Asset group definition
/What is an Asset Group?
An asset group is a cluster of long-lived assets that represents the lowest level at which cash flows can be identified that are independent of the cash flows generated by other clusters of assets and liabilities. The concept is used within International Financial Reporting Standards to establish cash-generating units, which are the basis for asset impairment testing.
Example of an Asset Group
A hotel chain, Slumber Corp., owns multiple properties across different cities. Each hotel operates as a standalone business unit, generating revenue from room bookings, event hosting, and dining services. Slumber classifies each hotel location as a separate asset group because the cash flows from one hotel are independent of those from other locations. For example, the Slumber hotel in Miami Beach includes the following assets within its asset group:
Buildings and land – The physical hotel property.
Furniture and fixtures – Beds, chairs, tables, and décor.
Kitchen equipment – Used in the hotel's restaurants.
Reservation system and IT infrastructure – Technology used for bookings and guest management.
If Slumber needs to conduct an impairment test, it would evaluate the Miami Beach Hotel’s asset group by comparing its future cash flows to its carrying value. If the hotel’s projected earnings decline significantly (e.g., due to a downturn in tourism), an impairment loss may be recorded. Since the hotel operates independently from Slumber’s other locations, it qualifies as an asset group for financial reporting purposes.