Accounting Standards 1-29 - Seth & Associates

generate cash inflows from continuing use that are largely independent of the cash
inflows from the other assets of the mine.
It is not possible to estimate the recoverable amount of the private railway because
the value in use of the private railway cannot be determined and it is probably
different from scrap value. Therefore, the enterprise estimates the recoverable
amount of the cash-generating unit to which the private railway belongs, that is, the
mine as a whole.
66. As defined in paragraph 4, an asset’s cash-generating unit is the smallest
group of assets that includes the asset and that generates cash inflows from
continuing use that are largely independent of the cash inflows from other
assets or groups of assets. Identification of an asset’s cash-generating unit
involves judgement. If recoverable amount cannot be determined for an
individual asset, an enterprise identifies the lowest aggregation of assets that
generate largely independent cash inflows from continuing use.
Example
A bus company provides services under contract with a municipality that requires
minimum service on each of five separate routes. Assets devoted to each route and
the cash flows from each route can be identified separately. One of the routes
operates at a significant loss.
Because the enterprise does not have the option to curtail any one bus route, the
lowest level of identifiable cash inflows from continuing use that are largely
independent of the cash inflows from other assets or groups of assets is the cash
inflows generated by the five routes together. The cash-generating unit for each
route is the bus company as a whole.
67. Cash inflows from continuing use are inflows of cash and cash equivalents
received from parties outside the reporting enterprise. In identifying whether
cash inflows from an asset (or group of assets) are largely independent of the
cash inflows from other assets (or groups of assets), an enterprise considers
various factors including how management monitors the enterprise’s
operations (such as by product lines, businesses, individual locations, districts
or regional areas or in some other way) or how management makes decisions
about continuing or disposing of the enterprise’s assets and operations.
Example 1 in the Appendix gives examples of identification of a cashgenerating
unit.
68. If an active market exists for the output produced by an asset or a group
of assets, this asset or group of assets should be identified as a separate
cash-generating unit, even if some or all of the output is used internally.
If this is the case, management’s best estimate of future market prices for
the output should be used:
a. in determining the value in use of this cash-generating unit, when
estimating the future cash inflows that relate to the internal use of
the output; and
b. in determining the value in use of other cash-generating units of
the reporting enterprise, when estimating the future cash