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Discuss the accounting for impairment of Cash Generating Unit

Discuss the accounting for impairment of Cash Generating Unit

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Answer #1
  • A Cash Generating Unit is the smallest identifiable group of assets which generate cash inflows that are independent of the cash flows of other assets or other group of assets.
  • An impairment loss is recognized for a cash generating unit where the recoverable value of the unit is less than the carrying value of the unit.
  • Impairment loss is allocated to reduce the carrying amount of assets of the unit on a pro rata basis, based on the carrying amount of each asset in the unit.
  • An impairment cost must be included in expenses when the book value of the unit exceeds its recoverable amount.
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