Present Value of value in use — OpenTuition Forums

Ttaha7y ago

They said that future cash flows should be discounted by means such as corporate lending rate, cost of capital and entity risk rate to determine recoverable amount via value in use i was doing a mock in which present value of a provsion needed to be determined and future cash to be incurred was discounted by risk free rate plus entity specific rate i am wondering is that something that is done to discount value in use cash flows ? Additionally before discounting the cash flows 6% uncertainity relating to cash flow was imposed and then cash flows were discounted , is that also a part of the proforma for recoverbale amount

P2-D2Tutor7y ago#1

Yes, as it is reflecting the entity risk rate by adding an element to the risk free rate. Sorry, not sure what you mean by the last point. Thanks

Ttaha7y ago#2

ok so provision before discounting stands at 900 lets say before we discount the question required to impose a 6 % (e.g) on 900 which is being reffered to as uncertainity in cash flow hence we get a provision of 954 now we can discount this provision is this something we do in value in use of an asset as well?

P2-D2Tutor7y ago#3

How do you get the 954? If you point me in the direction of the specific question then I might be able to help further. Thanks