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Revaluation Reserve & Impairment of Asset

Jaiminder Singh Dhillon (CA) (99 Points)

19 July 2021

Can we set off revaluation reserve created for asset A with impairment of asset B?

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10 Replies

CA Rashmi Gandhi (Chartered Accountant) (86500 Points)
Replied 19 July 2021

Amount of impairment loss set off against revaluation reserve

CA. Sourav Sarkar (Chartered Accountant ) (24588 Points)
Replied 19 July 2021

No it's not possible

Jaiminder Singh Dhillon (CA) (99 Points)
Replied 19 July 2021

Can you please tell the basis on which you are answering. I mean which AS or law to be referred?

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 19 July 2021

AS 28.57,58 answers this.

57. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset should be reduced to its recoverable amount. That reduction is an impairment loss.

58. An impairment loss should be recognised as an expense in the statement of profit and loss immediately, unless the asset is carried at revalued amount in accordance with another Accounting Standard (see Accounting Standard (AS) 10, Accounting for Fixed Assets), in which case any impairment loss of a revalued asset should be treated as a revaluation decrease under that Accounting Standard

Jaiminder Singh Dhillon (CA) (99 Points)
Replied 19 July 2021

I do understand that the impairment loss is set off against the revaluation reserve. But my question is little different. Suppose Revaluation Reserve pertains to asset A and Impairment loss is of asset B. In this case, is set off possible?

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 19 July 2021

Sry for not being clear as I got carried away with the principles. To answer your question, you can’t setoff with asset b’s revaluation reserve.

Impairment loss= 500

revaluatiin reserve= 1000

then you can 1000-500

if impairment loss= 1000

revaluation reserve= 500 then

500-500 and the balance 500 impairment must be taken to profit and loss to get tax benefit as the revaluation reserve did not cover the whole loss.

this can be done on revaluation reserve of asset A contact only.

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 19 July 2021

To narrow this, it’s mentioned under, INDIVIDUAL ASSET IMPAIRMENT or AN ASSET IMPAIRMENT. if its cgu impairment, procedure is different.

Jaiminder Singh Dhillon (CA) (99 Points)
Replied 19 July 2021

I think you typed wrong above. It should have been a's revaluation reserve.

So it means Revaluation Reserve of asset A can used for impairment of asset A only and not for any other asset impairment?