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Hi, Sir. Please help me tomfind the right answer here.
The question asks whether or not the option beliw is an indicator of impairment ?C) The carrying amount of an entity’s net assets is lower than the entity’s number of shares in issue multiplied by its share price – ANSWER IS YES
But, as standards says that if the carrying amount is greater than the market value, then impairment should be made. In this case, the market value of shares is higher (not lower) than the carrying amount. Why should we take it as impairment ?
Hi,
you need to be careful with this as you are right in that if the CV is greater than the recoverable amount then there is an impairment, but it is not an impairment indicator. What you’re looking at is how to calculate the impairment.
Impairment indicators are either external (recession) or internal (physical damage) and so the option given is trying to trick you.
Thanks
Thank you very much for your response. But had the question asked if there is an impairment, then the answer would have been No? Because CV is lower than market value.
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