CERTYNEX IFRS ACADEMY

For four years, the actual cash flows of one of Sorelle's units have been about 20% below the budgeted figures. For this year's test, management uses a budget built on the same assumptions, claiming that the trend will reverse, although no new event has been identified. What should Sorelle do?

Use the budget as it stands, since it is approved by management

Mechanically reduce all cash flows by 20% without looking for the cause of the variances

Analyse the causes of past variances and make its assumptions consistent with actual results

Abandon value in use as unreliable and use only fair value less costs of disposal, whatever its level