AS 28 (Impairment of Assets) is the Indian Accounting Standard that prescribes how an enterprise must ensure assets are not carried at more than their recoverable amount in the financial statements.

The Ministry of Corporate Affairs notified AS 28 via the Companies (Accounting Standards) Rules, 2006. It became effective for Level I enterprises from 1 April 2004 and was subsequently phased in for Level II and III enterprises. The predecessor was the ICAI standard issued in February 2002.

For FY 2026-27, AS 28 remains critical for capital-intensive sectors. In manufacturing industries such as steel and cement, cyclical downturns can trigger impairment indicators that require careful assessment and disclosure.

AS 28 at a Glance

AS 28 establishes that assets must not be carried above their recoverable amount. This principle protects users from overstated asset values. The standard is most relevant for preparers and auditors of financial statements in companies with significant fixed or intangible assets.

What is AS 28: Impairment of Assets?

AS 28 requires that an enterprise reviews the carrying amount of its assets at each balance sheet date to determine whether those assets may be impaired. If there are indicators that an asset’s carrying value exceeds its recoverable amount, being the higher of net selling price and value in use, the entity must recognise an impairment loss.

The Institute of Chartered Accountants of India introduced this standard to align Indian GAAP with international best practices on asset impairment. Its introduction followed global moves towards IFRS convergence and addressed gaps left by earlier Indian guidance on asset valuation.

CFOs, finance teams, statutory auditors, and CA students regularly consult this standard when testing property, plant and equipment or intangible assets for impairment.

Objective of AS 28

• Prescribe procedures to ensure assets are carried at no more than their recoverable amount.
• Specify conditions under which an enterprise reverses an impairment loss.
• Establish disclosures relating to impairment losses and reversals in financial statements.

These objectives support faithful representation by preventing overstatement of asset values. They also promote comparability across periods and entities. Compliance with these aims helps ensure a true and fair view as required by Section 129 of the Companies Act, 2013.

Who Must Apply AS 28?

Entities covered

All enterprises preparing financial statements under the Accounting Standards framework must apply AS 28 unless they have transitioned to Ind AS. This includes:

Ind AS-applicable companies do not apply AS; they follow Ind AS 36 per MCA’s roadmap.

Scope exclusions

AS 28 does not apply to:

• Inventories (addressed by AS 2).
• Construction contract assets (addressed by AS 7).
• Financial assets including investments within scope of AS 13.
• Deferred tax assets (governed by AS 22).
• Employee benefit-related assets (covered by AS 15).
• Goodwill arising on consolidation (carried at carrying amount; tested under principles aligned with those in AS 21).

When the standard does not apply

Inventories are covered under AS 2. Construction contracts fall within AS 7. Financial instruments are governed by AS 13. Deferred tax is addressed by AS 22. Employee benefits use AS 15. Goodwill on consolidation is tested using principles from AS 21.

Key Definitions under AS 28

Recognition and Measurement under AS 28

When to recognise

An enterprise assesses at each balance sheet date whether any indication exists that an asset may be impaired (Para 5). If such indications exist, arising from external factors like market value decline or internal evidence like obsolescence, the entity estimates the recoverable amount for that asset or its cash-generating unit (CGU).

Unlike Ind AS 36 or IAS 36, annual testing is not required unless indicators exist. For example, goodwill is tested only if there are impairment indicators rather than mandatorily every year.

Initial measurement

If the carrying amount exceeds recoverable amount, which is defined as the higher of net selling price (NSP) and value in use (VIU), the entity recognises an impairment loss equal to this excess.

**Formula:**

Recoverable Amount = Max { Net Selling Price, Value in Use }

Impairment Loss = Carrying Amount, Recoverable Amount

Value in use is determined by discounting estimated future cash flows over a reasonable period, typically not exceeding five years, to present value using a pre-tax discount rate reflecting current market assessments specific to that asset.

Net selling price represents expected proceeds from sale between knowledgeable parties less any direct disposal costs.

Subsequent measurement

Impairment losses are recognised immediately in profit or loss unless the asset is carried at revalued amounts per another standard such as AS 10 or AS 26. In such cases it is treated as a revaluation decrease.

For CGUs containing goodwill or corporate assets, allocation follows a hierarchy, first against allocated goodwill then pro-rata across other CGU assets based on carrying values.

Reversal of impairment loss is permitted if estimates used to determine recoverable amount change favorably, except for goodwill where reversal is generally prohibited under Para 124A.

The new carrying amount after reversal cannot exceed what would have been recognised had no prior impairment occurred, factoring normal depreciation/amortisation over intervening periods.

Indicators of Impairment Assessment at Each Balance Sheet Date

AS 28 adopts an indicator-based approach requiring assessment at each reporting date for both external indicators, like significant market decline or adverse economic shifts, and internal triggers such as physical damage or changes in usage patterns.

If any indicator exists:

Estimate recoverable amount.

Compare with carrying value.

Recognise loss if recoverable amount falls short.

This approach contrasts with Ind AS 36 where annual testing applies mandatorily to goodwill and indefinite-life intangibles regardless of indicator presence.

In our audit practice we frequently observe management overlooking internal triggers such as significant changes in expected usage, a common source of error flagged during statutory audits under SA 700 compliance reviews.

Worked Examples on AS 28

Example 1: Plant impairment due to technological obsolescence

Krishna Steel Industries owns a hot rolling mill with a carrying amount of Rs 18 crore as at March 31, 2026. New technology has made this mill inefficient compared to current alternatives. Net selling price stands at Rs 9 crore while discounted future cash flows yield a value in use figure of Rs 7.5 crore using a pre-tax discount rate appropriate for steel sector risk profiles.

Computation Table

Journal Entry

Dr Impairment Loss (P&L) Rs 9 crore

Cr Accumulated Impairment, Plant Rs 9 crore

Disclosure must include details about the indicator triggering impairment review, method used to estimate recoverable amount (NSP), discount rate if VIU applied, and operational impact per Para 121 requirements.

Example 2: Reversal of prior impairment loss

Sundaram Engineering Pvt Ltd previously recognised an impairment loss on its CNC machine, reducing its carrying value from Rs 12 crore down to Rs 8 crore during FY 2023-24 due to weak demand outlook then prevailing. As at March 31, 2026 market conditions have improved; current recoverable amount now stands at Rs 14 crore after two years’ further depreciation charged at Rs 80 lakh per annum since initial write-down.

Maximum permissible carrying value post-reversal equals original cost less accumulated depreciation had no impairment occurred:

Computation Table

Journal Entry

Dr Accumulated Impairment, Plant Rs 3.2 crore

Cr Reversal of Impairment Loss (P&L) Rs 3.2 crore

Such reversals require disclosure explaining circumstances leading to reversal, including basis for revised estimates, and confirmation that new carrying value does not exceed what would have been recorded had no prior loss been booked per Para 121 guidance.

Disclosure Requirements under AS 28

Disclosures under AS 28 are essential for transparency and compliance with Schedule III to the Companies Act, 2013. Entities must provide users with sufficient detail to understand the nature, timing, and financial impact of impairment losses and reversals. Proper disclosure supports audit trail integrity and enables investors to assess asset quality.

Auditors must verify these disclosures as part of their SA 700 reporting obligations to ensure fair presentation.

Common Mistakes & Industry-Specific Considerations

Common errors auditors flag

• Failing to assess for indicators of impairment at each balance sheet date.
• Using post-tax discount rates in value-in-use computations instead of pre-tax.
• Reversing impairment loss to an amount exceeding the carrying value that would have existed had no impairment been recognised.
• Including future capital expenditure to improve performance in value-in-use cash flows (cash flows must reflect asset in current condition).
• Misidentifying the cash-generating unit at too high a level, masking individual asset impairment.
• Failure to allocate goodwill to CGUs when testing for impairment in consolidated accounts.

Industry application notes

Capital-intensive manufacturing:

Steel, cement, paper, and chemical companies face cyclical impairments. Management’s cash-flow projections must align with industry-wide capacity utilisation forecasts and commodity price assumptions. Auditors typically encounter aggressive assumptions that overstate recoverable amounts.

Hospitality and aviation:

Asset impairment indicators include demand collapse, regulatory changes, and route economics. CGU identification at hotel-property or aircraft-fleet level is common. Patron’s clients in these sectors often require guidance on segmenting cash flows appropriately.

Distressed companies:

Going-concern concerns under AS 1 usually trigger impairment indicators under AS 28. Both assessments are interrelated and must be addressed together in statutory audits.

AS 28 vs Ind AS 36 vs IFRS: Key Differences

The table below compares key aspects of AS 28, Ind AS 36 (Impairment of Assets), and IFRS (IAS 36):

India retains certain carve-outs from IFRS by continuing an indicator-based approach under AS 28 rather than mandating annual tests for all goodwill. The terminology “net selling price” is used instead of “fair value less costs of disposal” (FVLCD). Sensitivity disclosures are less detailed under Indian GAAP compared to Ind AS 36/IAS 36 requirements.

Latest Amendments to AS 28 (FY 2026-27)

No amendments have been notified to AS 28 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.

Related Standards You Should Know

• [Ind AS 36](/ind-as-36-impairment-of-assets/), Equivalent impairment standard for Ind AS-applicable companies; broader scope and stricter testing for goodwill.
• [AS 10](/as-10-property-plant-and-equipment/), PPE within scope of AS 28 for impairment testing.
• [AS 26](/as-26-intangible-assets/), Intangible assets within scope of AS 28 for impairment testing.
• [AS 13](/as-13-accounting-for-investments/), Long-term investments tested under AS 13's other-than-temporary diminution test.
• [AS 21](/as-21-consolidated-financial-statements/), Goodwill on consolidation tested under principles aligned with AS 28.

Need Help with AS 28 Compliance?

Patron Accounting LLP supports enterprises across India with all aspects of AS 28 compliance, from technical assessment through audit support. Our specialists bring deep experience advising CFOs, finance teams, and statutory auditors on practical application challenges under Indian GAAP.

Our services include:

• Statutory Audit
• Financial Reporting & Schedule III
• Disclosure Review
• Ind AS Advisory

Schedule a 30-minute consultation with our Ind AS team, Pune · Mumbai · Delhi · Gurugram.

About This Article

Reviewed by CA & CS Team · Patron Accounting LLP

Technical reviewer: CA Sundram Gupta, FCA

Last reviewed: 2026-05-02

Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Accounting Standards) Rules, 2006 (reaffirmed in Companies (Accounting Standards) Rules, 2021)) · IFRS Foundation