Analysis of Impairment Loss on Cash Generating Units
VerifiedAdded on 2023/06/05
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Essay
AI Summary
This essay delves into the concept of impairment loss, focusing specifically on cash-generating units (CGUs) excluding goodwill. It elucidates the fundamental principle that assets should not be carried on the financial position statement above their recoverable amount, which is the higher of fair value less costs to sell and value in use. The essay explains the comparison between the asset's carrying value and recoverable amount, and details when impairment occurs. It covers the allocation of impairment loss, particularly emphasizing the impairment loss recognized in profit or loss. The essay also discusses impairment reviews, annual impairment tests for assets like goodwill, and the reversal of impairment losses. It further examines how impairment loss is treated for revalued assets and the testing of CGUs, which are the smallest identifiable groups of assets generating independent cash inflows. The essay explores the allocation of goodwill to CGUs, the role of IAS 36, and amendments issued by the International Accounting Standards Board (IASB). It also addresses the handling of business combinations, the measurement of non-controlling interest, and the allocation of impairment losses, including the calculation and allocation of impairment charges to individual assets, ensuring that the carrying amount of assets in a CGU does not fall below certain values.
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