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Present Value of value in use

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Present Value of value in use

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 2, 2019 at 10:13 am #518340
    nikaido
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    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
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    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
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    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
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    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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