Retail CGU's

[zahid khan]

Hello,

I am dealing with a company with a few retail stores, each in different locations in the UK. Is it possible that these can be combined as one CGU, rather than each of these stores being separate CGU's.

In what situations can you cluster CGU's for retail stores?

Also, if there was a separate store that has been set up as a promotional store (main purpose), but also sells products. Will this need to be its own separate CGU or can it be combined with the wider online business.

Thanks!

[Marek Muc]

Retail stores typically have different customer bases, so in principle they should be treated as separate CGUs due to independent cash *inflows*. However, companies often consolidate CGUs, as tracking hundreds of small ones is practically challenging. You could look at the financial statements of publicly traded retail chains like H&M, Tesco, Carrefour, and LVMH to see how they handle this. Please share your insights if you find time to review them!

[zahid khan]

Thanks, the majority of these do treat them as separate CGU's. Keen to understand what you mean by different customer bases. Is this geographical?

[Marek Muc]

Yes, geographical. Take, for instance, a Tesco store in London: its revenue is independent from the cash inflows of another store, say, in Manchester.

Could you please share the most relevant disclosures you've come across?

[zahid khan]

Thanks, had a look and the majority report individual store's as CGU's. Example companies such as M&S, Next, Ted Baker, Frasers Group, John Lewis.

M&S for example:
For impairment testing purposes, the Group has determined that each store is a separate CGU, with the exception of Outlets stores, which are considered together as one CGU. Click & Collect sales are included in the cash flows of the relevant CGU.