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CA Final · Financial Reporting · Ind AS 36 Impairment of Assets

Sundaram Textiles Ltd. prepares its financial statements under Ind AS. Its machinery shows signs of impairment. The machinery has a carrying amount of Rs 80 lakh, a fair value less costs of disposal of Rs 62 lakh and a value in use of Rs 70 lakh. What impairment loss should Sundaram Textiles recognise?

The impairment loss is Rs 10 lakh. Recoverable amount is the higher of fair value less costs of disposal (Rs 62 lakh) and value in use (Rs 70 lakh), so Rs 70 lakh. Deducting this from the carrying amount of Rs 80 lakh gives the loss.

  1. ARs 10 lakhCorrect
  2. BRs 18 lakh
  3. CRs 8 lakh
  4. DRs 0

Explanation

Recoverable amount is the higher of fair value less costs of disposal (62) and value in use (70), which is Rs 70 lakh. Impairment loss = 80 - 70 = Rs 10 lakh. Rs 18 lakh wrongly uses the lower figure, fair value less costs of disposal.

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