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Dear Professor,
I have a doubt in the following question. Why do cash flows have to exclude expenditure to improve or enhance an asset?
With regards to estimates of cash flows for the estimation of entity’s value in use, IAS 36 stipulates that:
The cash flow projections should relate to the asset’s current condition and should exclude expenditure to improve or enhance it
thanks a lot:)
First of all, please note that you are restricted to 3 single questions / day as this is a free service. 🙂
Re your question…………..it’s just the view they took when IAS 36 was developed. Improvement or enhancement is seen as being similar to buying a new asset.
The main thing, exclude these cash flows if you are ever asked to do a calculation.
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