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CA Final · Financial Reporting · Ind AS 34 Interim Financial Reporting

Anand Retail Ltd recognised a goodwill impairment loss of Rs 40 lakh in its first-quarter interim report as per Ind AS 36. At the half-year end, the estimated recoverable amount of the cash-generating unit has recovered and, had the test been done afresh at that date, no impairment would arise. The accountant proposes to reverse the Rs 40 lakh in the half-year report, since Ind AS 34 requires year-to-date measurement and the annual result should not depend on reporting frequency. What is the correct treatment?

The Rs 40 lakh goodwill impairment loss must not be reversed in the half-year report or later, because Ind AS 36 prohibits reversal of goodwill impairment in a subsequent period. That prohibition prevails over the year-to-date measurement principle, and it is not extended by analogy to other areas.

  1. AReverse the loss in the half-year report, as year-to-date measurement overrides Ind AS 36
  2. BReverse half of the loss in the half-year report and the rest at the year end
  3. CDo not reverse the loss; an impairment loss on goodwill shall not be reversed in a subsequent period, and this principle is not extended by analogy to other areasCorrect
  4. DReverse the loss only in the annual financial statements

Explanation

Ind AS 36 states that an impairment loss recognised for goodwill shall not be reversed in a subsequent period. The Appendix A to Ind AS 34 resolves the conflict with the year-to-date principle in favour of no reversal. The entity must not extend this principle by analogy to other areas of potential conflict. So reversal in either interim or annual report is wrong.

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