When an asset or group of assets generate a product for which active market exists, then such assets or group of assets can be identified as a cash generating unit. Then why cannot be a conference hall in a hotel or small shops in a big mall be identified as cash generating units... Please explain...
2 Replies
Padmanabhan
(Student)
(1321 Points)
Replied 09 June 2020
The shops or conference hall can't generate cash flows if it is not a part of the mall or the hotel.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 09 June 2020
“A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.”
largely independent or dependent, your examples are CGU’s. Associates can also be classified as CGU’s as long as it does not fall within the scope of financial instruments. In fact, anything which generates cash is called as a CGU.
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