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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Sundaram Textiles Ltd. owns a weaving machine with a carrying amount of ₹18,00,000. Its net selling price is ₹14,50,000 and its value in use is ₹15,20,000. As per AS 28, what is the impairment loss to be recognised?

The impairment loss is ₹2,80,000. Recoverable amount under AS 28 is the higher of net selling price and value in use, here ₹15,20,000. Subtracting this from the carrying amount of ₹18,00,000 gives the loss to be recognised in the statement of profit and loss.

  1. A₹2,80,000Correct
  2. B₹3,50,000
  3. C₹70,000
  4. DNil

Explanation

Recoverable amount is the higher of net selling price (₹14,50,000) and value in use (₹15,20,000), i.e. ₹15,20,000. Impairment loss = 18,00,000 − 15,20,000 = ₹2,80,000. Using net selling price would give ₹3,50,000, which is wrong because the lower figure is not the recoverable amount.

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