a portion of the unallocated corporate asset can be allocated on a reasonable

A portion of the unallocated corporate asset can be

This preview shows page 9 - 11 out of 13 pages.

a portion of the unallocated corporate asset can be allocated on a reasonable and consistent basis; - Compares the carrying amount of the larger cash-generating unit, including the portion of the corporate asset, with its allocated amount. Any impairment loss is then allocated across the assets of the larger cash-generating unit.
Image of page 9

Subscribe to view the full document.

When you are testing a CGU, then you should first identify all the corporate assets that relate to the CGU under review. Then, if a portion of the carrying amount of a corporate asset can be allocated to that unit on some reasonable and consistent basis, then you shall compare the carrying amount of that unit plus allocated portion of a corporate asset with its recoverable amount. If such an allocation is not possible, then you go so-called bottom-up direction: - You shall test the CGU without corporate asset for impairment first and recognize any impairment loss. - Identify the smallest group of CGUs that includes the CGU under review and to which a portion of the carrying amount of the corporate asset can be allocated on a reasonable and consistent basis. - Compare the carrying amount of that group of CGUs including the allocated portion of a corporate asset with the recoverable amount of the group of CGUs. - Recognize impairment loss in line with the next paragraph. If the recoverable amount of CGU is lower than its carrying amount, then an entity shall recognize the impairment loss. The impairment loss shall be allocated to reduce the carrying amount of the assets of the unit in the following order: - Reduce the carrying amount of any goodwill allocated to the CGU. - Allocate remaining impairment loss to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. These reductions are recognized as impairment losses on individual assets. See example p. 426 15.5 Cash generating units and goodwill . IAS 36 contains specific requirements for accounting for goodwill and how its existence affects the allocation of impairment losses across the assets of a cash-generating unit. Goodwill is recognised only when it is acquired in a business combination . It is not possible to determine a fair value less costs of disposal for goodwill, or to identify a set of cash flows that relates specifically to goodwill. Goodwill is not subject to amortisation. Instead, the acquirer tests the carrying amount of goodwill annually in accordance with IAS 36. When a business combination occurs, and goodwill is calculated as part of accounting for that combination, the goodwill acquired is allocated to one or more cash-generating units (IAS 36 paragraph 80). Even though goodwill was acquired in relation to the entity as a whole, the cash flow earning capacity of goodwill must be allocated across the cashgenerating units. The aim is to allocate all assets, whether corporate assets or goodwill, to the cash-generating units so they can be associated with the cash flows received by those units.
Image of page 10
Image of page 11

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes