Insights into IAS 36 - Allocating assets to cash-generating units

The accounting requirements regarding impairment of tangible and intangible assets are governed by IAS 36 ‘Impairment of Assets’. The requirements are not new, however remain challenging as the guidance is detailed and complex in some areas.

The articles in our ‘Insights into IAS 36’ series have been written to assist preparers of financial statements and those charged with the governance of reporting entities understand the requirements set out in IAS 36, and revisit some areas where confusion has been seen in practice.

This article is the second of a three-part series on cash-generating units (CGUs). In this article we discuss how to allocate assets to CGUs, which follows an article on how to identify CGUs and then finally we will discuss how to allocate goodwill to CGUs.

Identifying CGUs is a critical step in the impairment review and can have a significant impact on its results. That said, the identification of CGUs requires judgement. The identified CGUs may also change due to changes in an entity’s operations and the way it conducts them.