Where is impairment loss recognised in the financial statements?

• A. In the Statement of Profit or Loss and Other Comprehensive Income (SPLOCI)
• B. In equity
• C. In the cash flow statement
• D. On the balance sheet as a separate line item

Answer: (A)

Impairment losses reflect that an asset’s recoverable amount is lower than its carrying amount, so the loss is recognised in the income statement. This charge reduces the period’s profit, and the asset on the balance sheet is written down accordingly. It isn’t recorded directly in equity or as a separate line item in the cash flow statement; the impact on cash flows is only indirect (as a non-cash expense adjusted in the operating activities reconciliation). In practice, the impairment loss is shown in the Statement of Profit or Loss and Other Comprehensive Income, with any required adjustments to equity only through the effect on retained earnings after the loss reduces profit.