Question

Both Ron and Christine are calculating the loss of impairment for an asset. Ron is calculating the difference between the book value and the market value. Christine is calculating the difference between book value and the present value of future cash flows. Why are they using different methods?

Answer 1

Step-by-step explanation:

The difference is mainly that the asset is a generator of periodic cash flows, that is, if Christine is evaluating the present value of the flows generated by the asset, she does so due to a financial evaluation while Ron does it from a point of accounting view and this is called fair value according to the IFRS.