Recognition and cash generating units

In this lesson

1. 0:00 Recording impairment losses
2. 0:32 Impairment treatment for revalued assets
3. 1:25 Worked example: Building impairment
4. 2:27 Understanding cash generating units
5. 4:09 Allocating impairment across CGU assets
6. 6:58 CGU impairment allocation worked example

About this lesson

You'll discover the key difference between impairments on unrevalued versus previously revalued assets, and master the concept of cash generating units—the smallest group of assets that generates independent cash flows. This is essential for SBR and AFM papers, where impairment testing appears regularly in both objective tests and case studies. The video covers two core techniques. First, recording impairments: if an asset hasn't been revalued before, the loss goes straight to the statement of profit and loss; if it has been revalued, you charge the impairment against the revaluation reserve first, then expense any excess. Second, allocating impairments across a cash generating unit using a strict priority order: reduce any individually impaired assets first, then allocate against goodwill as much as possible, then spread the remaining loss across other assets on a pro-rata basis—but never reduce current assets like inventory or receivables, as these are already recorded at recoverable amount. You'll work through two detailed examples. The first shows how to treat a building impairment when a revaluation surplus exists. The second—a multi-asset CGU scenario—walks you through the full allocation process step by step, calculating pro-rata splits and confirming that the final carrying amount equals the recoverable amount. By the end, you'll be confident tackling impairment questions in both computational and case study formats.

Duration: 11m