The Scenic City Council contracts out the bus routes in Scenic City to various subcontractors based on a tender arrangement. Some routes, such as the Express to City routes, are profitable, while others, such as those collecting schoolchildren from remote areas, are unprofitable. As a result, the council requires tenderers to take a package of routes, some profitable, some less so.

The Saferide Bus Company has won the contract to operate its buses with a package of five separate routes, one of which operates at a significant loss. Specific buses are allocated by the Saferide Bus Company to each route, and cash flows can be isolated to each route because drivers and takings are specific to each route.

Required

Write a report to the accountant of Saferide Bus Company which includes the following information. (9 marks)

An explanation of why impairment testing may require the use of CGUs, rather than being based on a single asset.

An explanation of the factors that should be considered in determining a CGU for Saferide Bus Company.

Your determination as to the identification of CGUs for Saferide Bus Company.