A Ltd. purchased an asset of 100 lakh on 1st April, 20X0. It has useful life of 4 years with no residual value. Recoverable amount of the asset is…

As on 31st March, 20X1 Particulars ₹ Carrying amount of the asset (opening balance) 100 lakh Depreciation (100lakh /4 years) 25 lakh Carrying amount of the asset (closing balance) 75 lakh Recoverable amount (given) 60 lakh Therefore, an impairment loss of 15lakh should be recognised as on 31st March, 20X1. Depreciation for subsequent years should be charged on the carrying amount of the asset (after providing for impairment loss), i.e.,60 lakh. As on 31st March, 20X2 Particulars ₹ Carrying amount of the asset (opening balance) 60 lakh Depreciation (60lakh /3 years) 20 lakh Carrying amount of the asset (closing balance) 40 lakh Therefore, no impairment loss should be recognised as on 31st March, 20X2. As on 31st March, 20X3 Particulars ₹ Carrying amount of the asset (opening balance) 40 lakh Depreciation (40lakh / 2 years) 20 lakh Carrying amount of the asset (closing balance) 20 lakh Recoverable amount (given) 28 lakh Since, the recoverable amount of the asset exceeds the carrying amount of the asset by 8lakh, impairment loss recognised earlier should be reversed. However, reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. Carrying amount as on 31st March, 20X3 had no impairment loss being recognised would have been 25lakh. Therefore, the reversal of an impairment loss of 5lakh should be done as on 31st March, 20X3.