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value in use calculation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › value in use calculation

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Stephen Widberg.
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  • May 30, 2021 at 4:59 am #622243
    Jiya024
    Member
    • Topics: 168
    • Replies: 56
    • ☆☆☆

    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:)

    May 30, 2021 at 4:32 pm #622322
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    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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