Unformatted text preview: g for intangible assets that are not yet available for use. Impairment testing calculations are performed in line with general impairment requirements and take into account the time value of money. Cash-generating units (CGUs)
Identification of appropriate CGUs can be complex A CGU is the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or group of assets of the oil and gas company. In our experience, many companies in the oil and gas sector base the identification of CGUs on licence, field or core areas. For some companies that operate a number of areas or fields that have shared infrastructure and E&E assets, the identification of CGUs can be more complex. An accounting policy is also needed for allocating E&E assets to CGUs when an impairment test is to be performed. For assets during the E&E phase, CGUs can be aggregated to form a group of Goodwill
Impairment testing at least annually Under IFRS, oil and gas companies are required to test goodwill (and intangible assets with indefinite useful lives) for impairment at least annually, 2011 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 2011 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. Impact of IFRS: Oil and Gas 11 irrespective of whether indicators of impairment exist. Additional testing at interim reporting dates is required if impairment indicators are present. Goodwill by itself does not generate cash inflows independently of other assets or group of assets and therefore is not tested for impairment separately. Instead, it should be allocated to the acquirer's CGUs that are expected to benefit from the synergies of the related business combination. Goodwill is allocated to a CGU that represents the lowest level within the company at which the goodwill is monitored for internal management purposes. The CGU cannot be larger than an operating segme...
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