Can You Reverse an Impairment Loss? Accounting for Impairment Reversals: Ind As 36 | CA Final | FR

Is it ever allowed to reverse an impairment loss? The answer is yes! If you notice that previous negative indicators have reversed—meaning things are looking good again—you need to recalculate the recoverable amount and carrying amount. If the recoverable amount is higher, that difference is your reversal amount. But wait, there are two major rules to follow. Rule 1: Your reversal cannot exceed the earlier impairment loss. For example, if I previously recorded an impairment loss of 26 crores, I can't reverse more than 26 crores now. We are allowed to reverse an impairment, but we cannot record a completely new gain Rule 2: When you reverse the impairment, the asset's carrying amount goes up, but this new increased carrying amount cannot exceed the normal Written Down Value (WDV) that would have existed if no impairment ever happened Let’s say an impaired asset's current WDV is 40, and you want to reverse 30 to make it 70. But if you calculate the normal WDV from the beginning and it comes to only 65, you can't take it to 70. You are only allowed to reverse up to 65, meaning a maximum reversal of 25. To quickly summarize: First, indicators must reverse, then you calculate. If the recoverable amount is higher, find your reversal amount. Just make sure the reversal isn't more than the old impairment loss, and ensure the new carrying amount doesn't cross the normal WDV. Keep these conditions in mind, and you're good to go! #Accounting #ImpairmentLoss #FinanceTips #AccountingStandards #AssetManagement #CharteredAccountant #FinanceStudent