IAS 36Chapter 7Lesson 1
Identifying the cash-generating unit
Step 1 of 8Learning objectives
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When the recoverable amount of an asset cannot be estimated on its own, the test is performed at the level of its cash-generating unit (CGU): the smallest group of assets whose cash inflows are largely independent. The lesson shows how to identify it, why output that can be sold in an active market forms a CGU even if it is used internally, how to adjust internal transfer prices, and why the split must remain consistent.
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Learning objectives
- Explain when the recoverable amount must be estimated at the level of the CGU rather than the individual asset.
- Identify the smallest group of assets generating largely independent cash inflows, using management's monitoring and decision-making indicators.
- Recognise a CGU whose output has an active market and replace internal transfer prices with arm's length prices.
- Apply consistency in identifying CGUs and know what to disclose when the split changes.