What is Value-in-Use?

Value-in-use is the net present value of the cash flows generated by an asset as it is currently being used by the owner. This amount may be less than the net present value of cash flows from the highest and best use to which an asset can be put, and so may be lower than its market value. For example, the value-in-use of farmland in an urban area could be much lower than its highest and best use, since the farmer could earn more by constructing commercial or residential buildings on the property. However, it is also possible that value-in-use could be greater than market value in cases where the asset owner has access to special benefits, such as grandfathered zoning, that would not be available to a buyer of the asset.

Value-in-Use FAQs

How does value-in-use differ from fair value?

Value-in-use measures an asset’s worth based on the present value of cash flows the specific owner expects to generate from using it. Fair value measures the price received to sell the asset in an orderly market transaction. Value-in-use is entity-specific; fair value is market-based and participant-oriented.