AS-28 of ICAI on “Impairment of Assets” prescribes procedures for recognising the impairment loss, i.e. assets not to be stated at value above the amount recoverable through use or sale of the asset. This Standard also specifies disclosure requirements and when to reverse the impairment. Download PDF Copy of AS-28, from the link below:
This Standard should be applied in accounting for the impairment of all assets, other than:
(a) inventories (see AS 2, Valuation of Inventories);
(b) assets arising from construction contracts (see AS 7, Construction Contracts);
(c) financial assets, including investments that are included in the scope of AS 13, Accounting for Investments; and
(d) deferred tax assets (see AS 22, Accounting for Taxes on Income).
This Standard does not apply to inventories, assets arising from construction contracts, deferred tax assets or investments because existing Accounting Standards applicable to these assets already contain specific requirements for recognising and measuring the impairment related to these assets.
This Standard applies to assets that are carried at cost. It also applies to assets that are carried at revalued amounts in accordance with other applicable Accounting Standards. However, identifying whether a revalued asset may be impaired depends on the basis used to determine the fair value of the asset:
(a) if the fair value of the asset is its market value, the only difference between the fair value of the asset and its net selling price is the direct incremental costs to dispose of the asset:
(i) if the disposal costs are negligible, the recoverable amount of the revalued asset is necessarily close to, or greater than, its revalued amount (fair value). In this case, after the revaluation requirements have been applied, it is unlikely that the revalued asset is impaired and recoverable amount need not be estimated; and
(ii) if the disposal costs are not negligible, net selling price of the revalued asset is necessarily less than its fair value.
Therefore, the revalued asset will be impaired if its value in use is less than its revalued amount (fair value). In this case, after the revaluation requirements have been applied, an enterprise applies this Standard to determine whether the asset may be impaired; and
(b) if the asset’s fair value is determined on a basis other than its market value, its revalued amount (fair value) may be greater or lower than its recoverable amount. Hence, after the revaluation requirements have been applied, an enterprise applies this Standard to determine whether the asset may be impaired.