Home › CA Final › financialreporting › Ind AS 36 — Impairment Loss Recognition, CGU Identification, Goodwill Allocation to CGUs, Disposal within CGU › A bus company runs 5 routes under a municipal co…
A bus company runs 5 routes under a municipal contract that requires minimum service on each route; cash flows from each route are separately identifiable; one route is loss-making. Identify the CGU for any one route.
ARoutes 1-4 are one CGU; the loss-making route is its own CGU
BProfitable routes are CGUs; loss-making routes are excluded
CEach route is its own CGU
DThe entire bus company is the CGU — the entity has NO OPTION to curtail any single route, so independence test fails at the route level
Answer & Solution
Correct answer: D. The entire bus company is the CGU — the entity has NO OPTION to curtail any single route, so independence test fails at the route level
Independence of cash inflows is the test. Since the contract obliges service on all 5 routes — no curtailment option — the smallest level of independent inflows is all 5 routes together. The CGU is the bus company as a whole, despite separately identifiable per-route cash flows.
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