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A private railway in a mining operation has scrap-only sale value and its cash flows are NOT independent of the mine. The recoverable amount is determined for:
AThe railway as a standalone asset using scrap value
BThe CGU to which the railway belongs — i.e. the MINE as a whole (because VIU cannot be reliably estimated for the railway alone and inflows are not independent)
CNeither — the asset is non-impairable
DThe railway using value-in-use based on scrap value
Answer & Solution
Correct answer: B. The CGU to which the railway belongs — i.e. the MINE as a whole (because VIU cannot be reliably estimated for the railway alone and inflows are not independent)
Where an individual asset's VIU is materially different from its FVLCTS AND inflows aren't independent of other assets, the impairment test moves up to the smallest CGU containing the asset. The mine as a whole is that CGU here.
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