AS 28 Impairment: Organise Indicators and Supporting Evidence

An idle production line has repeated losses and unused capacity. The useful result is a working that explains the facts, the calculation or classification, and the evidence behind the conclusion. This guide shows how to prepare that working and where a reviewer should investigate before accepting the result.

Scope and applicable period

Financial reporting for FY 2025–26 under the applicable Accounting Standards (AS) framework. Assess entity-specific applicability and relief. Ind AS requirements are a separate analysis.

Verification date: 11 October 2026. Figures and rates identified as assumptions are teaching examples; apply the stated conditions and the actual facts to a real assignment.

The key principle

Under AS 28, impairment reviews begin with indicators and the relevant asset or cash-generating unit. Recoverable amount uses the standard's applicable comparison of net selling price and value in use. A poor month or an idle asset does not justify an arbitrary write-down; the measurement needs evidence. Conversely, an unchanged depreciation charge does not answer recoverability concerns.

Worked example

The example assumes both valuation inputs were prepared under the standard. Review whether the asset generates independent cash inflows or belongs in a larger cash-generating unit. Support forecasts with approved assumptions, capacity and market information and apply the appropriate discounting principles. After an impairment, reconsider the subsequent depreciation calculation. Keep the indicator assessment and measurement evidence together so the loss is not mistaken for a discretionary reserve.

A practical sequence

Identify impairment indicators and define the relevant asset or cash-generating unit. Obtain support for recoverable amount inputs and forecasts, checking consistency with approved budgets and actual performance.

Compare the carrying amount with the recoverable amount determined under AS 28. Record any required loss and disclosures, and consider subsequent review conditions.

An estimated resale price alone is not the full test when value in use is relevant, and a optimistic forecast needs evidence.

Choose the framework before drafting the note

Recognition, measurement, presentation and disclosure are related but distinct. First establish whether the entity follows AS or Ind AS and whether company Schedule III or ICAI non-corporate guidance governs presentation. Then determine the accounting treatment and assemble the applicable disclosure. A well-formatted note cannot cure an unsupported asset, liability or income figure. Reconcile note schedules to the trial balance and preserve comparative information. Where relief applies to an entity, assess the particular standard or guidance rather than assuming that small size removes every requirement. Record significant judgement with the supporting facts.

Evidence checklist

Keep the following records linked to the same entity, period and working version. Identify missing items explicitly; a checked box should mean the document was examined and supports the stated conclusion.

• Asset/CGU identification and carrying values
• Internal and external impairment indicators
• Disposal-value support
• Forecast, assumptions and discounting support
• Loss, allocation and subsequent depreciation working

Common mistakes and how to avoid them

• Using an unsupported percentage write-down. Compare the conclusion with the asset/cgu identification and carrying values and resolve any conflicting facts.
• Testing one asset despite inseparable cash inflows. Trace the affected item to the disposal-value support before finalising the working.
• Assuming normal depreciation eliminates impairment review. Use the loss, allocation and subsequent depreciation working to make the final position and remaining exceptions clear.

Before you finalise

Recheck the example’s assumptions against the actual assignment, resolve the identified exceptions and make the final figure or conclusion traceable to its source. Preserve the reviewed version and the reason for material changes. For this task, the loss, allocation and subsequent depreciation working should agree with the conclusion presented to the client, reviewer or authority.

Frequently asked question

Is recoverable amount the lower of the two valuation measures? Under the AS 28 comparison in this example it is the higher; the carrying amount is then tested against it.

Sources and further reading

• ICAI Accounting Standard AS 28
• ICAI AS 10 — Property, Plant and Equipment

Related guide: Fixed asset register ppe depreciation ledger reconciliation.