Present Value of value in use

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June 2, 2019 at 10:13 am #518340
nikaido
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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
June 4, 2019 at 7:40 pm #518919
P2-D2
Keymaster
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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
June 5, 2019 at 12:36 am #518989
nikaido
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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?
June 5, 2019 at 7:43 pm #519218
P2-D2
Keymaster
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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
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