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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Kaveri Pharma Ltd. has a plant with original cost ₹20,00,000, accumulated depreciation ₹8,00,000 (carrying amount ₹12,00,000), and no revaluation. At year end its recoverable amount is ₹9,00,000, so an impairment loss is recognised. The remaining useful life is 3 years with nil residual value, straight-line method. What is the depreciation charge for the next year after the impairment?

The depreciation charge is ₹3,00,000. After recognising impairment, the asset's carrying amount becomes ₹9,00,000, and AS 28 requires depreciation to be adjusted to allocate this revised amount over the remaining useful life of three years, straight-line.

  1. A₹3,00,000Correct
  2. B₹4,00,000
  3. C₹6,66,667
  4. D₹2,00,000

Explanation

After the impairment the carrying amount is 9,00,000 (the recoverable amount). Depreciation is revised to allocate this over the remaining life: 9,00,000 / 3 = 3,00,000. Using the old carrying amount gives 4,00,000, which ignores the impairment.

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