# AS 28: Impairment of Assets — Core Calculation
## Key Definitions
| Term | Formula / Meaning |
|---|---|
| Carrying Amount (CA) | Cost − Accumulated Depreciation |
| Net Selling Price (NSP) | Selling Price − Cost of Disposal |
| Value in Use (VIU) | Present value of future cash flows from the asset |
| Recoverable Amount (RA) | max(NSP, VIU) |
| Impairment Loss (IL) | CA − RA (only when CA > RA) |
> Impairment loss arises only when CA > RA. If RA ≥ CA, no impairment.
---
## Step-by-Step Process
1. Compute CA = Cost − Accumulated Depreciation (book value on the test date)
2. Compute NSP = Expected sale price − Costs to sell
- If NSP is negative (disposal costs exceed sale price) → treat NSP as zero
- If asset cannot legally be sold (e.g., fails environmental standards) → SP = 0, so NSP ≤ 0 → NSP = zero
3. Compute VIU = PV of future cash flows
4. RA = Higher of NSP and VIU
5. IL = CA − RA (if positive; otherwise no impairment)
---
## Journal Entry
```
Impairment Loss A/c (P&L) Dr. [Amount]
To PPE / Asset A/c [Amount]
```
## Balance Sheet Presentation
```
Non-Current Assets
PPE (at cost) ₹500
Less: Impairment Loss (₹100)
Net Carrying Amount ₹400
```
## Critical Note on Negative NSP
When a plant is legally barred from sale, SP = ₹0. Even if disposal costs money, NSP is floored at zero — a negative NSP never increases the impairment loss beyond what the CA itself represents.