Entity Specific Value

The present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability

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An entity is something that exists independently, such as a business that operates separately from its owner.

Example: Imagine "Sunny Bakes," a bakery owned by Sarah. Even though she is the sole owner, the bakery is considered a separate legal entity with its own financial records and tax obligations. This separation ensures that the business can enter contracts, own property, hire employees, and sell goods independently of Sarah's personal finances. In practice, this means that if "Sunny Bakes" borrows money, it's the business entity that owes the debt, not Sarah personally.