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When projecting cash flows beyond the period covered by management's most recent budgets/forecasts, Ind AS 36 limits the perpetuity growth rate to:
AThe risk-free rate
BThe inflation rate only
CA rate not exceeding the LONG-TERM AVERAGE GROWTH RATE for the products/industries/country/markets to which the CGU is dedicated — unless a higher rate is justified and disclosed
DWhatever rate management chooses
Answer & Solution
Correct answer: C. A rate not exceeding the LONG-TERM AVERAGE GROWTH RATE for the products/industries/country/markets to which the CGU is dedicated — unless a higher rate is justified and disclosed
Ind AS 36 limits the perpetuity growth assumption to long-term average industry/country/market growth — a curb on optimistic terminal-value assumptions. Any rate exceeding this benchmark must be justified and disclosed.
Related questions
Identify the statement about CGU disclosure under Ind AS 36 that is INCORRECT.When an impairment loss recognised in a prior period for a CGU is REVERSED:When an impairment loss is allocated within a CGU, the order of allocation under Ind AS 36Multiple CGUs share the SAME key assumption (e.g. growth in a common end market) and the AAn entity's CGU recoverable amount is based on VIU. The discount rate disclosure required An entity uses a SENSITIVITY disclosure when a reasonably possible change in a key assumptWhen an entity discloses a CGU to which significant goodwill is allocated and recoverable An entity tests goodwill annually. The most recent detailed RA calculation for a CGU excee