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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Sundaram Ltd purchased a licence on 1 April 2025 for Rs 24 lakh, amortised over 6 years straight-line with nil residual value. On 31 March 2027 an impairment test showed the recoverable amount to be Rs 10 lakh. What is the impairment loss to be recognised for the year ended 31 March 2027?

The impairment loss is Rs 6 lakh. After two years of amortisation at Rs 4 lakh a year the carrying amount is Rs 16 lakh, and the excess over the recoverable amount of Rs 10 lakh is the loss recognised in profit and loss.

  1. ARs 2 lakh
  2. BRs 6 lakhCorrect
  3. CRs 14 lakh
  4. DRs 10 lakh

Explanation

Annual amortisation = Rs 4 lakh. Carrying amount at 31 March 2027 after two years = 24 - 8 = Rs 16 lakh. Impairment loss = 16 - 10 = Rs 6 lakh. Rs 14 lakh uses original cost less recoverable amount, ignoring amortisation.

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