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ACCA Applied Skills · Financial Reporting · Impairment of assets

Under IAS 36 Impairment of Assets, what is a cash-generating unit (CGU)?

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets. It is the level at which impairment is tested when an individual asset cannot be tested alone.

  1. AThe smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assetsCorrect
  2. BAny group of assets that shares the same depreciation method and useful life
  3. CThe entire reporting entity, regardless of how many operating segments it has
  4. DA group of assets that generates profit for a single reporting segment under IFRS 8

Explanation

IAS 36 defines a CGU as the smallest identifiable group of assets generating cash inflows largely independent of other assets or groups. Depreciation method is irrelevant, and a CGU is generally smaller than the entity or a segment.

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