AASB 136 Impairment of Assets 33-38: Basis for cash flow projections: use reasonable and supportable assumptions representing management's best estimate with more weight on external evidence, start from the latest approved budgets or forecasts for at most five years unless a longer period is justified, exclude uncommitted restructurings and enhancements, and extrapolate beyond the budget period at a flat or falling growth rate capped at the long-term average for the product, industry, country or market unless a higher rate is justified

What does 33-38 require?

Cash flow projections rest on reasonable and supportable assumptions that reflect management's best estimate of the economic conditions over the asset's remaining life, giving greater weight to external evidence. They are built on the most recent budgets or forecasts approved by management, stripped of cash flows from restructurings the entity is not yet committed to and from improving or enhancing the asset, and they normally cover no more than five years because reliable detailed forecasts rarely extend further; a longer period is acceptable only where management can show from experience that it forecasts accurately over that horizon. Beyond the budget period the projections are extended at a growth rate that is flat or falling (zero or negative where appropriate), a rising rate being allowed only where objective lifecycle information supports it, and the rate is capped at the long-term average growth of the relevant products, industries, countries or market unless a higher figure is justified, given that competitors enter favourable markets and restrict growth. Management checks its assumptions against the causes of past differences between projections and actual cash flows and keeps current assumptions consistent with past outcomes where later events do not make that inappropriate.