Entity-specific value
The measure reflects cash flows specific to the entity rather than necessarily the assumptions of market participants. IAS 16 uses entity-specific value in assessing whether an exchange has commercial substance, among other matters. Distinguish it from fair value, which is a market-participant exit price, and from value in use as defined and applied by IAS 36. Select assumptions and the applicable definition for the standard and transaction.
Worked example
An asset is expected to generate a net $11,000 for the entity in one year, with no further flows. At an appropriate 10% rate, the present value of those expected flows is $10,000, assuming the simplified facts meet the relevant definition.
Common mistake
Assuming entity-specific value is always identical to fair value, even when the entity’s own expected use differs from market-participant assumptions.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Supporting | September 2026–June 2027 |