When testing for impairment, several cash-generating units may be combined if
A) The combination is not larger than an operating segment.
B) The units were not previously impaired.
C) The units' exploration efforts have not discovered commercially viable possibilities.
D) There are clear indicators that the carrying amounts of the E&E assets are unlikely to be recovered.

Question

Quizplus · Accepted Answer

The correct answer is A because according to accounting standards, several cash-generating units (CGUs) may be combined for impairment testing if the combination is not larger than an operating segment. This allows for a more practical approach to impairment testing, especially in cases where individual CGUs are too small or interrelated with others within the same operating segment.

When Testing for Impairment, Several Cash-Generating Units May Be Combined