Document ID: chunk:federal_register_of_legislation:F2023C00180:front:0:p49
Version: federal_register_of_legislation:F2023C00180
Segment Type: other
Provision Reference: 
Character Range: 126046–130873

title is a separate cash-generating unit.

E  Building half-rented to others and half-occupied for own use

Background
IE20 M is a manufacturing company. It owns a headquarters building that used to be fully occupied for internal use. After down-sizing, half of the building is now used internally and half rented to third parties. The lease agreement with the tenant is for five years.
What is the cash-generating unit of the building?

Analysis
IE21 The primary purpose of the building is to serve as a corporate asset, supporting M's manufacturing activities. Therefore, the building as a whole cannot be considered to generate cash inflows that are largely independent of the cash inflows from the entity as a whole. So, it is likely that the cash-generating unit for the building is M as a whole.
IE22 The building is not held as an investment. Therefore, it would not be appropriate to determine the value in use of the building based on projections of future market related rents.

Example 2 Calculation of value in use and recognition of an impairment loss
In this example, tax effects are ignored.

Background and calculation of value in use
IE23 At the end of 20X0, entity T acquires entity M for CU10,000. M has manufacturing plants in three countries.
Schedule 1. Data at the end of 20X0

End of 20X0                                                                                                                                                                                                                                                                                                           Allocation of purchase price  Fair value of identifiable assets  Goodwill(a)

                                                                                                                                                                                                                                                                                                                      CU                                                               CU              CU

Activities in Country A                                                                                                                                                                                                                                                                                               3,000                                                            2,000           1,000
Activities in Country B                                                                                                                                                                                                                                                                                               2,000                                                            1,500           500
Activities in Country C                                                                                                                                                                                                                                                                                               5,000                                                            3,500           1,500
Total                                                                                                                                                                                                                                                                                                                 10,000                                                           7,000           3,000

  (a)  Activities in each country represent the lowest level at which the goodwill is monitored for internal management purposes (determined as the difference between the purchase price of the activities in each country, as specified in the purchase agreement, and the fair value of the identifiable assets).

IE23A Because goodwill has been allocated to the activities in each country, each of those activities must be tested for impairment annually or more frequently if there is any indication that it may be impaired (see paragraph 90 of AASB 136).
IE24 The recoverable amounts (ie higher of value in use and fair value less costs of disposal) of the cash-generating units are determined on the basis of value in use calculations. At the end of 20X0 and 20X1, the value in use of each cash-generating unit exceeds its carrying amount. Therefore the activities in each country and the goodwill allocated to those activities are regarded as not impaired.
IE25 At the beginning of 20X2, a new government is elected in Country A. It passes legislation significantly restricting exports of T's main product. As a result, and for the foreseeable future, T's