Impairment of assets means weakening in value of assets. An asset is said to be impaired when the carrying amount of asset is more than its recoverable amount.

Carrying Amount is the amount at which assets are shown in the Balance Sheet, i.e. generally at cost less accumulated depreciation or amortization and accumulated impairment losses. The recoverable amount of an asset is higher the following:

(i) Fair value less cost of disposal;
(ii) Value in use i.e. estimated future cash flow arising from the use of asset residual price at the end of its useful life.

Leave a Reply

Your email address will not be published. Required fields are marked *