Present Value
Accounting glossary · Understand, connect, apply
Present value is the value at a chosen date of a future amount or series of cash flows after discounting at a specified rate. It makes timing assumptions explicit.
Example
A single 1,210 receipt due in two years has a present value of 1,000 at 10% annual compounding: 1,210 ÷ 1.10².
Formula and assumptions
Present value of one amount = future amount ÷ (1 + rate) raised to the number of periods
Remember the difference
A present value is model-dependent. It is not automatically a market price or a fair-value measurement, and changes when timing, expected cash flows or the appropriate rate changes.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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