Impairment loss on Cash generating Units excluding goodwill

Essay on “Impairment loss on Cash generating Units excluding goodwill”

The basic principle of the impairment is that an asset might not be carried on the financial
position statement which is found above the amount of recovery. This is higher of the asset fair
value less cost to sell and its value is then seen to be in use. The asset carrying value is then
compared to the recoverable amount and the assets are seen to be repaired when the former
exceeds the later assets. The impairment is then allocated for the asset with focusing on the
impairment loss that has been recognized in profit or loss. The asset seems to be subjected for the
impairment review which needs to be tested for the indication that the assets might be impaired.
This are certain assets like goodwill and the indefinite lived intangible assets that are for the
impairment done annually even if there has been no indicator for impairment (Vogt, Pletsch,
Moras & Klann, 2016). The impairment loss, if recognized in the prior times for any asset
excluding goodwill needs to be reversed, if there is a change in estimates which is used to
determine about the recoverable amount for the assets. The impairment loss needs to be
recognized immediately in the profit and loss till there are assets which are carried out at a
revalued amount and then set in accordance to the other Standard with revaluation model of IAS
16. The impairment loss for a revalued asset is recognized in the comprehensive income with the
extent that the loss does not exceed the revaluation amount. The impairment loss is then
revaluated for the asset which reduces the revaluation surplus for that asset (Hellman, 2016).
The asset generates the cashflow which are independent of the other assets and there are
tests for the impairments for the cash generating units. They are smallest identifiable group of
assets that help in generating the cash inflow and are independent of the cash inflows from other
assets or the groups. The goodwill is acquired with the combination that includes the allocation
to CGU which is expected to bring benefit from the combination of business. The largest groups
of CGU are then permitted for the goodwill with testing that is at a lower level and the operating
segment. Under IAS 36, the Impairment of Assets, with impairment testing of the goodwill helps
in performing at a level which is not larger than the segment of operations that are set at IFRS 8,
Operating Segments.
For dealing with the lack of clarity, International Accounting Standards Board (IASB)
has been able to issue the amendment for IAS 36 which is mainly clarifying about CGU that
cannot be larger than the operating segment, till aggregation is there (Lobo et al., 2017). There
are entities which needs to ensure about the alignment with the other operating segments and the