CERTYNEX IFRS ACADEMY

For a specialised press, Ortalis expects a single net cash flow next year: 20,000 with a probability of 40% or 70,000 with a probability of 60%. An analyst argues that the expected cash flow is meaningless, since neither outcome equals that average, and proposes using 70,000. Which answer complies with Appendix A of IAS 36?

Use 70,000, because only the most likely amount represents a unique item such as this press

Use 45,000, the simple average of the two possible outcomes

Use 50,000, because the measurement targets the recoverable amount of the asset and must reflect the weighted average of the outcomes

Use 20,000, the least favourable outcome, so as never to overstate the asset