Question

The objective of present value when used to determine an accounting measurement for initial recognition purposes is to Capture the value of an asset or liability in the context of a given entity. Estimate fair value. Estimate value in use. Calculate the effective-settlement amount of assets.

Answer 1

Answer:

The objective of present Value is to present a set of cash flows based on their estimated fair value; to help decision makers in assessing the viability or otherwise of an option of investments.

Values don't stay the same year on year, various influences act to most times make the same $ amount lessened by tomorrows valuation; some factors like inflation, obsolescence, opportunity cost of not investing in other activities (cost of capital)....all these play a role in determining time value of money.

Present value attempts to harmonize all these influences and present a fair value of our $ dollar estimate of future values based on the impact of these factors.