This appendix is an integral part of the Standard. It provides guidance on the use of present value techniques in measuring value in use. Although the guidance uses the term ‘asset’, it equally applies to a group of assets forming a cash-generating unit.
The components of a present value measurement
A1 The following elements together capture the economic differences between assets:
(a) an estimate of the future cash flow, or in more complex cases, series of future cash flows the entity expects to derive from the asset;
(b) expectations about possible variations in the amount or timing of those cash flows;
(c) the time value of money, represented by the current market risk-free rate of interest;
(d) the price for bearing the uncertainty inherent in the asset; and
(e) other, sometimes unidentifiable, factors (such as illiquidity) that market participants would reflect in pricing the future cash flows the entity expects to derive from the asset.
A2 This appendix contrasts two approach
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