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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 price). -why the statement above is an indicator of impairment ?
Because the number of shares multiplied by the share price gives the total market value of shares and what the business is potentially worth. If the carrying value if lower than this then it could indicate that the net assets are worth less than the value of the business so we then end to look and see if they should be reduced further to truly reflect their worth, via an impairment review.
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