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What is the meaning of “Impairment of Assets”?

What is the meaning of “Impairment of Assets”?

What is the meaning of “Impairment of Assets”?

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Chiranjibi Chapagain Mar. 14, 2018

An impaired asset is a company's asset that has a market price less than the value listed on the company's balance sheet. Accounts that are likely to be written down are the company's goodwill, accounts receivable and long-term assets because the carrying value has a longer span of time for impairment.

In other words, besides charging annual depreciation on assets by the reason of normal wear and tear, afflux ion of time and obsolescence to re-instate the correct value of the assets considering the future cash flows that the assets can generate, impairment loss needs to be provided. The difference between the carrying amount of an asset and recoverable amount is termed as impairment loss. The treatment of impairment loss is similar to depreciation except the fact that it can be re-instated in future, if the recoverable amount of the asset exceeds the carrying amount. The auditor must ensure that the provisions of AS 28 “Impairment of Assets” are followed.

What is the meaning of “Impairment of Assets”?

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