ACCA SBR Practice Exam 2026 – Complete Prep Guide

A cash-generating unit (CGU) is defined as the smallest identified group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. This definition aligns well with the answer selected, as it emphasizes the independence of cash generation from other units. In practical terms, a CGU forms the basis for assessing the recoverability of assets and impairment testing, ensuring that companies can accurately reflect the value of assets in their financial statements.

Understanding CGUs is essential for identifying how assets operate within the broader organizational structure and their contribution to cash flow generation. This concept is crucial when performing impairment reviews under accounting standards like IAS 36, which focuses on ensuring assets are not carried above their recoverable amount.

While the other options relate to aspects of business structure or functionality, they do not capture the specific criteria required to define a cash-generating unit. The main business unit of an entity could encompass a variety of assets and cash flows and does not inherently reflect the independence of cash inflows. A department that produces profit may contribute to overall cash flow but does not necessarily constitute an identifiable group of assets for impairment testing purposes. Lastly, a group of assets that can be sold lacks the necessary provision that these assets