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BPP Revision Kit-question 46

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › BPP Revision Kit-question 46

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 29, 2020 at 11:21 pm #587027
    rustamov123
    Participant
    • Topics: 5
    • Replies: 9
    • ☆

    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 ?

    October 1, 2020 at 8:42 pm #587170
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    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

    October 3, 2020 at 12:27 pm #587263
    rustamov123
    Participant
    • Topics: 5
    • Replies: 9
    • ☆

    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.

    October 3, 2020 at 9:19 pm #587296
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Yes, that sounds right.

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    Posts
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