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Please explain cash generating unit concept practically. Theoretically It's very easy to understand. Anybody explain it with example?
in IAS 36 - Impairment of Assets by
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By definition, a cash-generating unit (CGU) is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets.

CGU can be anything; it may be a division of a single company, a subsidiary or even a single machine.

Example 1: Say a company uses two main machines to manufacture two different products with different inputs, the two machines can be CGUs.

Example 2: Retail company has 05 sales outlets each selling products independent of other outlets. Then each outlet is a CGU.

CGU concept is used primarily in the determination of asset impairment. Without this cash-generating unit concept, it can be very difficult to determine the cash flows associated with individual assets for an impairment analysis.

Also note that in 2007 the IFRIC was asked to develop an Interpretation on whether a cash-generating unit (CGU) could combine more than one individual store location. The submitter developed possible considerations including shared infrastructures, marketing and pricing policies, and human resources.

The IFRIC noted that IAS 36 requires identification of CGUs on the basis of independent cash inflows rather than independent net cash flows and so outflows such as shared infrastructure and marketing costs are not considered. The IFRIC took the view that developing guidance beyond that already given in IAS 36 on whether cash inflows are largely independent would be more in the nature of application guidance and therefore decided not to take this item on to its agenda.

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