Establish why a reversal is being considered
This guide concerns individual non-goodwill assets under Ind AS 36, principally the cost-model illustrations below. Paragraph 114 requires a change in estimates supporting recoverable amount since the impairment. A higher number alone does not explain the change. Preserve the previous valuation and a current bridge identifying the revised assumptions. The standard does not permit reversal merely from discount unwinding as time passes. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Maintain two carrying-amount histories
The most useful control is a parallel asset history: actual carrying amount after impairment, and the amount that would exist without prior impairment, net of subsequent depreciation or amortisation. The second history is the paragraph 117 ceiling. Reconstruct it from the asset record rather than restoring the original purchase cost or automatically reversing the full historical loss. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Apply the ceiling to a supported estimate
After establishing an eligible change, compare recoverable amount with the current carrying amount and the no-impairment ceiling. The illustrations use the positive increase up to the lower of recoverable amount and that ceiling. An increase above the ceiling belongs to a separately justified revaluation analysis under the applicable standard, rather than being labelled an impairment reversal. Do not post an increase merely because the asset's original cost was higher. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Review presentation separately
Paragraph 119 ordinarily places the reversal in profit or loss, with the revalued-asset exception requiring the applicable revaluation treatment. The models here do not determine revaluation-surplus allocations. Identify the accounting model before drafting the journal so a calculation prepared for a cost-model asset is not transferred uncritically to a revalued asset. Goodwill and cash-generating-unit allocation need separate rules and are outside these individual-asset calculations. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Reset the future charge
Paragraph 121 requires future depreciation or amortisation to reflect the revised carrying amount, residual value and remaining useful life. The reversal journal and fixed-asset depreciation settings therefore form one implementation task. Retain the effective date and approved assumptions. A system that posts the reversal but continues the obsolete depreciation base leaves the reconciliation incomplete. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Prepare a reviewable close-out pack
Use the same asset identifier across the previous impairment, new estimate, parallel history, journal and future charge. Our recommended working also records evidence dates and who resolved valuation differences. All amounts below are in lakh rupees. The examples assume supported eligible estimate changes unless stated otherwise, no tax effects, and independently determinable individual-asset recoverable amounts. ICAI-hosted Ind AS 36: paragraphs 114–121 and 124.
Applicable primary references
ICAI-hosted Ind AS 36: paragraphs 114–121 and 124
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Ceiling restricts a strong recovery
Current carrying amount is ₹60 lakh, recoverable amount ₹90 lakh and no-impairment carrying amount ₹80 lakh. Permitted closing amount is min(90, 80) = ₹80 lakh; reversal is ₹20 lakh, not ₹30 lakh.
Illustrative example 2: Recoverable amount is the lower constraint
Current carrying amount is ₹60 lakh, recoverable amount ₹75 lakh and no-impairment amount ₹80 lakh. Closing amount is ₹75 lakh and reversal ₹15 lakh. The unused ₹5 lakh of ceiling does not justify a further increase.
Illustrative example 3: Rebuild the parallel history
A ₹100 lakh asset has a ten-year straight-line life and zero residual value. After two full years, the no-impairment amount is 100 − 2 × 10 = ₹80 lakh. Assume actual carrying amount after impairment and subsequent depreciation is ₹50 lakh and supported recoverable amount is ₹90 lakh. The reversal is 80 − 50 = ₹30 lakh, not ₹40 lakh.
Illustrative example 4: Future depreciation after reversal
After a valid reversal, carrying amount is ₹80 lakh, residual value ₹8 lakh and remaining useful life four years. Assuming straight-line allocation, future annual depreciation is (80 − 8) ÷ 4 = ₹18 lakh. The old charge must not continue simply because the asset identifier is unchanged.
Illustrative example 5: Passage of time alone
Current carrying amount is ₹60 lakh. A model increases value in use from ₹60 lakh to ₹66 lakh solely because the same future cash flows are closer in time, with no other relevant estimate change. The ₹6 lakh increase does not support a reversal under the stated unwinding restriction; reversal in this model is ₹0.
Illustrative example 6: Separate individual-asset limits
Asset A has current amount ₹40 lakh, recoverable amount ₹70 lakh and ceiling ₹60 lakh: reversal ₹20 lakh. Asset B has current amount ₹20 lakh, recoverable amount ₹25 lakh and ceiling ₹30 lakh: reversal ₹5 lakh. With independently determinable recoverable amounts, total reversal is ₹25 lakh; unused capacity in one asset is not a licence to increase the other beyond its own limit.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the asset | Confirm scope, individual-asset testing basis and accounting model. |
| 2 | Retrieve the prior impairment | Keep the original amount, date and valuation assumptions. |
| 3 | Explain the estimate change | Document current evidence and the specific changed assumptions. |
| 4 | Exclude unwinding-only increases | Separate passage-of-time effects from a supported change. |
| 5 | Roll forward the actual amount | Tie the asset ledger and subsequent depreciation together. |
| 6 | Rebuild the parallel history | Calculate the no-impairment amount with supported depreciation or amortisation. |
| 7 | Apply the lower constraint | Compare recoverable amount with the ceiling before measuring the reversal. |
| 8 | Check presentation | Confirm cost-model profit-or-loss treatment or separately analyse revaluation requirements. |
| 9 | Update future charges | Record revised carrying amount, residual value, remaining life and effective date. |
| 10 | Approve the reconciliation | Tie evidence, journal, disclosures and fixed-asset settings to one reviewed working. |
Sixteen practitioner FAQs
1. Is a higher recoverable amount enough on its own?
Explain the eligible estimate change and retain supporting evidence.
2. What does the parallel history represent?
The net carrying amount that would exist without the prior impairment.
3. Is original purchase cost the ceiling?
Not without the subsequent depreciation or amortisation roll-forward.
4. Can the entire old impairment always be reversed?
No. Apply the current recoverable amount and ceiling.
5. Does discount unwinding alone qualify?
No, as illustrated by the unchanged-cash-flow model.
6. Can unused ceiling be posted as additional recovery?
No. A ceiling is not independent evidence of recoverable amount.
7. Are the models cash-generating-unit allocations?
No. They assume individually determinable recoverable amounts.
8. Can the same calculation be used for goodwill?
No. Goodwill has a separate prohibition on subsequent reversal.
9. Are all reversals presented identically?
Check the accounting model, including the revalued-asset exception.
10. Do these examples allocate revaluation surplus?
No. That requires a separate supported presentation analysis.
11. Should the asset register be updated after the journal?
Yes. Reconcile the revised base and future depreciation settings.
12. Does remaining life automatically restart?
No. Use the supported remaining useful life.
13. Should residual value be deducted for the future charge?
Yes, where applicable to the depreciation or amortisation calculation.
14. Does the example annual charge include a partial year?
No. It assumes a full-year straight-line charge; use actual effective dates in practice.
15. Are deferred tax effects calculated here?
No. Analyse them separately under the applicable standard.
16. What should the reviewer be able to reproduce?
The estimate bridge, actual and parallel histories, capped reversal and revised future charge.
Conclusion
For an individual non-goodwill asset, document the changed estimate, rebuild the no-impairment carrying amount and cap the reversal before revising depreciation.