Different project risks and CGUs
An aircraft manufacturer makes both civilian and military aircraft. The risks for both sectors are markedly different as they are much lower for defence contractors than for the civilian market. The assembly plants for civilian and military aircraft are separate CGUs. In this sector there are entities that are based solely in one or other of these markets, i.e. they are purely defence or civilian contractors, so there will be a basis for identifying the different discount rates for the different activities. If the entity makes its own components then the defence CGU or CGUs could include the manufacturing activity if defence is vertically integrated and components are made solely for military aircraft. Manufacturing could be a separate CGU if components are used for both activities and there is an external market for the products.
A manufacturer of soft drinks uses the same plant to produce various flavours of carbonated and uncarbonated drinks. Because the market for traditional carbonated drinks is declining, it develops and markets a new uncarbonated ‘health’ drink, which is still produced using the same plant. The risks of the product are higher than those of the existing products but it is not a separate CGU.
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