Discount Rates [Completed]
Effective date: |
The IASB has no plans to conduct a separate project on discount rates. Therefore, the project summary concludes this project. |
Last updated: |
February 2019 |
Overview
A discount rate is a rate that is used to determine the present value of future cash flows. Present value techniques serve to measure the fair value, value in use or other current value of an asset or a liability, as a method for initial or subsequent measurement.
Some IFRS Standards require or allow companies to use different discount rates for estimating future cash flows. In some cases, the differences are clearly justified because they reflect different risk factors or circumstances. In other cases, the reasons for the differences are unclear.
Standards that include requirements in relation to discount rates include:
- IAS 19, Employee Benefits (2011) (where discount rates are used to discount post-employment benefit obligations)
- IAS 36, Impairment of Assets (where discount rates are used to determine the recoverable amount / value in use)
- IAS 37, Provisions, Contingent Liabilities and Contingent Assets (where discount rates are used to determine the present value of the expenditures expected to be required to settle an obligation)
- IFRS 13, Fair Value Measurement (where discount rates are used to determine fair value)
From 2014 to 2017, the International Accounting Standards Board (IASB) conducted a research project on discount rates in IFRS Standards, with the objectives to:
- investigate reasons for inconsistencies between requirements relating to discount rates in IFRS Standards; and
- assess whether the Board should consider addressing those inconsistencies.
The Board’s investigation found that:
- inconsistencies between requirements relating to discount rates in IFRS Standards arise in some cases in specifying either:
- which types of inputs to use in a present value measurement technique; or
- how to determine the amount of the inputs.
- some of those inconsistencies arise because different IFRS Standards adopt different measurement bases. Other inconsistencies, mostly relating to entity-specific current value measurements, arise partly because different IFRS Standards were developed at different times and with different areas of focus.
The project had two outputs:
- the research findings; and
- a summary listing matters that the staff will consider in the future when developing recommendations for the Board on present value measurement requirements.
The Board will use those outputs in other projects in considering:
- whether and how to address some of the inconsistencies identified; and
- how to avoid creating unjustifiable inconsistencies in the future.
The Board has no plans to conduct a separate standard-setting project on discount rates.
The Project Summary was published in February 2019 providing an overview of research discussed by the Board.
Other developments
February 2019
On February 28, 2019, the IASB published Discount rates in IFRS Standards project summary. The Board will not conduct any further work regarding this project.
December 2018
On December 14, 2018, the IASB® staff updated the work plan to indicate that the Board expects to issue a Project Summary in February 2019.
September 2018
On September 20, 2018, the IASB staff updated the work plan to indicate that the Board plans to issue a project summary in December 2018.
July 2018
On July 18, 2018, the IASB staff updated the work plan to indicate that the Board plans to issue a project summary in Q4/2018.
May 2018
On May 25, 2018, the IASB staff updated the work plan to indicate that the Board expects to issue a Research Summary in Q3/2018.
March 2018
On March 23, 2018, the IASB staff updated the work plan to indicate that the Board expects to issue a Research Summary in June 2018.
January 2018
On January 26, 2018, the IASB Staff updated this project to indicate that the IASB now expects to issue a Research Summary in Q2/2018.
July 2017
On July 21, 2017, the staff of the IASB updated the work plan to indicate that the IASB expects to issue a Research Summary in the first half of 2018.
June 2017
In June 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue a Research Summary in September 2017.
March 2017
On March 23, 2017, the IASB staff updated the Work Plan in respect of this project to indicate that this project is now in a drafting stage and that the IASB expects to publish a Research Summary by September 2017.
December 2016
On December 15, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Research Summary by June 2017.
September 2016
On September 23, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Research Summary by March 31, 2017.
July 2016
On July 20, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Research Summary sometime before January 31, 2017.
October 2015
The IASB Work Plan for October 30, 2015 updated the planned next steps for this project.
December 2012
This project was added to the IASB’s Work Plan as a research project.