List of Accounting Standards

Accounting Standard 28 (AS 28) in India is titled "Impairment of Assets" It lays down the guidelines for the impairment of assets and the recognition of related losses in the financial statements of a company. The standard applies to all types of assets except those covered by other accounting standards.

Key provisions of AS 28 :

1. Impairment of Assets:

An asset is considered impaired if the carrying amount of the asset exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. The fair value less costs to sell is the amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Value in use is the present value of estimated future cash flows expected to be derived from an asset or cash-generating unit.

2. Recognition of Impairment Loss:

If an asset is impaired, the company should recognize an impairment loss in its financial statements. The impairment loss is the excess of the carrying amount of the asset over its recoverable amount. The impairment loss should be recognized immediately in the profit and loss statement, unless the asset is carried at a revalued amount, in which case the impairment loss should be recognized as a decrease in the revaluation surplus.

3. Reversal of Impairment Loss:

If the recoverable amount of an impaired asset increases in a subsequent period, the company may reverse the impairment loss. The reversal of impairment loss should be recognized in the profit and loss statement, to the extent that the carrying amount of the asset does not exceed its carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

4. Disclosure Requirements:

The company should disclose the following information in its financial statements:

• The amount of impairment losses recognized during the period, including the line item(s) of the statement of profit and loss in which they are included.
• The amount of impairment losses reversed during the period, including the line item(s) of the statement of profit and loss in which they are included.
• The recoverable amount of impaired assets.
• The methods and assumptions used to determine the recoverable amount of impaired assets.

Overall, AS 28 provides a framework for the recognition and measurement of impairment losses in the financial statements of a company. It is important for companies to comply with this standard to ensure transparency and accuracy in their financial reporting.

Examples of how Accounting Standard 28 (AS 28) might be applied in India:

1. Example of Impairment Loss Recognition:

Suppose a company purchased a machine for Rs. 10 lakh five years ago. The company has been depreciating the machine at a rate of 10% per year, and the accumulated depreciation is now Rs. 5 lakh. However, the market conditions have changed, and the demand for the products produced by the machine has decreased significantly. As a result, the company estimates that the recoverable amount of the machine is now only Rs. 3 lakh. In this case, the carrying amount of the machine (Rs. 10 lakh - Rs. 5 lakh) exceeds its recoverable amount (Rs. 3 lakh), indicating that the machine is impaired. The company should recognize an impairment loss of Rs. 4 lakh (Rs. 10 lakh - Rs. 3 lakh) in its financial statements.

2. Example of Impairment Loss Reversal:

Suppose the company in the above example conducts a review of its assets in the following year and determines that the recoverable amount of the machine has increased to Rs. 5 lakh due to increased demand for its products. In this case, the carrying amount of the machine (Rs. 10 lakh - Rs. 5 lakh) is less than its recoverable amount (Rs. 5 lakh), indicating that the impairment loss recognized in the previous year can be reversed. The company should recognize a reversal of impairment loss of Rs. 2 lakh (Rs. 5 lakh - Rs. 3 lakh) in its financial statements.

3. Example of Disclosures:

Suppose a company has recognized impairment losses on its assets during the year. In its financial statements, the company should disclose the amount of impairment losses recognized during the year, including the line item(s) of the statement of profit and loss in which they are included. The company should also disclose the recoverable amount of impaired assets and the methods and assumptions used to determine the recoverable amount of impaired assets. Additionally, if the company has reversed any impairment losses during the year, it should disclose the amount of impairment losses reversed during the period, including the line item(s) of the statement of profit and loss in which they are included.