Corporate assets

Learning objectives

• Identify corporate assets and why their recoverable amount cannot be estimated individually.L3
• Calculate the allocation of a corporate asset to units on a reasonable and consistent basis, or test the smallest group of units to which it can be allocated.L3, L4

Normative references

• IAS 36 §100Corporate assets include group or divisional assets (headquarters building, EDP equipment, research centre); the structure of the entity determines whether an asset meets the definition of a corporate asset for a particular CGU. They do not generate cash inflows independently and their carrying amount cannot be fully attributed to the CGU under review.
• IAS 36 §101Because they do not generate separate cash inflows, the recoverable amount of a corporate asset cannot be estimated individually (unless management has decided to dispose of it); if there is an indication, the CGU or group of CGUs to which it belongs is tested.
• IAS 36 §102If a portion of the corporate asset can be allocated on a reasonable basis to the CGU, the carrying amount including that portion is compared; otherwise, the CGU is tested excluding the corporate asset, then the smallest group of CGUs to which a portion can be allocated is tested.
• IAS 36 §103Refers to Illustrative Example 8 for the application to corporate assets.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

7 questions

• The Altaïs group has three CGUs: a fruit juice plant, a soft drinks plant and a distribution platform. Which of the following is a corporate asset for these CGUs?L3
• Corvane's headquarters building shows an indication of impairment following a sharp fall in office property prices in its city. The company has not decided to dispose of the building, which serves all its CGUs. How must it proceed?L3
• Ravel has two CGUs, A and B, served by a headquarters with a carrying amount of {hq_carrying}. Management considers it reasonable and consistent to allocate the headquarters in proportion to the carrying amounts of the units (given): {cgu_a_carrying} for A and {cgu_b_carrying} for B. An indication of impairment arises for CGU A, whose recoverable amount is {cgu_a_recoverable}. Compute the share of the headquarters allocated to A and the impairment loss of A.L3
• The Bellerive group operates three branch networks (CGUs X, Y and Z) that share an IT platform with a carrying amount of {it_carrying}. After analysis, the key considered reasonable and consistent for allocating the platform is the number of connected workstations (given): {users_x} for X, {users_y} for Y and {users_z} for Z. Network Y, whose own assets have a carrying amount of {carrying_y}, loses a framework contract; its recoverable amount is estimated at {recoverable_y}. Compute the share of the platform allocated to Y and the impairment loss of Y.L4
• Fontcaude has two CGUs, M and N, which use a research centre with a carrying amount of {research_centre}. No reasonable and consistent basis allows a portion of the centre to be allocated to each unit, but it can be allocated to the group formed by M and N. Test data: M, carrying amount {carrying_m} and recoverable amount {recoverable_m}; N, carrying amount {carrying_n} and recoverable amount {recoverable_n}; recoverable amount of the group M + N: {group_recoverable}. Compute the loss of CGU N, then the additional loss identified at group level.L4
• Mareuil operates a data centre that serves its two CGUs, Insurance and Brokerage. A new technology makes some of the servers obsolete: there is an indication of impairment. The company does not plan to dispose of the centre, and usage measured in computing hours provides a reasonable and consistent basis for allocating it. The treasurer proposes estimating a value in use specific to the data centre by attributing to it an estimated share of the two units' cash flows. Which approach should be adopted?L4
• The Navarre group has four CGUs: two plants, a store network and an online sales business. Its headquarters houses the finance, legal and human resources functions shared by all the units; its research centre works almost exclusively for the two plants. An indication of impairment arises for the online sales business. The management accountant proposes testing that business on its own assets only, on the grounds that the headquarters and the research centre do not belong to it. Write a judgement memo on the treatment of corporate assets in this test.L4