IAS 36 Notes: Impairment lOMoARcPSD|4127138
1. Cash Generating Unit (CGU)
CGU 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 e.g. Production line that consists of different machinery, raw
materials etc. working together to produce cash flows
If asset does not generate own CFs and its Value in Use cannot be estimated to
be close to fairV less costs of disposal – determine the recoverable amt of CGU
to which it belongs
2. Recoverable Amount & Carrying Amount of a CGU
RA is higher of:
O FairV less costs of disposal
O Value in use
CA is sum total of individual CAs of assets that form part of the CGU
3. Impairment Loss for a CGU
Impairment loss recognised for CGU if RA < CA
Impairment loss should be allocated to reduce the CA of the assets of the
unit in the following order:
O First to goodwill (reverse the entire amt of goodwill)
O Then to the other assets on a pro-rata basis, based on CA of each asset in
the unit
Reductions treated as impairment losses on individual assets
O Recognised in P/L or
O Recognised in OCI (if carried at revalued amt and a previous surplus exists)
DR CR
Impairment loss (P/L) xx
Goodwill (REVERSE TOTAL GW AMT) xx
Machine (SFP)
xx
→ (CA of machine ÷ Total CA of remaining assets xx
in unit) x Remainder of Impairment
1
1. Cash Generating Unit (CGU)
CGU 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 e.g. Production line that consists of different machinery, raw
materials etc. working together to produce cash flows
If asset does not generate own CFs and its Value in Use cannot be estimated to
be close to fairV less costs of disposal – determine the recoverable amt of CGU
to which it belongs
2. Recoverable Amount & Carrying Amount of a CGU
RA is higher of:
O FairV less costs of disposal
O Value in use
CA is sum total of individual CAs of assets that form part of the CGU
3. Impairment Loss for a CGU
Impairment loss recognised for CGU if RA < CA
Impairment loss should be allocated to reduce the CA of the assets of the
unit in the following order:
O First to goodwill (reverse the entire amt of goodwill)
O Then to the other assets on a pro-rata basis, based on CA of each asset in
the unit
Reductions treated as impairment losses on individual assets
O Recognised in P/L or
O Recognised in OCI (if carried at revalued amt and a previous surplus exists)
DR CR
Impairment loss (P/L) xx
Goodwill (REVERSE TOTAL GW AMT) xx
Machine (SFP)
xx
→ (CA of machine ÷ Total CA of remaining assets xx
in unit) x Remainder of Impairment
1
