The discount rate: a note on IAS 36

Arbeitspapier

Measurement in financial accounting often requires determining an interest rate to discount future cash flows. One example is the International Accounting Standard (IAS)36 Impairment of assets. IAS 36´s impairment test requires determining a value in use (a present value). The Appendix A to the standard gives some guidance on how to determine a suitable discount rate. In this paper, we show that the different approaches included in IAS 36´s guidance are theoretically different. We discuss how the standard should be interpreted and applied based on the theoretical background of financial theory. Only the first alternative, we weighted cost of capital should be used and the other two alternatives should be discarded. In addition, we show that IAS 36´s guidance, applied in practice, may give rise to substential measurement errors.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper ; No. 246

Klassifikation und Themen

• Klassifikation: Wirtschaft

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Husmann, Sven ; Schmidt, Martin ; Seidel, Thorsten
• Ereignis: Veröffentlichung
• (wer): European University Viadrina, Department of Business Administration and Economics
• (wo): Frankfurt (Oder)
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/23816
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ