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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Kaveri Industries Ltd. has a plant revalued in an earlier year. Its carrying amount is ₹30,00,000, which includes a revaluation reserve of ₹8,00,000 relating to this plant. Its recoverable amount at year end is ₹19,00,000. As per AS 28, the amount to be charged to the profit and loss statement is:

₹3,00,000 is charged to profit and loss. The total impairment loss is ₹11,00,000, treated as a revaluation decrease, so it is first adjusted against the ₹8,00,000 revaluation reserve of the same asset. Only the excess of ₹3,00,000 goes to the statement of profit and loss.

  1. A₹11,00,000
  2. B₹3,00,000Correct
  3. C₹8,00,000
  4. DNil

Explanation

Impairment loss = 30,00,000 − 19,00,000 = ₹11,00,000. For a revalued asset, the loss is treated as a revaluation decrease and set against the revaluation reserve up to ₹8,00,000. The balance ₹3,00,000 is charged to profit and loss. Charging the full ₹11,00,000 ignores the reserve.

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