CS Executive · Corporate Accounting and Financial Management · Accounting Standards
According to the Conceptual Framework, a central estimate derived from cash-flow-based measurement techniques depends on estimates of future cash flows and their possible variations. What does it NOT capture?
A central estimate depends on estimated future cash flows and their possible variations in amount or timing, but it does not capture the price for bearing the uncertainty that the final outcome may differ from that central estimate, the factor in paragraph 6.14(d).
- AThe timing of future cash flows
- BThe amounts of future cash flows
- CThe price for bearing the uncertainty that the outcome may differ from the central estimateCorrect
- DPossible variations in the amounts of cash flows
Explanation
The central estimate relies on estimates of future cash flows and possible variations in amount or timing. However, it does not capture the price for bearing the uncertainty that the ultimate outcome may differ from the estimate. That is the factor referred to in paragraph 6.14(d). The other options are things the estimate does depend on.
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