Beside charging annual depreciation on assets 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 then asset 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 impairment loss can be re-instated in future if the recoverable amount of the asset exceeds the carrying amount. Various external and internal sources of information can be taken as the basis of determining the impairment for Assets. The auditor must ensure that provisions of AS 28, “Impairment of Assets” issued the Institute are followed.
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