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Financial Accounting


Task details: Monash Cow Ltd operates dairy farms across different locations of Victoria. Since the start of its operation in 1981, the firm’s business has been rapidly growing and it has become one of the largest players in this segment. The company runs a number of factories that are used to produce milk products that are then sent to other factories to be converted into milk-based products such as yoghurt, custard, and etc. In applying AASB 136 Impairment of Assets, the accountant of Monash Cow Ltd, James Dodd, is concerned about correctly identifying the cash-generating units (CGUs) for the company. The accountant has sought your advice on such questions as to whether the milk production section is a separate CGU even though the company does not sell milk directly to other parties, or whether it should be included in the milk-based products CGU. Required: As a consultant hired by the company, you are requested to provide some suggestions for the accountant of Monash Cow Ltd. Inareporttotheaccountant, you need to: a) explain the general definition of CGU; b) explain why impairment testing requires the use of CGUs, rather than being based on single assets; and c) Explain the factors that the accountant of Monash Cow Ltd, James Dodd, might need to consider in determining the CGUs for his company. (This is an open-ended question)