Impairment: Cash Generating Units

Updated: Sep 2, 2019


A Cash Generating Unit (CGU) is defined as the smallest identifiable group of assets that are able to generate cash inflows. Additionally, CGUs are mostly independent of cash inflows generated by other assets in other Cash Generating Units. Identifying the different CGUs and their cash flows will enable us to test for impairment. Examples of CGUs include: an individual factory, a shop (from a chain of stores), etc…


When calculating the carrying amount of an CGU we must:

  • Include all the assets that can be directly attributed to the cash flows

  • Exclude liabilities, unless the recoverable amount cannot be determined without the liability. For example, if there are disposal obligations, then these should be included.

  • Goodwill should be allocated to all individual CGUs that benefit from this goodwill

  • Assets that serve more than one CGU (like head offices), should only be allocated to the CGUs to which they relate.


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