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on or after 01.04.2005 :
SCOPE
* To be applied in accounting for impairment of all assets, other than :- Inventories as per (AS-2) - Assets arising from construction contracts as per (AS-7) - Financial assets including investments as per (AS-13) - Deferred tax assets as per (AS-22) * Applicable to assets valued at cost or at revalued amount
CONCEPT
Impairment loss - is the amount by which the carrying amount of an asset exceeds its recoverable amount Carrying amount- is the amount at which an asset is recognised in the balance sheet (W.D.V.) Recoverable - is the higher of an assets net selling amount price and its value in use
AS-28 IMPAIRMENT OF ASSETS CONCEPT Net selling price - Sale price - costs of disposal in an arms length transaction Value in use - Present value of estimated future cash flows expected from the use of an asset & from its disposal at the end of its useful life
IF YES
recoverable amount to be estimated
- Significant changes with an adverse effect on the enterprise due to technological, market, economic or legal environment
- Decrease in assets value in use due to adjustment in the discount rate as a result of increase in market interest rate or other market rates of ROI - Carrying amount of the net assets of the enterprise is more than its market capitalisation
If either of these amounts exceeds the assets carrying amount, the asset is not impaired and it is not necessary to estimate the other amount
Binding sale agreement Market price Current bid price Price of the most recent transaction Based upon best information available
installment of borrowings (against those assets) and interest cost thereof, to be taken into account. - While estimating cash outflows, whether following costs to be taken into account :- Corporate office costs - Interest cost of working capital - Depreciation of assets - Why pre-tax cash flows are required to be considered? - Why income tax expense, which is a cash outflow of variable nature, is not being considered?
AS-28 IMPAIRMENT OF ASSETS Transitional Provision In the first year of applicability of this standard, if there is any impairment loss in the beginning of the year, the same to be recognised and adjusted against opening balance of revenue reserves or revaluation reserve as the case may be.
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