Impairments

Question 1

What is a Cash Generating Unit (CGU)?

Answer 1

Smallest identifiable group of assets.
That generate cash inflow.
That are largely independent of cash inflows from other assets/ group of assets.

Question 2

Impairment loss.

Answer 2

RA > CA

Question 3

Recoverable amount (RA)

Answer 3

Higher of:
- fair value less cost to sell; and
- value in use

Question 4

Before recording the impairment loss…

Answer 4

Ensure that the CA is correct by reviewing the assets:
- useful life
- residual value
- depreciation / amortisation method

Question 5

What is the value in use period of prediction?

Answer 5

• ideally be 5 years
• should not exceed the useful life of the asset