What is a cash-generating unit IAS 36?
The objective of identifying CGUs is to identify the smallest identifiable group of assets that generates largely independent cash inflows. CGUs are identified at the lowest level to minimise the possibility that impairments of one asset or group will be masked by a high-performing asset.
What is cash-generating unit in accounting?
A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.
What is a cash-generating unit example?
A cash-generating unit is an identifiable assets group provides money inflows to a company, these cash flows are independent of those generated by other types of assets. For example, a company has 50 hotels worldwide. Therefore, this group of assets is considered as a whole a cash-generating unit.
What is the carrying amount of a cash-generating unit?
CU500
The carrying amount of the cash‑generating unit is CU500, which is the carrying amount of the mine (CU1,000) less the carrying amount of the provision for restoration costs (CU500). Therefore, the recoverable amount of the cash‑generating unit exceeds its carrying amount.
Is IAS 36 still applicable?
IAS 36 was reissued in March 2004 and applies to goodwill and intangible assets acquired in business combinations for which the agreement date is on or after 31 March 2004, and for all other assets prospectively from the beginning of the first annual period beginning on or after 31 March 2004.
When should I apply IAS 36 impairment of assets?
An impairment test is required for all assets within the scope of IAS 36 when there is an indication of impairment at the reporting date. In addition IAS 36 requires certain assets to be tested for impairment annually, irrespective of whether there is any indication of impairment.
What is a cash-generating unit CGU?
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of a CGU is the same as for an individual asset.
How do you find cash generating units?
Identification of an asset’s cash-generating unit involves judgement. If recoverable amount cannot be determined for an individual asset, an entity identifies the lowest aggregation of assets that generate largely independent cash inflows.
What is a cash-generating unit quizlet?
CASH GENERATING UNIT. THE SMALLEST IDENTIFIABLE GROUP OF ASSETS THAT GENERATE CASH INFLOWS FROM CONTINUING USE THAT ARE LARGELY INDEPENDENT OF THE CASH INFLOWS FROM OTHER ASSETS OR GROUP OF ASSETS.
When should apply IAS 36 impairment of assets?
Does IFRS 9 replace IAS 36?
As a result of the issue of IFRS 9, IAS 36 is amended to: Exclude financial instruments accounted for in accordance with IFRS 9, rather than IAS 39. Refer to IFRS 9 for the impairment of financial assets not within the scope of IAS 36.
Can you reverse impairment loss?
An impairment loss may only be reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss had been recognised. If this is the case, then the carrying amount of the asset shall be increased to its recoverable amount.
What does value in use mean in IAS 36?
The value in use is the present value of the future cash flows that an asset is expected to obtain. IAS 36 set out that an impairment loss of a cash-generating unit will be recognized if its recoverable amount is less than the carrying amount of the assets associated with the unit.
When does IAS 36 require assets to be combined into a CGU?
Instead, IAS 36 requires assets to be combined into cash-generating units (‘CGU’) consisting of assets for which it is impossible to estimate the recoverable amount individually. This is the case when (IAS 36.67):
How is impairment of assets determined in IAS 36?
Identifying an asset that may be impaired At the end of each reporting period, an entity is required to assess whether there is any indication that an asset may be impaired (i.e. its carrying amount may be higher than its recoverable amount). IAS 36 has a list of external and internal indicators of impairment.
What does it mean to have a cash generating unit?
– IFRS MEANING What is a cash generating unit? A cash-generating unit is an identifiable assets group provides money inflows to a company, these cash flows are independent of those generated by other types of assets.