Corporate Financial Reporting · Impairment of Assets (Ind AS 36)

Impairment Loss on an Individual Asset under Ind AS 36

Updated 11 October 2026 · Fact-checked

An impairment loss is the excess of an asset's carrying amount over its recoverable amount. For a non-revalued asset, charge it to profit or loss. For a revalued asset, treat it as a revaluation decrease: first against that asset's revaluation surplus through OCI, then the balance to profit or loss. Then depreciate the revised carrying amount over the remaining life.

Understand Recognition and Measurement of Impairment Loss for an Individual Asset

Ind AS 36 makes sure an asset is not carried above what you can recover from it. Recoverable amount is the higher of fair value less costs of disposal and value in use. If carrying amount is higher than recoverable amount, the asset is impaired and you write it down.

Where the debit goes depends on how the asset is carried. Under the cost model, the standard says the loss is recognised immediately in profit or loss (para 60). Nothing else is involved.

Under the revaluation model (for example Ind AS 16), the loss is treated as a revaluation decrease (para 60). In practice, as para 61 says, the loss goes to other comprehensive income only up to the revaluation surplus held for that same asset, and it reduces that surplus. Any excess over the surplus goes to profit or loss. The surplus is tracked asset by asset, not for the class as a whole.

After the write-down, the asset has a lower carrying amount. Para 63 requires you to adjust depreciation in future periods so that the revised carrying amount, less residual value, is spread over the remaining useful life. So the depreciation charge usually falls from the next period.

A revalued asset needs an impairment test only in some cases. Under para 5, if disposal costs are negligible, the recoverable amount is close to or above the revalued amount, so impairment is unlikely. If disposal costs are not negligible, the asset is impaired when its value in use is less than its revalued amount, so you apply the standard.

Key rules to remember

Recoverable amount: Recoverable amount = Higher of (Fair value less costs of disposal, Value in use); Compare with carrying amount. If either measure is above carrying amount, there is no impairment.
Impairment loss: Impairment loss = Carrying amount − Recoverable amount (if positive); Carrying amount is after depreciation up to the test date.
Non-revalued asset (para 60): Dr Impairment loss (P&L) ; Cr Asset (or accumulated impairment); Recognised immediately in profit or loss.
Revalued asset (paras 60 and 61): Dr Revaluation surplus (OCI) up to surplus of that asset ; Dr P&L for the excess ; Cr Asset; Surplus is tracked for the same asset only. The OCI part reduces that surplus.
Depreciation after impairment (para 63): New annual depreciation = (Revised carrying amount − Residual value) ÷ Remaining useful life; Applies from the period after the loss, on a systematic basis.

How to solve Recognition and Measurement of Impairment Loss for an Individual Asset questions

Use this order for any numerical on an individual asset.

1Find the carrying amount at the test date: cost (or revalued amount) less accumulated depreciation up to that date.
2Work out fair value less costs of disposal and value in use. Take the higher as recoverable amount.
3Compare. If carrying amount is not higher than recoverable amount, record no loss and stop.
4Impairment loss = carrying amount − recoverable amount.
5Check the model. Cost model: the whole loss goes to profit or loss. Revaluation model: set it against that asset's revaluation surplus first, through OCI.
6Charge any excess over the surplus to profit or loss. Write the journal entry.
7Compute revised depreciation: (revised carrying amount − residual value) ÷ remaining life, and apply it to later years.

Quickest way: Three-line impairment check

When to use it: Use this in MCQs and in the first marks of a long numerical when time is short.

Write: carrying amount, then recoverable amount (the higher of the two measures). The gap is the loss.
Ask one question: is the asset revalued? If no, all to P&L. If yes, deduct the surplus first, rest to P&L.
New depreciation = (new carrying amount − residual) ÷ remaining life.

Common mistakes in Recognition and Measurement of Impairment Loss for an Individual Asset

Using the lower of fair value less costs of disposal and value in use as recoverable amount.
Students link impairment with prudence and pick the smaller figure.
Fix: Recoverable amount is always the higher of the two. Only compare it with carrying amount afterwards.
Charging the whole loss on a revalued asset to profit or loss.
Students remember the cost-model rule and apply it to every asset.
Fix: For a revalued asset, use the revaluation surplus of that asset first. Only the excess goes to profit or loss.
Using the total revaluation surplus of the class instead of the surplus of the same asset.
The balance sheet shows one revaluation surplus figure.
Fix: Para 61 refers to the surplus for that same asset. Use only that asset's share.
Continuing the old depreciation after the write-down.
Students forget the loss changes the depreciable base.
Fix: Recompute using the revised carrying amount, less residual value, over the remaining useful life (para 63).
Forgetting to deduct costs of disposal from fair value.
Fair value is given in the question, and the costs sit in a later line.
Fix: Always compute fair value less costs of disposal before comparing with value in use.
Measuring carrying amount at cost without deducting depreciation up to the test date.
Students rush to the comparison step.
Fix: Compute depreciation for the exact period first, then test.

Worked examples

Example 1

Sunrise Textiles Ltd bought a machine on 1 April 2024 for ₹50,00,000 (useful life 10 years, nil residual value, straight line, cost model). On 31 March 2026 the machine's fair value less costs of disposal is ₹32,00,000 and its value in use is ₹35,00,000. Compute the impairment loss, give the journal entry and the depreciation for 2026-27.

Show the solution

Annual depreciation = ₹50,00,000 ÷ 10 = ₹5,00,000.
Carrying amount on 31 March 2026 = ₹50,00,000 − (2 × ₹5,00,000) = ₹40,00,000.
Recoverable amount = higher of ₹32,00,000 and ₹35,00,000 = ₹35,00,000.
Impairment loss = ₹40,00,000 − ₹35,00,000 = ₹5,00,000.
Cost model, so the whole loss goes to profit or loss: Dr Impairment loss (P&L) ₹5,00,000; Cr Machine (accumulated impairment) ₹5,00,000.
Remaining life = 8 years. Revised depreciation = ₹35,00,000 ÷ 8 = ₹4,37,500.

Answer: Impairment loss ₹5,00,000 charged to profit or loss. Depreciation for 2026-27 is ₹4,37,500.

Example 2

Bharat Realty Ltd carries a building at a revalued amount. On 31 March 2026 its carrying amount is ₹80,00,000. The revaluation surplus relating to this building is ₹6,00,000. Its recoverable amount is ₹70,00,000. Remaining useful life is 20 years, nil residual value. Show the treatment and the depreciation for 2026-27.

Show the solution

Impairment loss = ₹80,00,000 − ₹70,00,000 = ₹10,00,000.
It is a revalued asset, so the loss is treated as a revaluation decrease.
Amount against that building's revaluation surplus (OCI) = ₹6,00,000, which reduces the surplus to nil.
Excess to profit or loss = ₹10,00,000 − ₹6,00,000 = ₹4,00,000.
Journal: Dr Revaluation surplus (OCI) ₹6,00,000; Dr Impairment loss (P&L) ₹4,00,000; Cr Building ₹10,00,000.
Revised depreciation = ₹70,00,000 ÷ 20 = ₹3,50,000 per year.

Answer: ₹6,00,000 is recognised in OCI against the revaluation surplus and ₹4,00,000 in profit or loss. Depreciation for 2026-27 is ₹3,50,000.

Exam tips

In MCQs, first check whether the asset is revalued. That single fact usually decides which option is right.
Show the recoverable amount calculation as a separate line. Markers give marks for choosing the higher figure.
Always write the journal entry, and show the OCI and profit or loss split in separate lines.
End the answer with revised depreciation. Many questions add a 'depreciation for next year' part.
State the standard's rule in one line (for example, loss goes to OCI up to that asset's surplus) before the working.

Practice questions from Impairment of Assets (Ind AS 36)

Recognition and Measurement of Impairment Loss for an Individual Asset 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 for an Individual Asset: frequently asked questions

Where is an impairment loss on a revalued asset recognised?

It is treated as a revaluation decrease. It goes to other comprehensive income up to the revaluation surplus for that same asset, and that reduces the surplus. Any excess is recognised in profit or loss.

How is depreciation calculated after an impairment loss?

Spread the revised carrying amount, less residual value, over the remaining useful life on a systematic basis. The depreciation charge is adjusted for future periods only, not restated for the past.

What is the journal entry for an impairment loss on a non-revalued asset?

Debit Impairment loss in the statement of profit and loss and credit the asset, or accumulated impairment losses. The loss is recognised immediately.

Does a revalued asset always need an impairment test?

No. If disposal costs are negligible, recoverable amount is close to or above the revalued amount, so impairment is unlikely and you need not estimate it. If disposal costs are not negligible, the asset is impaired when value in use is below the revalued amount.