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AS 28: Impairment of Assets

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 28: Impairment of Assets: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

An asset is impaired when carrying amount exceeds recoverable amount, requiring identification of cash-generating units, estimation and recognition of impairment loss.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Loss-making plant or business unit
02Obsolescence, damage or market decline
03Goodwill or intangible impairment indicators
04Reversal of earlier impairment

3. Practical application workflow

  1. Review external and internal impairment indicators.
  2. Identify the smallest cash-generating unit with independent cash inflows.
  3. Estimate recoverable amount as the higher of applicable value measures.
  4. Recognise impairment and allocate it appropriately.
  5. Reassess indicators and permitted reversals in later periods.

4. Real-world application example

A production unit loses a major customer and forecast cash flows decline. The company tests the relevant cash-generating unit, compares recoverable amount with carrying value and records the supported impairment loss.

5. Journal-entry and accounting record pattern

ImpairmentDr Impairment loss / Cr Asset or accumulated impairment.
Permitted reversalDr Asset/accumulated impairment / Cr Reversal of impairment, subject to limits and exclusions.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Quarterly impairment indicator questionnaire.
  • CGU mapping and consistency review.
  • Board-approved forecasts tied to budgets.
  • Discount-rate and sensitivity review.
  • Asset allocation and reversal-limit schedule.

Common errors and red flags

  • Testing only when management plans closure.
  • Using optimistic forecasts inconsistent with budgets.
  • Defining CGUs too broadly to hide impairment.
  • Ignoring corporate assets.
  • Reversing beyond the no-impairment carrying amount.

7. Reviewer questions

  1. What indicator triggered the test?
  2. What is the appropriate CGU?
  3. Are cash flows supportable and internally consistent?
  4. How was the discount rate determined?
  5. Does the loss allocation and disclosure reconcile?

Related standards: AS 10, AS 13, AS 23, AS 26

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

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Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.