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Under Ind AS 28, when computing 'value in use' for impairment of an associate, an entity may use which of the following approaches?
AMethod 1: PV of the entity's share of future cash flows of the associate (including ultimate disposal); OR Method 2: PV of dividends to be received + ultimate disposal proceeds — both are permitted
BNeither — only fair value less costs of disposal can be used
COnly Method 1 is permitted
DOnly Method 2 is permitted
Answer & Solution
Correct answer: A. Method 1: PV of the entity's share of future cash flows of the associate (including ultimate disposal); OR Method 2: PV of dividends to be received + ultimate disposal proceeds — both are permitted
Ind AS 28 permits two equivalent methods for value-in-use: cash-flows approach or dividends approach (plus disposal proceeds). With appropriate assumptions, both give the same result.
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