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Corporate Financial Reporting · Impairment of Assets (Ind AS 36)

Cash-Generating Units, Corporate Assets and Goodwill under Ind AS 36

Updated 11 October 2026 · Fact-checked

A cash-generating unit (CGU) is the smallest group of assets that generates cash inflows largely independent of other assets. Goodwill and corporate assets are allocated to CGUs. If the unit's recoverable amount is below its carrying amount, the loss first reduces goodwill, then other assets pro rata to carrying amounts.

Understand Cash-Generating Units, Corporate Assets and Goodwill

Ind AS 36 tests an asset for impairment on its own when it can. Often it cannot, because one machine does not generate cash by itself. It works with other assets. So you group assets into a cash-generating unit (CGU): the smallest identifiable group of assets that generates cash inflows largely independent of the inflows from other assets or groups.

Some assets cannot be tied to one CGU on a reasonable and consistent basis. Goodwill and corporate assets such as head office buildings are the usual cases. They contribute to cash flows, but they do not generate their own. Paragraph 77 says the CGU must include all assets that generate or are used to generate the relevant cash inflows. If you leave something out, the unit may look recoverable when it is actually impaired.

Goodwill from a business combination is allocated, under paragraph 80, to each CGU or group of CGUs expected to benefit from the synergies of the combination. This applies whether or not other assets or liabilities of the acquiree are assigned to those units.

The test is simple. Compare the recoverable amount of the unit with its carrying amount (including allocated goodwill and corporate assets). An impairment loss arises if, and only if, recoverable amount is less than carrying amount.

The loss is then allocated under paragraph 104: first to goodwill allocated to the unit, then to the other assets pro rata on their carrying amounts. If the unit has a non-controlling interest, Appendix C decides how the loss is shared and how goodwill is grossed up.

Key rules to remember

Impairment test for a CGU
Impairment loss = Carrying amount of CGU − Recoverable amount, only if recoverable amount < carrying amount
Carrying amount includes allocated goodwill and the allocated share of corporate assets. Recoverable amount is the higher of fair value less costs of disposal and value in use.
Order of allocating the loss (para 104)
Step 1: reduce goodwill allocated to the CGU. Step 2: reduce other assets pro rata to their carrying amounts
Pro rata means in proportion to carrying amount after goodwill has been written down. These reductions are treated as impairment losses on individual assets.
Pro rata share of an asset
Loss to asset = Remaining loss × (Asset carrying amount ÷ Total carrying amount of the other assets)
Use only the assets that share the loss, not goodwill once it is fully written off.
Gross-up for NCI (para C4)
Adjusted carrying amount = Goodwill recognised + Goodwill attributable to NCI + Net identifiable assets
Needed only when NCI is measured at its proportionate share of net identifiable assets. Compare the adjusted amount with recoverable amount.
Loss attributable to NCI (para C6)
Loss shared between parent and NCI on the same basis as profit or loss
Applies where the subsidiary is itself a CGU. Under para C8, NCI loss relating to unrecognised goodwill is not recognised as goodwill impairment.
Sequence of testing (para 98)
Test the individual asset first, then the CGU containing goodwill, then the group of CGUs
Recognise each loss before testing the next higher level.

How to solve Cash-Generating Units, Corporate Assets and Goodwill questions

Use this order for any question on CGU impairment with goodwill or corporate assets.

  1. 1Identify the CGU from the facts: which assets produce cash inflows largely independent of others. Group them.
  2. 2Allocate goodwill and corporate assets to the CGU on a reasonable and consistent basis. Add them to the unit's carrying amount.
  3. 3If an individual asset shows impairment indicators, test and write it down first (para 98), then test the CGU.
  4. 4If NCI is measured at proportionate share of net identifiable assets, gross up goodwill to include the NCI's share (para C4).
  5. 5Compare the recoverable amount of the unit with its adjusted carrying amount. If recoverable amount is not lower, there is no loss.
  6. 6Allocate the loss: goodwill first, then other assets pro rata to carrying amounts (para 104).
  7. 7If NCI exists, share the loss between parent and NCI as profit or loss is shared. Do not recognise the part relating to unrecognised NCI goodwill (para C8).
  8. 8Pass the journal entry and show the revised carrying amount of each asset.

Quickest way: Table-free CGU allocation in four lines

When to use it: Use in 14-mark problems where time is short and the unit has goodwill plus several assets.

  1. Write total carrying amount (with goodwill and corporate share) and recoverable amount. Subtract to get the loss.
  2. Deduct the loss from goodwill. If goodwill covers it, stop.
  3. If a balance remains, divide it among the other assets using their carrying amounts as ratio. Reduce each asset.
  4. Check that total of reductions equals the loss and that the new total equals recoverable amount.

Common mistakes in Cash-Generating Units, Corporate Assets and Goodwill

  • Allocating the loss pro rata to all assets including goodwill.

    Students remember pro rata and apply it everywhere.

    Fix: Para 104 is two steps. Goodwill is reduced first. Only the balance goes pro rata to the other assets.

  • Leaving out the allocated corporate assets or goodwill from the unit's carrying amount.

    Students treat them as separate and compare only operating assets with recoverable amount.

    Fix: Include them in the carrying amount when allocated on a reasonable and consistent basis, as para 77 warns. Otherwise the unit may look fully recoverable.

  • Skipping the gross-up of goodwill when NCI is at proportionate share.

    The question gives only the parent's goodwill, so it looks complete.

    Fix: Gross up under para C4 before comparing with recoverable amount. Then recognise only the part of the goodwill loss relating to the parent (para C8).

  • Testing the CGU before an impaired individual asset.

    Students go straight to the larger unit.

    Fix: Under para 98, write down the individual asset first, then test the unit containing goodwill.

  • Sharing the NCI loss in the ratio of shareholding by default without reading the profit-sharing basis.

    Ownership and profit sharing are usually equal, so the difference is overlooked.

    Fix: The standard says to use the same basis as profit or loss allocation. Check the facts for that basis.

Worked examples

Example 1

Sunrise Foods Ltd has a CGU (Plant Unit) with these carrying amounts: goodwill ₹20,00,000; building ₹60,00,000; machinery ₹90,00,000; inventory-handling equipment ₹30,00,000. Recoverable amount of the unit is ₹1,40,00,000. Compute the impairment loss and the carrying amount of each asset after allocation.

Show the solution
  1. Total carrying amount = 20,00,000 + 60,00,000 + 90,00,000 + 30,00,000 = ₹2,00,00,000.
  2. Impairment loss = 2,00,00,000 − 1,40,00,000 = ₹60,00,000.
  3. Step 1: write off goodwill ₹20,00,000 fully. Balance loss = ₹40,00,000.
  4. Step 2: other assets total = 60,00,000 + 90,00,000 + 30,00,000 = ₹1,80,00,000.
  5. Building share = 40,00,000 × 60 ÷ 180 = ₹13,33,333 (rounded).
  6. Machinery share = 40,00,000 × 90 ÷ 180 = ₹20,00,000.
  7. Equipment share = 40,00,000 × 30 ÷ 180 = ₹6,66,667 (rounded).
  8. Revised amounts: building ₹46,66,667; machinery ₹70,00,000; equipment ₹23,33,333; goodwill nil. Total = ₹1,40,00,000, which equals recoverable amount.

Answer: Impairment loss ₹60,00,000: goodwill ₹20,00,000, building ₹13,33,333, machinery ₹20,00,000, equipment ₹6,66,667.

Example 2

Bharat Textiles Ltd acquires 80% of Kaveri Mills Ltd. NCI is measured at its proportionate share of net identifiable assets. Kaveri Mills is a CGU. Goodwill recognised in consolidated statements is ₹16,00,000, so total goodwill including the NCI's share is ₹20,00,000. Net identifiable assets are ₹1,00,00,000 (building ₹40,00,000, plant ₹60,00,000). Recoverable amount of the unit is ₹1,05,00,000. Profits are shared 80:20. Compute the impairment and the amount recognised in consolidated statements.

Show the solution
  1. Gross up under para C4: adjusted carrying amount = 1,00,00,000 + 20,00,000 = ₹1,20,00,000.
  2. Impairment loss = 1,20,00,000 − 1,05,00,000 = ₹15,00,000.
  3. Allocate to goodwill first: grossed-up goodwill is ₹20,00,000, so the whole ₹15,00,000 is a goodwill loss. Identifiable assets are not reduced.
  4. Share between parent and NCI as profit is shared: parent 80% = ₹12,00,000; NCI 20% = ₹3,00,000.
  5. Under para C8, the NCI's ₹3,00,000 relates to goodwill not recognised in the parent's consolidated statements, so it is not recognised as goodwill impairment.
  6. Goodwill impairment recognised = ₹12,00,000. Recognised goodwill becomes 16,00,000 − 12,00,000 = ₹4,00,000.

Answer: Total loss is ₹15,00,000, but only ₹12,00,000 is recognised as goodwill impairment. Consolidated goodwill falls to ₹4,00,000 and identifiable assets stay unchanged.

Exam tips

  • Always show total carrying amount, recoverable amount and the loss in the first three lines. Marks are given for each.
  • State the order of allocation with the paragraph number (para 104) before you compute. This earns method marks even if arithmetic slips.
  • Check the NCI measurement basis in the question. If it is proportionate share, gross up goodwill at once.
  • End by proving that revised carrying amounts add up to recoverable amount, unless an asset floor applies.
  • For MCQs, watch the word 'first'. The answer is nearly always goodwill.

Practice questions from Impairment of Assets (Ind AS 36)

Cash-Generating Units, Corporate Assets and Goodwill in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Cash-Generating Units, Corporate Assets and Goodwill: frequently asked questions

What is a cash-generating unit under Ind AS 36?

It is the smallest identifiable group of assets that generates cash inflows largely independent of the inflows from other assets or groups. You use it when an individual asset's recoverable amount cannot be estimated on its own.

In what order is an impairment loss allocated within a CGU?

Under para 104, first reduce goodwill allocated to the unit. Then reduce the other assets pro rata to their carrying amounts. These reductions are treated as impairment losses on individual assets.

Why is goodwill grossed up when there is non-controlling interest?

If NCI is measured at proportionate share of net identifiable assets, goodwill attributable to NCI is in the unit's recoverable amount but not in the consolidated books. Para C4 requires you to add it to the carrying amount before the comparison, so that like is compared with like.

What if an individual asset in the unit is also impaired?

Test that asset first and recognise its loss before testing the CGU that contains goodwill. Para 98 sets this sequence, and it also applies to a CGU inside a larger group of units.