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Dear Mike,
Kindly help me understand the point, the external indicators of impairment may include:
carrying amount of net assets exceeds the market capitalization. Does this point mean that the assets are over valued, hence we need the fair value adjustment and so we impair the asset?
Also, how does the increase in market rate influence the impairment? Is it because the investors ill withdraw there investments in the entity and invest else where in the market which may lead to fall in value of the company.Also, can you please explain or provide an example of what restructuring of an asset is?
“Does this point mean that the assets are over valued,…” – yes
“Also, how does the increase in market rate influence the impairment?” – it’s ot market rate that we are looking at! It’s market capitalisation. Market capitalisation is number of shares in issue multiplied by market value per share – effectively it’s telling us the “worth” of the entity
And if that worth is lower than the fair value of the entity’s net assets, that indicates that the net assets are over-valued
“restructuring of an asset is?” – I’d prefer to have the expression written in context! Where an asset is in use but the directors feel that it could be better utilised doing some other job, that may involve restructuring
If you’re not happy with that, let me have the full sentence where you have read this expression
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