2. to ensure that assets are carried at not more than
at recoverable value.
The standard also specifies when an entity should
reverse an impairment loss
disclosures while preparing and presenting the
financial statements.
3. Notes Financial Statements on 31st March,
2018 OF RIL ltd Follow IND AS 36
Impairment of Non-Financial Assets –
Property, Plant and Equipment and Other Intangible
Assets
4. Impairment of Assets
The Company has an investment of 974.30 crore (31 March
2016 and 1 April 2015: 974.30 crore) in the equity shares of
M/s Ratnagiri Gas & Power Pvt.Ltd. (RGPPL), a joint venture
of the Company.
RGPPL has incurred losses during last few years which has
resulted in erosion of net worth of the Company. Also, value of
RGPPL’s assets has declined during the period significantly
more than would be expected as a result of the passage of
time or normal use.
Further, neither Power Block nor LNG Terminal (CGUs) of
RGPPL are operating at their installed capacity from last many
years.
The recoverable amount of this investment has been
assessed at 191.35 crore and accordingly
the Company has recognized an impairment loss of 782.95
crore in respect of such investment and disclosed the same as
‘Exceptional items - Impairment loss on investments’ in the
6. Solution
• Carrying Amount on 31 march 2016 - 974.30 crore
• Recoverable amt on 31 march 2016 - 191.35 crore
• impairment loss - 782.95 crore
• disclosed the same as ‘Exceptional items -
Impairment loss on investments’ in the Statement of
Profit and Loss
7. Inventories
Contracts that are recognized in accordance with
Ind AS 115
Deferred Tax Assets
Financial Assets
Non Current Assets classified for sale in
accordance with Ind AS 105
Biological Assets related to agricultural activity
Assets arising from the employee benefits.
8. Impairment loss: It is the amount by which the of
an asset or a cash-generating unit- carrying
amount exceeds its recoverable amount
Impairment loss = Carrying Amount- Recoverable
Value-
Carrying amount :It is the amount at which an
asset is recognized after deducting any
accumulated depreciation (amortization) and
accumulated impairment losses thereon
9. Recoverable Amount: Recoverable amount of an
asset or cash generating unit
shall be higher of the following:
1. Fair Value less cost of disposal
2. Value in use
Fair value less costs to sell: the amount
obtainable from the sale of an asset or cash-
generating unit in an arm’s length transaction
between knowledgeable, willing parties, less the
costs of disposal.
10. Costs of disposal are deducted while determining
the fair value less cost of disposal. Examples of such
costs are:
1. Legal costs
2. Stamp duty and similar taxes
3. Costs of removing the assets
4. Incremental costs for bringing the assets into
the conditions for its sale
5. Other costs
11. Value in use: It is the present value of the future
cash flows expected to be derived from an asset or
cash-generating unit.
It shall be calculated on the following basis:
1. Estimated Future Cash Flow
2. Discount Rate
12. INDICATIONS of impairment
Assets are impaired when
Carrying
amt(CA)>recoverable
amt(RA)
Assessment at the
end of each
reporting period
whether there are
any impairment
indicators
Indicators exist
estimate the
recoverable
amount of
assets
.
13. CS— CGU impairment of NTPC Ltd
The carrying amounts of the Company’s non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment considering the provisions of Ind AS 36
‘Impairment of Assets’.
If any such indication exists, then the asset’s recoverable amount is
estimated.
The recoverable amount of an asset or cash-generating unit is the
higher of its fair value less costs to disposal and its value in use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset.
For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the
“cash-generating unit”, or “CGU”).
An impairment loss is recognized if the carrying amount of an asset or
14. Cash-generating unit:
It is the smallest identifiable group of assets that
generates cash inflows that are largely independent
of the cash inflows from other assets or groups of
assets
C.G.U
Generates cash inflow
Smallest identifiable
group of assets
Largely Independent from other group of
assets
15. IND AS 36 – Identifying an Asset that May Be Impaired
TANGIBLE Assets- end of each reporting period
for indications of impairment if indications of
impairment, test for impairment
Intangible Assest-It can be conducted on
annual basis ,Test for impairment annually
when has indefinite life or intangible assets are
not available for use. goodwill annually for
impairment regardless of indications of
impairment Whenever impairment indicators
occurs.
16. INDICATORS OF IMPAIRMENT
A.External Indicators
1. Significant decline in market value
2. Change in technology, market, economic or
legal environment
3. Change in interest rate.
4. Low market capitalization
B.Internal Indicators
1. Assets performance is declining
2. Discontinuance or restructuring plan
3. Evidence of physical obsolesces
17. IF Recoverable Amount < Carrying Amount of an Asset
Impairment Loss =Carrying Amount less Recoverable
Amount
Impairment loss to be recognized:
❖ As an expense in the P&L account (if there is no
revaluation)
❖ As a decrease in revaluation reserve (if carried at
revalued amount)
After recognition:
❖ Adjust depreciation/amortisation charge for the asset in
future periods
❖ Allocate the asset’s revised carrying amount less
residual value, on a systematic basis over its remaining
useful life
18.
19.
20. For each class of assets, the financial statements
should disclose:
❖ Amount of impairment loss
❖ line item(s) of the income statement in which
those impairment losses are included
❖ Amount of reversals of impairment losses
❖ Line item(s) of the income statement in which
those impairment losses are reversed
❖ Amount of impairment losses recognized
directly against revaluation surplus
❖ Amount of reversals of impairment losses
recognized directly against revaluation surplus
21. Enterprise should disclose:
❖ Recoverable amount – net selling price or value in
use. Describe basis etc
❖ Main classes of assets affected by impairment
losses or reversals
❖ Events and circumstances
❖ Amount of loss or reversal recognized
❖ Nature of asset/CGU
❖ Reported segment of asset/CGU
22. Reversal of an impairment loss
Same approach as for the identification of impaired
assets: assess at each balance sheet date whether
there is an indication that an impairment loss may
have decreased. If so, calculate recoverable amount
The increased carrying amount due to reversal
should not be more than what the depreciated
historical cost would have been if the impairment
had not been recognised.
Reversal of an impairment loss is recognised in the
profit or loss unless it relates to a revalued asset
Adjust depreciation for future periods. Reversal of
an impairment loss for goodwill is prohibited
23. QUIZZZ
1. Impairment loss =
a) Recoverable Value- Carrying Amount-
b) Carrying Amount- Recoverable Value
c) Carrying Amount = Recoverable Value
d) None of the above
2. IND AS -36 Does not apply to
a) Inventories
b) Deferred Tax Assets
c) Non Current Assets classified held for sale
d) All of the above
24. 3. Ind as – 36 is
a) Impairment loss
b) EPS
c) Consolidation of asset
d) None of these
4. Which is the amount at which an asset is
recognized
after deducting accumulated depreciation and
accumulated impairment losses
a) Recoverable Value
b) Carrying Amount
c) Impairment loss
d) None of these
25. 5. higher of the following Fair Value less cost of
disposal and Value in use is called……
a) Recoverable Value
b) Carrying Amount
c) Impairment loss
d) None of these
6. the amount obtainable from the sale of an asset or
cash-generating unit
a) Carrying Amount
b) Value in use
c) Impairment loss
d) Fair value – cost of disposal
26. 7. Costs of disposal includes. Examples of such costs
are:
a) Legal costs
b) Stamp duty and similar taxes
c) Costs of removing the assets
d) All of the above
8. ………… is the present value of the future cash
flows expected to be derived from an asset or cash-
generating unit
a) Carrying Amount
b) Value in use
c) Impairment loss
d) Fair value – cost of disposal
27. 9.Which is the indicators of impairement
a) Carrying amt(CA)>recoverable amt(RA)
b) Assessment at the end of each reporting period
whether there are any impairment indicators
c) Indicators exist estimate the recoverable amount of
assets
d) All of the above
10. …………smallest identifiable group of assets that
generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets
a) Recoverable Value
b) Carrying Amount
c) Impairment loss
d) Cash generating unit
28. 11. Which is the indicators of Impairment
a) External Indicators
b) Internal indicators
c) Intangible indicators
d) Both a and b
12. Which is not the external indicator of impairment
a) Significant decline in market value
b) Change in technology, market, economic environment
c) Assets performance decline
d) Change in interest rate.
29. 13. Which is the internal indicator for impairment
a) Assets performance is declining
b) Discontinuance or restructuring plan
c) Evidence of physical obsolesces
d) All of the above
14. Which is the disclosure as per ind as 36- impairment
loss
a) Amount of impairment loss
b) Line item(s) of the income statement in which those
impairment losses are included
c) Amount of reversals of impairment losses
d) All of the above
30. 15. how Impairment loss to be recognized if there is
no revaluation
a) Adjustment(Decrease) from revaluation reserve
b) As an expense in the P&L account
c) Shown assets side
d) None of the above
16. how Impairment loss to be recognized if there is
revaluation reserve also made on assets
a) Adjustment (Decrease) from revaluation reserve
b) As an expense in the P&L account
c) Shown assets side
d) None of the above
31. 17. After recognition: of impairment loss -
a) Adjust depreciation/amortisation charge for the
asset in future periods
b) Allocate the asset’s revised carrying amount less
residual value, on a systematic basis over its
remaining useful life
c) Both of above
d) None of these
18. Assets value check at each balance sheet date
whether there is an indication that an impairment loss
may have decreased is called
a) Impairment loss
b) Reversal of impairment loss
c) Consolidation of asset
d) None of these
32. 19.Treatment of Reversal of an impairment loss is
a) recognised in the profit or loss in Credit side
b) If it relates to a revalued asset, so adjust
impairment loss from against revaluation surplus
c) Adjust depreciation for future periods
d) All the above
33. MATCH OF FOLLOWING
1. Impairment loss a. Recoverable amount
2. higher of the following:
i. Fair Value less cost of
disposal
ii. Value in use
b. amount obtainable from
the sale of an asset
3. Fair Value C. Assets performance is
declining
4. arm’s length d. transaction between
knowledgeable, willing
parties
5. Indicator for impairment e. = Carrying Amount-
Recoverable Value
34. 1. CGU a. Cash generating unit
2. Legal costs b. Fair value of assets
3. Significant decline in
market value
c. Cost of disposal
4. the present value of the
future cash flows
d. Indicators for impairment
35. 1. CGU a. Deferred tax assets
2. IND AS 36 does not
Apply to
b. the smallest identifiable group
of assets that generates cash
inflows that are largely
independent of the cash inflows
3. Indicators of
impairment
c. Amount of impairment loss
4. Disclosure as per ind
as 18
d. indication that an impairment
loss may have decreased
5. Reversal of
impairment loss
e. Evidence of physical
obsolesces
36. 1. Impairment loss to be
recognized:
a. Adjust depreciation/
amortisation charge for the
asset in future periods
2. External indicators for
impairment
b. As an expense in the P&L
account
3. Disclosures as per ind as
36
c. Nature of asset/CGU
4. Cost of disposal d. Change in technology,
market, economic or legal
environment
5. After recognition: e. Stamp duty and similar
taxes
37. MATCH THE FOLLOWING
A. IND AS 12 Business combination
B. IND AS 16 Impairment of assets
C. IND AS 33 Accounting for tax
D. IND AS 36 PPE
E. IND AS 103 EPS
38. Case study of
Impairment of assets Ind as 36
The Mittal ltd is famous automobile company. Its head office
in Bangalore . The business is running well. But on the
reporting date on 31 march 2020, the accountant perform
impairment test of assets .
Management observe that about the assets
For machinery A – due to decline in performance of assets
the fair value of assets A is 400000 , cost of disposal is
20000 and its value in use is 470000 in year 2019 company
also revalued the assets and transferred rs 50000 in
Relvaluation reseve
For Machinery B –Due to change in economic situation of
business of the entity company observe that its fair value is
425000 and at the disposal company estimated the legal cost
12000 and cost of removal is 13000 and its value in use is
500000 this assets is already impaired on 31 march 2019 is
39. For machinery C is group of assets and Cash generating
unit and by this company manufactures the Engine which
are used for Internal purpose as raw material for Car and
also sold engine to other manufacturer like Toyota ltd It is
able to generate separate cash flows its values in use is
250000 and the fair value is 375000
The due to decline in market value of patent it is observed
that the patent is outdated and its value in use –100000
and fair value is also 150000
As a financial analyst you need to adjust these values as
per Ind as 36
1. Show impairment losses of each assets
2. Treatment in balance sheet and profit and loss account
and reversal of impairment loss and also adjustment
from revaluation account
3. Disclosure requirement
40.
41. ANS
Entity needs to adjustment in Values of assets
Machinary A-
Carrying Amount= 500000
Recoverable amount=
a.value in use=470000
b.fair value – cost of disposal=400000-20000=380000
higher of a and b is = 470000
Here CA> RA so we impaired the assets
Impairment loss = CA-RA =500000-470000=30000
Here revaluation reserve already have on particular assets so 1st
we adjust impairment loss from Revaluation reserve
Revaluation reserve is 50,000 it is sufficient so we need to adjust
Impairment loss of 30000 from revaluation reserve
So new value of asset is 500000
42. For machinery B-
Carrying Amount= 300000
Recoverable amount=
a. value in use=500000
b. fair value –cost of disposal=
425000-12000-
13000=400000
higher of a and b is = 500000
Here CA< RA so here is no impairment of assets
But the asset is already impaired so we need to
REVERSAL OF IMPAIRMENT of assets
Asset already impaired 45000
So we do reversal of impairement of assets so the new
value of assets is 300000+45000=345000
43. For machinery C is a CGU
Carrying Amount= 200000
Recoverable amount=
a. value in use=250000
b. fair value –cost of disposal=
375000-0=375000
higher of a and b is = 375000
Here CA< RA so here is no impairment of assets
44. For the intangible assets- PATENT
Carrying Amount= 400000
Recoverable amount=
a.value in use=100000
b.fair value – cost of disposal=150000
higher of a and b is = 150000
Here CA> RA so we impaired the assets
Impairment loss = CA-RA =400000-150000=250000
IT will be transferred to P&L Account =250000
The new value of patent in balance sheet is =400000-
250000= 150000
