Paragraph 6.93 of the Conceptual Framework contains a brief high-level discussion of three different central estimates of a set of estimated future cash flows:
- the expected value (statistical mean)
- the maximum amount that is more likely than not to occur (similar to statistical median)
- the most likely outcome (statistical mode)
Papers considered by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) in the week of 14-18 February 2011 discussed all three of these central estimates in much more detail. The papers are:
- an overview paper introducing the other papers. https://www.ifrs.org/content/dam/ifrs/meetings/2011/february/iasb/cc-0211b02obs.pdf
- Comparison of different measurements.
The main paper. This:- analyses in detail the properties of the three central measures now mentioned in the Conceptual Framework and discusses when each one might be more suitable.
- discusses briefly three other measures sometimes mentioned in accounting literature: minimum or maximum amount in a range of possible outcomes; the midpoint in a range of possible outcomes; and possible outcome nearest to expected value.
- explains why the term ‘best estimate’ is poorly defined.
https://www.ifrs.org/content/dam/ifrs/meetings/2011/february/iasb/cc-0211b02aobs.pdf
- Measures for uncertain cash flows.
This one page summary table lists the characteristics of all 6 measures discussed in the main paper.
cc-0211b02a-appobs.pdf (ifrs.org) - A PowerPoint slide deck summarising the main paper.
https://www.ifrs.org/content/dam/ifrs/meetings/2011/february/iasb/cc-0211b02ahandout.pdf - Additional comments on expected cash flows.
This short paper contains comments on expected value, risk adjustments and some practical issues.
https://www.ifrs.org/content/dam/ifrs/meetings/2011/february/iasb/cc-0211b02bobs.pdf
If you would like to understand what information each of the central estimates provides, and when each one might be most useful, I strongly recommend that you read these excellent papers.