AASB136 - Cash Generating Units for Business

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note

ADVANCED FINANCIAL ACCOUNTING
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Executive Summary
The assignment consists of four parts which are related to different areas of different business.
The first question, Cash Generating Units (CBU) is to defined as per AASB 136 which is on
impairment of assets and discuss why a business recognizes CBU for the purpose of
impairments. The first part will be based on analysis of company Wentnor Dairy ltd for which
discussions are to be made. The second question requires calculations of significant ratios of
Qantas ltd for the year 2017 and analyzing the same to determine performance of the business.
The third question also relates to Qantas ltd where facts and treatments of foreign transaction
will be discussed. The last question will be showing a cash flow statement prepared on the basis
of both indirect and direct method.

ADVANCED FINANCIAL ACCOUNTING
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Table of Contents
Answer to Question 1......................................................................................................................3
Requirement A.............................................................................................................................3
Requirement B.............................................................................................................................3
Requirement C.............................................................................................................................4
Answer to Question 2......................................................................................................................4
Requirement A.............................................................................................................................4
Requirement B.............................................................................................................................4
Requirement C.............................................................................................................................5
Answer to Question 3......................................................................................................................6
Answer to Question 4......................................................................................................................7
Reference.......................................................................................................................................11
Appendix........................................................................................................................................12

ADVANCED FINANCIAL ACCOUNTING
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Answer to Question 1
Requirement A
As per the provisions which is set out in para 6 of AASB 136 “Impairment of Assets”
states that a cash generating unit is the smallest group of assets which can be identified which are
capable of generating cash inflows and are independent from the assets which belongs to other
groups. For the purpose of charging impairment, assets are identified in CBUs (Bond, Govendir
and Wells 2016).
Requirement B
As per the provision which is stated in AASB 136, the test of impairment on the assets of
the company requires appropriate comparison of recoverable amount which is to be higher of the
asset value or fair value of the asset less cost of disposal of the asset. As per the standard, value
in use measurement requires the estimate of the future cash flows that the business estimates that
they will be receiving from the use of the asset (Guthrie and Pang 2013). The expectation about
the timing of the cash flow of the business. The price for bearing the uncertainty of the assets.
There are certain assets needs to be taken in group to effectively calculate the cash which
is generated from the use of the asset. The machines which are used by Wentnor Dairy ltd does
not generate cash flow on their own but are to be taken as a group to identify the cash which is
generated from such an asset. The main source of cash inflow for the business is through
producing milk and milk related products. The machine such as purifying machines and
extracting machine are taken togethers as a group of assets when impairment is charged as per
respective provisions.