Value in use

Value in use is a discounted cash flow with constraints attached, and the constraints are the point. It measures the asset as the entity holds it today, so it excludes the benefit of a future restructuring to which the entity is not yet committed and of capital expenditure that improves or enhances the asset rather than maintaining its current standard of performance. Forecasts are expected to be grounded in the most recent approved budgets, and growth beyond that period should not exceed the long term rate for the market unless a higher rate can be justified.

The discount rate is specified on a pre tax basis, which is a real difference from the post tax rate used in a deal model rather than a technicality, and in practice it is usually derived from a post tax rate and grossed up rather than observed directly.

Put those together and the number is deliberately more conservative than a valuation prepared for a transaction. That is a feature. The test is asking whether the carrying amount is supported by the asset as it exists, not whether someone could do something better with it.

The useful takeaway is the one candidates rarely have: an impairment charge and a higher offer for the same business are not contradictory. The buyer is allowed to price its own plans and the impairment test is not, so the two answers are measuring different things under different rules.