Audit – impairment assessment – identification of cash-generating units within a legal entity

Recently, we came across a intriguing observations relating to impairment assessment once we audit an authorized entity. The entity, which consist of 3 business branches, is profit-making in an overall perspective. By taking a look at the surface, one could conclude that there is no sign of impairment. Is this sufficient and appropriate?

When we dealt with the audit further (which can be a brand new audit customer ), we noted that one of the three company division is at loss-making and in gross loss position. The assets aren’t generating return that’s within management’s expectation. Is this regarded as a sign of impairment? Yes.

Query: when carrying out impairment evaluation, do we need to consider 3 business divisions or only 1 legal thing?

Looking at IAS 36, a principle of identifying a CGU is to identifying the lowest amount of cash generating unit which make independent cash stream. We noted that the money f… Read More

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