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The only exception to the recognition and measurement of and impairment is IF THE IMPAIRMENT REVERSES A PREVIOUS GAIN TAKEN TO THE REVALUATION RESERVE… can u explain this mechanism??
Until the tutor answers…
If you wanted to impair an asset, and it has been previously revalued, you must first DR the revaluation reserve account with the impairment charge; any remainder goes to the I/S as an expense.
e.g Building
2010 = NBV £100
2011 = Revalued to 150, thus creating a RR A/C of 50
2012 = Recoverable amount after a fire = 25So, first we deduct the impairment charge of 125 (150 – 125 = 25) from the RR A/C “reversing a previous gain.”
Once the RR A/C is closed, we send the remainder as a Dr to the I/S of 75 (125 – 50 = 75)All it is saying is, if a revaluation reserve exists for the asset, and the balance covers the impairment charge, no expense would be recognised in the I/S.
Hope this helps.
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