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CA Final · Financial Reporting · Ind AS 36 Impairment of Assets

Narmada Power Ltd. has an asset with a carrying amount of Rs 50 lakh, previously carried at cost, and a recoverable amount of Rs 40 lakh, so an impairment loss was recognised. The asset was acquired when the company had no revaluation surplus on it. For a similar asset, which of the following is the correct treatment of its impairment loss?

The impairment loss on an asset carried at cost is recognised immediately in profit or loss. Only a revalued asset's loss can be treated as a revaluation decrease through other comprehensive income, and deferral or adjustment against reserves is not allowed.

  1. ARecognise the loss immediately in profit or lossCorrect
  2. BRecognise the loss in other comprehensive income
  3. CDefer the loss and amortise it over the remaining useful life
  4. DAdjust the loss directly against retained earnings

Explanation

For an asset carried at cost, an impairment loss is recognised immediately in profit or loss. Only for revalued assets is the loss treated as a revaluation decrease, charged to OCI up to the surplus held. Deferral and direct adjustment to retained earnings are not permitted.

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