Exclusions: AS 2 (valuation of inventories); AS 13 (accounting for investment) AS 7 (construction contracts); AS 22 (accounting for taxes on income); application assets carried at cost; and assets that are carried at revalued amounts.

Key definitions

Impairment loss: This is the amount by which the carrying amount of an asset exceeds its recoverable amount;

A cash generating unit: This 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 group of assets. Corporate assets: These are assets other than goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units

When to assess impairment?

At each balance sheet date assess whether there is any impairment of an asset and identify the recoverable amount.

An impairment loss should be recognised as expense in the profit and loss account. The carrying amount of the asset should be reduced to its recoverable amount.

An impairment loss on a revalued asset should be recognised as an expense in the profit and loss account but should be directly recognised against the revaluation surplus.

When the impairment loss is greater than the carrying amount, there is no need to recognise a liability unless another accounting standard requires it to be complied with.

After the recognition of the impairment loss, depreciation is to be allocated over its useful life in a systematic manner.

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