Measurements based on future cash flows

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:

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.

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