01 May 2012
AS are the standards according to which accounts of an organization should be prepared. AS 28 deals with Impairment of assets It is not applicable on: (because these are covered by other ASs) Inventories Investments DTA Investent in finance lease Investent in retirement benefits construction contracts
Other than the above mentioned areas,if: Carrying Amount of assets < Recoverable Amount,the assets is said to be impaired and should be accounted for.
Entry : Impairment Loss a/c to Assets a/c
P&l A/c to Impairment Loss a/c
where, Carrying Amount = Net Book Value as per Balance sheet Recoverable Amount= higher of Net Selling price(Selling Price-Expected cost to dispose off the asset) or value in use( Expected Cash Inflow * P.V Factor)
How to Detect if there is impairment : there can be internal indication like: asset is no more useful to the entity, or is damaged due to any reason
there can be external indication like : market price has declined more than expected or more than the pricing policy, interest rate has increased etc
Incase we cant calculate the Net selling price or value in use for a group of inter-related assets,we can find it by - Aggregation process or segregation process
Imapirment of Goodwill can be found out by Bottom up Approach or Top down approach
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