BC116 The previous version of IAS 36 required that if an active market exists for the output produced by an asset or a group of assets:

(a) that asset or group of assets should be identified as a cash‑generating unit, even if some or all of the output is used internally; and

(b) management’s best estimate of the future market prices for the output should be used in estimating:

(i) the future cash inflows that relate to the internal use of the output when determining the value in use of this cash‑generating unit; and

(ii) the future cash outflows that relate to the internal use of the output when determining the value in use of the entity’s other cash‑generating units.

BC117 The requirement in (a) above has been carried forward in the revised Standard. However, some respondents to the Exposure Draft asked for additional guidance to clarify the role of internal transfer pricing versus prices in an arm’s length transaction when developing cash flow forecasts. The Board decided to address this issue by amending the requirement in (b) above to deal more broadly with cash‑generating units whose cash flows are affected by internal transfer pricing, rather than just cash‑generating units whose internally consumed output could be sold on an active market.

BC118 Therefore, the Standard clarifies that if the cash inflows generated by any asset or cash‑generating unit are affected by internal transfer pricing, an entity should use management’s best estimate of future prices that could be achieved in arm’s length transactions in estimating: