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

Sagar Ltd tests a machine for impairment. Carrying amount is ₹80 lakh. Fair value less costs of disposal is ₹62 lakh and value in use is ₹70 lakh. What impairment loss should Sagar Ltd recognise under Ind AS 36?

The impairment loss is ₹10 lakh. Recoverable amount is the higher of fair value less costs of disposal (₹62 lakh) and value in use (₹70 lakh), i.e. ₹70 lakh. Carrying amount of ₹80 lakh exceeds this by ₹10 lakh, which is recognised as the loss.

  1. A₹10 lakhCorrect
  2. B₹18 lakh
  3. C₹8 lakh
  4. DNil

Explanation

Recoverable amount is the higher of fair value less costs of disposal (62) and value in use (70), so it is 70. Impairment loss = 80 - 70 = 10 lakh. Using the lower figure (62) would give 18 lakh, which wrongly takes the lower of the two measures.

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