CA Inter P1 · Chapter 3 · Question 16 of 16
Case: An asset of Tapti Motors Ltd cost ₹10,00,000 with a 10-year life and nil residual value (straight-line). At the end of year 2 it was written down to its recoverable amount of ₹6,40,000, with depreciation thereafter over the remaining 8 years. At the end of year 4, its recoverable amount is estimated at ₹7,00,000. The reversal of impairment loss to be recognised under AS 28 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹1,20,000
Explanation
Carrying amount at end of year 4 = 6,40,000 - 2 x 80,000 = 4,80,000. Had no impairment been recognised, the carrying amount would be 10,00,000 - 4 x 1,00,000 = 6,00,000. AS 28 limits the increased carrying amount to this figure, so reversal = 6,00,000 - 4,80,000 = ₹1,20,000, even though recoverable amount is 7,00,000.
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