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CMA Final · Corporate Financial Reporting · Impairment of Assets (Ind AS 36)

Tara Ltd's cost-model asset was bought for ₹100 lakh with a 10-year life, nil residual value, straight line. At the end of year 4 carrying amount is ₹60 lakh and it is impaired to a recoverable amount of ₹42 lakh. At the end of year 6, the recoverable amount is ₹50 lakh. Remaining life is unchanged. What is the impairment reversal at the end of year 6?

The reversal is ₹12 lakh. After the impairment the asset is depreciated at ₹7 lakh a year to ₹28 lakh at year 6, while the depreciated cost without impairment would be ₹40 lakh. The reversal is capped at that ceiling, not at recoverable amount of ₹50 lakh.

  1. A₹8 lakh
  2. B₹12 lakh
  3. C₹4 lakhCorrect
  4. D₹6 lakh

Explanation

After impairment, 42 lakh over 6 remaining years gives 7 lakh a year. At end of year 6 carrying amount is 42 - 14 = 28 lakh. Without impairment, carrying amount would be 100 - 60 = 40 lakh. Recoverable amount is 50, so reversal is limited to 40 - 28 = 12 lakh.

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