Accounting for Impairment Loss under AS-28

AS 28 comes into effect in respect of accounting periods commencing on or after 1-4-2004 and is mandatory in nature from that date for the following:

  • Enterprises whose equity or debt securities are listed on a recognised stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognised stock exchange in India as evidenced by the board of directors’ resolution in this regard.
  • All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds 50 crores.

This standard prescribes the procedures to be applied to ensure that the assets of an enterprise are carried at an amount not exceeding their recoverable amount (amount to be recovered through use or sale of the asset). The standard also lays down principles for reversal of impairment losses and prescribes certain disclosures in respect of impaired assets. An enterprise is required to assess at each balance sheet date whether there is an indication that an enterprise may be impaired. If such an indication exists, the enterprise is required to estimate the recoverable amount and the impairment loss, if any, should be recognised in the profit and loss account.


The standard should be applied in accounting for impairment of all assets except

  • inventories (AS 2),
  • assets arising under construction contracts (AS 7),
  • financial assets including investments covered under AS 13, and deferred tax assets (AS 22).

There are chances that the provision on account of impairment losses may increase sickness of companies and potentially sick companies may actually become sick.

Therefore, AS 28 applies to (among other assets):

  • Land and buildings;
  • Plant and machinery;
  • Investment property;
  • Intangible assets;
  • Goodwill;

Assets carried at revalued amounts under AS 10.


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