Accounting standard 28 Impairment of Assets – Complete Details

Accounting standard 28 Impairment of Assets, Here we are providing complete details for accounting standard 28 (Impairment of Assets). In this article you can find full details for Accounting standard – 28 like applicability, various terms related to Accounting standard – 28, Indicators, what is the treatment of Impairment losses, Download Accounting standard – 28 in PDF, PPT Format etc. Now you can scroll down below and check complete details for Accounting standard 28 Impairment of Assets

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Accounting standard 28 Impairment of Assets

Applicability of Accounting standard 28

AS – 28 should be applied in accounting for the impairment o f all assets except the following :

  1. Inventories (As – 2)
  2. Assets arising from construction contracts (AS – 7)
  3. Financial assets including investments that are covered by AS – 13.
  4. Deferred tax assets. (AS – 22).

Terms to be known

1.Recoverable amount

It is the higher of an asset’s net selling price and its value in use.
Value in use means the present value of estimated future cash flows.

2.Carrying amount :

Carrying amount means the book value of an asset after depreciation and after any revaluation which is carried by an enterprise in its balance sheet.

3.Impairment loss :

An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

4.Cash generating units :

A cash generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Taxation point of view

1.Impairment is not considered for calculation of taxable income

2.But depreciation is considered and this is the major difference between Depreciation and impairment.

Must Read – Accounting standard 2, Inventory valuation Complete Guide


A.Externally :

  1. Significant Decline in market value of the asset other than due to natural wear and tear.
  2. Significant adverse changes that have taken place in the technological, market, economic or legal environment.
  3. Increase in interest rates on investments which would increase discounting rates which affect the value in use of assets.
  4. Carrying amount of net assets is more than the market capitalisation of the entity.

B.Internally :

1.Significant internal developments have happened affecting the value of the asset, eg., plans to restructure, because of what some assets become useless.

2. Technological and physical obsolescence.

3.internal evidence suggests that economic performance of the asset is worse than expected.

Must Read – Accounting Standard 3

Treatment of impairment loss :

  1. Assets not revalued – profit&loss a/c
  2. Assets revalued-recognised against revaluation reserve
  3. Related deferred tax asset / liability determined.

Top down approach and bottom up approach :

1.Bottom up approach:

If the assets are not capable of being individually identified of impairment at their level then in such case, identify the Cash generating unit to which this asset belong. After identifying compare the recoverable value of whole unit with the carrying value of this particular asset and then decide on its impairment.

Must Read – Accounting Standard 15

2.Top down approach :

As per this we are required to test the assets with indefinite lives at the lowest level of the cash generating unit level under which it is and not at the level of whole company or department.

Reversal of impairment loss :

1.An impairment loss recognised earlier may be reversed if there are any indicators as given below :

External indicators:

1.Assets market value has increased 2.Significant changes have occurred that favourably affect the asset’s value.
3.Market interest rates have come down.

Internal indicators:

1.Significant favourable changes have taken place within the entity which are indicating that asset may be in good use.
2.Internal evidence indicates that the asset may perform better than expected.


  1. Amount of impairment loss recognised in statement of profit and loss
  2. Reversal of impairment recognised in P/L statement
  3. Impairment loss taken directly to revaluation reserves.
  4. Reversal of impairment taken to revaluation.

In case of significant impairment or reversal, enterprise should disclose Events and circumstances because of which it happened.

Individual assets –nature of the assets

Cash generating units.

Whether recoverable amount is net selling price or value in use and the discount rate used to get the present value of future cash flows that will be arriving since its disposal.

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