Accounting Standards 1-29 - Seth & Associates

59. An impairment loss on a revalued asset is recognised as an expense in the
statement of profit and loss. However, an impairment loss on a revalued asset
is recognised directly against any revaluation surplus for the asset to the extent
that the impairment loss does not exceed the amount held in the revaluation
surplus for that same asset.
60. When the amount estimated for an impairment loss is greater than the
carrying amount of the asset to which it relates, an enterprise should
recognise a liability if, and only if, that is required by another Accounting
Standard.
61. After the recognition of an impairment loss, the depreciation
(amortisation) charge for the asset should be adjusted in future periods
to allocate the asset’s revised carrying amount, less its residual value (if
any), on a systematic basis over its remaining useful life.
62. If an impairment loss is recognised, any related deferred tax assets or liabilities
are determined under Accounting Standard (AS) 22, Accounting for Taxes on
Income (see Example 3 given in the Appendix).
Cash-Generating Units
63. Paragraphs 64 to 92 set out the requirements for identifying the cashgenerating
unit to which an asset belongs and determining the carrying amount
of, and recognising impairment losses for, cash-generating units.
Identification of the Cash-Generating Unit to Which an Asset
Belongs
64. If there is any indication that an asset may be impaired, the recoverable
amount should be estimated for the individual asset. If it is not possible
to estimate the recoverable amount of the individual asset, an enterprise
should determine the recoverable amount of the cash-generating unit to
which the asset belongs (the asset’s cash-generating unit).
65. The recoverable amount of an individual asset cannot be determined if:
Example
a. the asset’s value in use cannot be estimated to be close to its net
selling price (for example, when the future cash flows from continuing
use of the asset cannot be estimated to be negligible); and
b. the asset does not generate cash inflows from continuing use that are
largely independent of those from other assets. In such cases, value in
use and, therefore, recoverable amount, can be determined only for
the asset’s cash-generating unit.
A mining enterprise owns a private railway to support its mining activities. The
private railway could be sold only for scrap value and the private railway does not