Reversal for a cash-generating unit

Learning objectives

• Calculate the allocation of a unit's reversal to the assets other than goodwill, pro rata, limited to the lower of their recoverable amount and their carrying amount had no impairment been recognised.L3, L4

Normative references

• IAS 36 §122A reversal of an impairment loss for a CGU is allocated to the assets of the CGU other than goodwill, pro rata on the basis of their carrying amounts; these increases are treated as reversals for individual assets recognised in accordance with paragraph 119.
• IAS 36 §123In this allocation, the carrying amount of an asset cannot exceed the lower of its recoverable amount (if determinable) and its carrying amount had no impairment loss been recognised previously; the excess is allocated to the other assets, excluding goodwill.

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

9 questions

• Two years ago, Vellora impaired its packaging cash-generating unit. At the end of 20X3, the unit's carrying amounts are: goodwill {goodwill_ca}, building {building_ca}, equipment {equipment_ca}. Had no impairment loss been recognised previously, the carrying amounts, net of depreciation, would have been {building_cap} for the building and {equipment_cap} for the equipment; the recoverable amount of each asset on its own cannot be determined. The reversal to be allocated for the unit is {unit_reversal}. What reversal is allocated to each item?L3
• Daloz Printing operates a cash-generating unit carrying residual goodwill of {goodwill_ca}, a digital press ({press_ca}), a process licence ({licence_ca}) and a fleet of vans ({fleet_ca}). After a strong recovery in orders, the unit shows an impairment reversal of {unit_reversal} to be allocated. Without the prior loss, the carrying amounts net of depreciation and amortisation would be: press {press_cap}, licence {licence_cap}, fleet {fleet_cap}. No individual recoverable amount can be determined. Calculate the reversal allocated to the press, the licence and the fleet.L3
• At Marbek Foundries, the Moulding cash-generating unit comprises a melting plant (carrying amount {plant_ca}) and a set of tooling (carrying amount {tools_ca}); the unit's goodwill was fully impaired in the past. The impairment reversal to be allocated amounts to {unit_reversal}. Without the prior loss, the carrying amounts net of depreciation would be {plant_cap} for the plant and {tools_cap} for the tooling. Individual recoverable amounts cannot be determined. What reversal is ultimately allocated to each asset?L4
• Three years ago, the logistics company Arvanto recognised a loss on its regional hub, treated as a cash-generating unit. At the reporting date, the reversal to be allocated for this unit amounts to {unit_reversal}. The warehouse has a carrying amount of {warehouse_ca}; a valuer has determined its own recoverable amount at {warehouse_ra}, whereas its carrying amount without the prior loss, net of depreciation, would be {warehouse_cap}. The automated sorter has a carrying amount of {sorter_ca} and an amount without the prior loss of {sorter_cap}; its own recoverable amount cannot be determined. Determine the reversal allocated to the warehouse and to the sorter.L4
• The recoverable amount of a cash-generating unit that carries goodwill, and whose impairment loss had been allocated to goodwill and then to the other assets, increases on a lasting basis. The unit's assets are not revalued. How is the reversal treated?L3
• The hotel group Solvane is reversing an impairment loss on its Resort cash-generating unit, with an amount of 40,000 to be allocated. The unit comprises goodwill of 15,000 (after the loss), the hotel building (carrying amount 300,000, amount without the prior loss 310,000) and the furniture (carrying amount 100,000, amount without the prior loss 150,000). Individual recoverable amounts cannot be determined. The controller proposes: building + 30,000, furniture + 10,000. Which allocation is correct?L4
• True or false? When a cash-generating unit carries impaired goodwill, the prohibition on reversal extends to all the unit's assets, none of which can then be subject to any reversal.L2
• In 20X1, Ternac impaired the goodwill of its Nutrition cash-generating unit by 100,000. In 20X2, the unit's recoverable amount increases by 60,000 thanks to the success of a new product range. What is the effect of this increase on goodwill?L2
• A trainee summarises the reversal rules for a cash-generating unit as follows. Which sentence of the summary contains an error?L1