluation decrease. It is set against the revaluation surplus held for that same asset. Only the excess, if any, goes to profit and loss.

After the loss, the asset's carrying amount is lower. So depreciation for future periods must be adjusted. Take the revised carrying amount, less residual value, and spread it over the remaining useful life. Past depreciation is not changed.

If the calculated loss is more than the asset's carrying amount, you recognise a liability only if another Accounting Standard requires it. Otherwise the asset is simply reduced to nil.

Key rules to remember

Recoverable amount
Recoverable amount = Higher of (Net selling price, Value in use)
Use the higher figure. If either one is above the carrying amount, there is no impairment, so you need not compute the other.
Impairment loss
Impairment loss = Carrying amount − Recoverable amount (only if carrying amount is higher)
If recoverable amount is equal or higher, the loss is nil.
Treatment of loss on an asset at cost
Impairment loss → Statement of Profit and Loss immediately
Debit Impairment Loss A/c, credit the asset (or a provision for impairment).
Treatment of loss on a revalued asset
Loss first against Revaluation Surplus of that asset; excess → Statement of Profit and Loss
Surplus of other assets cannot be used.
Revised depreciation
Revised depreciation = (Revised carrying amount − Residual value) ÷ Remaining useful life
Applies from the period after the impairment. It is a prospective change.

How to solve Recognition and Measurement of Impairment Loss questions

Use this order for any numerical on recognising an impairment loss and revising depreciation.

  1. 1Compute the carrying amount at the date of testing: cost (or revalued amount) less accumulated depreciation up to that date and earlier impairment losses.
  2. 2Find net selling price: selling price less costs of disposal.
  3. 3Find value in use: the present value of future cash flows, as given in the question.
  4. 4Recoverable amount is the higher of the two figures from steps 2 and 3.
  5. 5Compare. If carrying amount is more than recoverable amount, impairment loss = the difference. Otherwise no entry.
  6. 6Decide where the loss goes. Asset at cost: all to profit and loss. Revalued asset: first against that asset's revaluation surplus, then the balance to profit and loss.
  7. 7Pass the journal entry and show the revised carrying amount.
  8. 8Compute future depreciation: (revised carrying amount − residual value) ÷ remaining useful life.

Quickest way: Four-line exam method

When to use it: Use this for both MCQs and short written problems when time is tight.

  1. MCQ: write carrying amount and the two recoverable figures. Pick the higher recoverable figure and subtract it from carrying amount. This is the loss.
  2. MCQ trap check: if the question says the asset is revalued and a surplus exists, split the loss between surplus and profit and loss before choosing an option.
  3. Written: use a clear layout. Line 1 carrying amount, line 2 recoverable amount (show both figures), line 3 impairment loss, line 4 journal entry. Each line earns step marks.
  4. Always end with revised depreciation, using remaining life, even if the question only hints at it. Show the working in one line.

Common mistakes in Recognition and Measurement of Impairment Loss

  • Comparing carrying amount with only net selling price, or only value in use.

    Students stop at the first figure they calculate.

    Fix: Always take the higher of the two as recoverable amount before comparing.

  • Taking carrying amount as original cost.

    Accumulated depreciation is forgotten when the asset is old.

    Fix: Deduct depreciation up to the date of testing and any earlier impairment loss first.

  • Charging the whole loss on a revalued asset to profit and loss.

    Students apply the cost-model rule to every asset.

    Fix: Set the loss against that asset's revaluation surplus first. Only the excess goes to profit and loss.

  • Using the revaluation surplus of other assets to absorb the loss.

    Total revaluation reserve in the balance sheet looks like one pool.

    Fix: Use only the surplus relating to the same asset.

  • Restating past depreciation after the impairment.

    Students think the asset should always have been at the lower value.

    Fix: Revise depreciation only for current and future periods. Past charges stay as they are.

  • Dividing revised carrying amount by the original total life.

    The remaining life is not worked out.

    Fix: Divide by the remaining useful life only, after deducting any residual value.

Worked examples

Example 1

A machine costing ₹10,00,000 was bought on 1 April 2024. Useful life is 10 years, residual value nil, depreciation by straight-line method. On 31 March 2027, net selling price is ₹4,50,000 and value in use is ₹5,00,000. Compute the impairment loss, pass the journal entry and find depreciation for the year ending 31 March 2028.

Show the solution
  1. Annual depreciation = ₹10,00,000 ÷ 10 = ₹1,00,000.
  2. Accumulated depreciation for 3 years (to 31 March 2027) = ₹3,00,000.
  3. Carrying amount = ₹10,00,000 − ₹3,00,000 = ₹7,00,000.
  4. Recoverable amount = higher of ₹4,50,000 and ₹5,00,000 = ₹5,00,000.
  5. Impairment loss = ₹7,00,000 − ₹5,00,000 = ₹2,00,000. The machine is at cost, so the whole loss goes to profit and loss.
  6. Journal: Impairment Loss A/c Dr ₹2,00,000 to Machinery A/c ₹2,00,000.
  7. Remaining life = 10 − 3 = 7 years.
  8. Revised depreciation = ₹5,00,000 ÷ 7 = ₹71,428.57, about ₹71,429.

Answer: Impairment loss ₹2,00,000 charged to profit and loss. Depreciation for 2027-28 is about ₹71,429.

Example 2

A plant was revalued and its carrying amount on 31 March 2027 is ₹12,00,000. The revaluation surplus relating to this plant is ₹1,50,000. Recoverable amount is ₹9,00,000. Remaining useful life is 6 years, residual value nil. Show the treatment of the impairment loss and the depreciation for the next year.

Show the solution
  1. Impairment loss = ₹12,00,000 − ₹9,00,000 = ₹3,00,000.
  2. The plant is carried at a revalued amount, so the loss is a revaluation decrease.
  3. Set against this plant's revaluation surplus: ₹1,50,000.
  4. Balance = ₹3,00,000 − ₹1,50,000 = ₹1,50,000, charged to profit and loss.
  5. Journal: Revaluation Reserve A/c Dr ₹1,50,000, Impairment Loss A/c Dr ₹1,50,000 to Plant A/c ₹3,00,000.
  6. Revised carrying amount = ₹9,00,000.
  7. Depreciation = ₹9,00,000 ÷ 6 = ₹1,50,000 per year.

Answer: ₹1,50,000 is adjusted against revaluation surplus and ₹1,50,000 is charged to profit and loss. Next year's depreciation is ₹1,50,000.

Exam tips

  • Show carrying amount, recoverable amount and the loss on separate lines. Examiners award marks for each.
  • Read the question for the words 'revalued' or 'revaluation reserve'. They change the treatment of the loss.
  • When both net selling price and value in use are given, write both and circle the higher one.
  • Add the revised depreciation calculation even when the question does not ask directly. It is a frequent follow-up part.
  • In MCQs, check whether depreciation up to the test date has been deducted before computing the loss.

Practice questions from AS 28 Impairment of Assets

Recognition and Measurement of Impairment Loss in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Recognition and Measurement of Impairment Loss: frequently asked questions

Where is impairment loss shown in the books?

For an asset at cost, it is charged as an expense in the statement of profit and loss. For a revalued asset, it is first set against that asset's revaluation surplus. Only the balance goes to profit and loss.

Is depreciation revised after an impairment loss?

Yes. Depreciation for future periods is based on the revised carrying amount, less residual value, over the remaining useful life. Depreciation already charged is not changed.

What if recoverable amount is higher than carrying amount?

There is no impairment loss and no entry is passed. You also need not compute the other measure once one of them is above the carrying amount.

Can I credit the asset account directly in the journal entry?

Yes, in exam answers you may credit the asset account directly or credit a provision for impairment. State which you use and keep it consistent in the working.