impairment test for CGU

@fairlygladys

You have the answer in your question

For impairment of CGU, should I use Total asset or Total equity as FV of NET ASSET?

What is Total Equity

Total Equity = Total Assets – Total Liabilities= NET ASSETS

so in essence Equity=net assets

You did not provided the question extract here but in most of the questions of groups you can see impairment is calculated by using this method and fair value of net assets is calculated somewhat like that

Share Capital
Share Premium
Other Components of Equity
Fair value of adjustment (if any)

=fair value of net assets.

Thank you for the extracts

Impairment occurs when the recoverable value of the asset falls below the carrying value.

When calculating goodwill impairment in a sub we will look at the carrying value of the sub and compare it with the recoverable value to calculate the impairment.

and what does the subsidiary carries as its carrying value?
the answer is the net assets and goodwill

Carrying Value of the sub=total net assets before impairment + Goodwill before impairment

Impairment (BALANCING FIGURE)

Recoverable Value

For your December 2011 extracts

Carrying value of the sub = [1089+60] (net assets at year end just before impair+gw)
Impairment (balance)=50
Recoverable value=1099

So
Goodwill at acquisition =60
Impairment (50)
Goodwill at year end 10

For your December 12 extracts

Carrying value of Heeny [631 + 23]=654
Impairment (balance)=50
Recoverable value = 604

Goodwill at acq = 23
Impairment (50) [of which 27 relates to intangibles goodwill can never be negative]

For December 2011:

Carrying value is quite literal

What two things do we carry as regards the subsidiary we carry net assets and we carry goodwill.

Now what was the goodwill at acquisition 12 months ago [60 for dec 11 question]
at the year end 12 months later before the impairment what is it still now = 60 before the impairment

what about the net assets, at the point in time when we are doing the impairment review as always we are doing the impairment review at the year end so how bigger the net assets in this entity at that year end are 1089.

Carrying Value [1089+60]
Impairment 50
Recoverable value =1099

That is the kind of logic that you should be looking.

However regarding your question from december 2012, it looks like it has something to do with the last sentence of point 2 in December 2012.

[Both Bower and Heeny were impairment tested at 30 November 2012. The recoverable amounts of both cash
generating units as stated in the individual financial statements at 30 November 2012 were Bower,
$1,425 million, and Heeny, $604 million, respectively. The directors of Minny felt that any impairment of assets
was due to the poor performance of the intangible assets. The recoverable amount has been determined without
consideration of liabilities which all relate to the financing of operations.]

What does it mean by: The recoverable amount has been determined without
consideration of liabilities which all relate to the financing of operations

to me it looks like the recoverable amount only includes assets and needs to be compared with assets and not nets assets. But I will look for its more clear answer and comeback to you.