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ACCA Strategic Professional · Strategic Business Reporting (International) · The applications, strengths and weaknesses of the accounting framework

Which of the following best describes the current value measurement basis of 'value in use' as set out in the Conceptual Framework?

Value in use is the present value of the cash flows or other economic benefits the entity expects to obtain from using an asset and from its eventual disposal. It is entity-specific, unlike fair value, which is an exit price based on market participants' assumptions.

  1. AThe price that would be received to sell an asset in an orderly transaction between market participants at the measurement date
  2. BThe present value of the cash flows the entity expects to derive from the continuing use of an asset and from its ultimate disposalCorrect
  3. CThe cost of an equivalent asset at the measurement date, comprising the consideration that would be paid plus transaction costs
  4. DThe amount paid to acquire the asset, updated to reflect the consumption of the asset

Explanation

Value in use is the present value of cash flows or other economic benefits an entity expects to derive from using an asset and from its ultimate disposal. The first option is fair value. The third is current cost and the fourth is amortised historical cost.

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