Skip to content

CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Sundaram Textiles Ltd. holds a spinning machine with a carrying amount of ₹50 lakh at the balance sheet date. Its net selling price is ₹42 lakh and its value in use is ₹46 lakh. What impairment loss should be recognised under AS 28?

The impairment loss is ₹4 lakh. Recoverable amount is the higher of net selling price and value in use, which is ₹46 lakh. Since the carrying amount of ₹50 lakh exceeds it by ₹4 lakh, that excess is recognised as an impairment loss.

  1. A₹4 lakhCorrect
  2. B₹8 lakh
  3. C₹0
  4. D₹12 lakh

Explanation

Recoverable amount is the higher of net selling price (₹42 lakh) and value in use (₹46 lakh), so it is ₹46 lakh. Impairment loss = 50 − 46 = ₹4 lakh. Using net selling price would give ₹8 lakh, which is wrong because the higher figure must be used.

Did you get it right without looking?

One question tells you little. A timed set on AS 28 Impairment of Assets shows your real accuracy, how long you take and where you lose marks.

Practise AS 28 Impairment of AssetsFree diagnostic mock

More AS 28 Impairment of Assets questions