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Hi Sir,
Can you please explain to me the answer for these 2 questions?1. Under the current value measurement basis, what is the definition of fulfillment value?
A. The amount of consideration received to incur liability, less transaction costs
B. The price that would be paid to settle the liability at the measurement date
C. The consideration that would be received for incurring an equivalent liability at the measurement date
D. The present value of the estimated cash flows needed to fulfill a liability
–> The answer in BPP book is A while according to the definition in the text book, there is no mention of transaction cost so I think the answer is D?2. Under the current value measurement basis, what is the definition of value in use measurement method?
A. Cost incurred at the time of acquisition
B. PV of future cash flows, less cost of disposal
C. Open market value of the asset
D. Open market value of the asset, less the PV of future cash flows
–> The answer in BPP book is B. But in the text book there is no mention of cost of disposal. Therefore, I think that the definition should only cover PV of cash flow?Thank Sir and hope you have a good day!!!
Hi,
We would need to consider all cash flows in our valuation, so would incorporate the transaction costs in the definition to get the fulfilment value.
Likewise, if the PV of cash flows was from selling the item then we’d need to consider the selling costs in our valuation too.
Thanks
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