Dynamic Paper and Paperboard Ltd owns a large number of pulp and paper manufacturing plants in Tasmania. It has a number of factories that are used to produce paper pulps that are then sent to other factories to be converted into paper and paperboards. In applying AASB 136 Impairment of Assets, the financial accountant for Dynamic Paper and Paperboard Ltd is concerned about correctly identifying the cash-generating units (CGUs) for the company in recognizing impairment loses for each factory/unit. The financial accountant has sought your advice on such questions as to whether the paper pulp production section is a separate CGU even though the company does not sell paper pulp directly to external parties, or whether it should be included in the paper and paperboard producing CGU. The company is considering undertaking an impairment test under AASB 136 impairment of assets.

Required

Explain the factors that the accountant should consider in determining the CGUs for Dynamic Paper and Paperboard Ltd.

Define a CGU in accordance with AASB 136, giving reason for your conclusions.