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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Yamuna Engineering Ltd. has a CGU with carrying amounts: Plant Rs 10,00,000, Building Rs 6,00,000, Goodwill Rs 4,00,000 (total Rs 20,00,000). Recoverable amount of the CGU is Rs 14,00,000. The net selling price of the Building is Rs 5,50,000 and the Plant has no separately determinable recoverable amount. After allocating the impairment loss under AS 28, what is the revised carrying amount of the Plant?

The working gives a Plant carrying amount of Rs 8,50,000, which is not among the options, so this item is invalid.

  1. ARs 8,00,000
  2. BRs 7,50,000Correct
  3. CRs 8,75,000
  4. DRs 7,00,000

Explanation

Total loss = 20,00,000 - 14,00,000 = 6,00,000. Goodwill is written off first: 4,00,000. Remaining 2,00,000 is allocated pro rata to Plant and Building (10:6). Plant share = 2,00,000 x 10/16 = 1,25,000; Building share = 75,000, giving Building 5,25,000, which is below its net selling price of 5,50,000, so Building's loss is limited to 50,000. The excess 25,000 goes to Plant. Plant loss = 1,25,000 + 25,000 = 1,50,000, so Plant = 10,00,000 - 1,50,000 = Rs 8,50,000. Rechecking the options: 8,50,000 is absent, so the key does not follow.

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