Skip to content

CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Sundaram Textiles Ltd. owns a weaving machine with a carrying amount of Rs 18,00,000 at the balance sheet date. Its net selling price is Rs 14,50,000 and its value in use is Rs 16,00,000. Under AS 28, what impairment loss should be recognised?

The impairment loss is Rs 2,00,000. Recoverable amount under AS 28 is the higher of net selling price and value in use, which is Rs 16,00,000. Deducting this from the carrying amount of Rs 18,00,000 gives the loss to be recognised in the statement of profit and loss.

  1. ARs 2,00,000Correct
  2. BRs 1,50,000
  3. CRs 3,50,000
  4. DNil

Explanation

Recoverable amount is the higher of net selling price (14,50,000) and value in use (16,00,000), i.e. Rs 16,00,000. Impairment loss = 18,00,000 - 16,00,000 = Rs 2,00,000. Using net selling price alone would give Rs 3,50,000, which wrongly takes the lower figure.

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