A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash inflows largely independent of other assets or groups of assets. CGUs are the reference unit for goodwill impairment testing under IFRS (IAS 36): goodwill acquired in a business combination is allocated to CGUs and tested annually for impairment by comparing the CGU's carrying value to its recoverable amount (the higher of fair value less costs to sell and value in use). In business valuation, CGU analysis supports the allocation of enterprise value across business segments and the identification of underperforming units.

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Example: a Swiss industrial group allocates CHF 12.0 million of goodwill across three CGUs. Annual impairment testing reveals that one CGU (plastic components division) has a carrying value of CHF 8.5 million against a recoverable amount of CHF 6.0 million — triggering a CHF 2.5 million impairment charge that reduces reported earnings but not operating cash flows. This impairment signals strategic underperformance in that division.

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Hectelion conducts CGU impairment testing and goodwill allocation analyses for IFRS reporting purposes and transaction advisory.