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The carrying amount of an entity’s net
assets is lower than the entity’s number of
shares in issue multiplied by its share priceDear Sir, but Revision Kit BPP has shown as indicator of impairment although this statement is not applicable for indicator of impairment
pls help
because
“Note that assets in this case include all tangible and intangible assets. It does not include assets
such as inventories, deferred tax assets, assets arising under IAS 19 Employee Benefits and
financial assets within the scope of IFRS 9 Financial Instruments as these standards already have
rules for recognising and measuring impairment.”External sources::
“Carrying amount of net assets of the entity exceeds market capitalisation”
Examples of events indicating impairment
“Carrying amount of net assets of the entity exceeds market capitalisation”
Yes, if the carrying amount of the net assets is less than the market capitalisation then there is no impairment indicator as the market value of the business (e.g. $100m) is higher than the book value (e.g. $80m). We’re looking for where the net assets are higher in the accounts (e.g. $120m) in comparison to the market value (e.g. $100m), indicating that the net assets are valued too highly in comparison to what the external markets believe.
Thanks
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