We at our company has provided the imapairment of the assets during the year 2008-09. During the year 2011-12 we have write back the imapairment loss due to good expected revenue on the basis of the good production profile as intimated by the Production group.
As per AS-28 the WBV of the assets after the writeback should not be morethen the WBV which would have been arrived at if there was no Impairment provious years but it is silent on the issue of dep calculation after revised WDV. My Query are: 1.what should be the dep for the year i.e. on the WDV before Write back of Impairment or after Writeback 2. Whether the revised dep calculation should be done retrospectively. 3. we at our company are following the SAP system which is recalculating the Depriciation with retrostective effect w.e.f. the year where the imapairment was done on the wdv before imapirment......whether it is corrct?
Pl advise me onthe same. If anybody can give any reference to any book or material that will be helpfull to me....
22 May 2012
Example: An asset costing 10 million is amortised over 20 years. Two years after it is purchased, it becomes impaired and is written down from its carrying amount of 9 million to its estimated recoverable amount of 5 million. Two years after the recognition of that impairment loss, the recoverable amount of the intangible asset is now estimated to be 10 million, following a change in estimates of the future cash flows arising from this asset.
Response The impairment loss can only be reversed to the extent that it does not increase the carrying amount above what it would have been had the impairment never occurred. The carrying amount, had the impairment never occurred, would be 8 million (9 million – two years depreciation @ 0.5 million per year); therefore, only 3 million of the original 4 million impairment loss can be reversed.
IN SAP:
1. Allow depreciation to be calculated retrsopectively.
2. SInce the asset was inpaired, the seprecatuion debited in income statement was on a lower WDV and hence less.
3. Now allow depreciation calculation on gross value before impairment from the date of imapirment till the date of reversal of impairment.
4. Post the cumulative difeerence between point 3 and 2 as a charge on the date of reversal.
5. reverse the entire amount of reversal on the same day.
6. Your annswer should match the solution in the example.
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