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The choice of discount rate for external reporting purposes: Considerations for standard setting

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  • Leonard Eckel
  • Steve Fortin
  • Kathryn Fisher

Abstract

Currently, there is no general standard concerning the choice of the discount rate to be used when calculating the present value of an asset or liability for external reporting purposes. This paper provides an analysis of the issues that should be considered in establishing such a standard. Six candidate rates are evaluated based on six criteria of high quality accounting standards identified from the literature. No rate candidate dominates on all points. Accordingly, the paper proposes the underlying structure of a comprehensive discount rate–choice accounting standard, which would resolve most of the issues identified in the paper.

Suggested Citation

  • Leonard Eckel & Steve Fortin & Kathryn Fisher, 2003. "The choice of discount rate for external reporting purposes: Considerations for standard setting," Accounting Forum, Taylor & Francis Journals, vol. 27(1), pages 28-59, March.
    • Handle: RePEc:taf:accfor:v:27:y:2003:i:1:p:28-59
    DOI: 10.1111/1467-6303.00095
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    Cited by:

    1. Ricardo Luiz Menezes da Silva & Paula Carolina Ciampaglia Nardi & Maisa de Souza Ribeiro, 2015. "Earnings Management and Valuation of Biological Assets," Brazilian Business Review, Fucape Business School, vol. 12(4), pages 1-26, June.
    2. Jaunzeme Justine Sophia, 2016. "Combining Environmental and Spatial Discount Rates for Valuation of Assets According to International Financial Reporting Standards," Economics and Culture, Sciendo, vol. 13(1), pages 14-20, June.
    3. M. Stárová & H. Čermáková & T. Hlavsa & H. Vostrovská & M. Levá, 2016. "Evaluation of applicability of IAS 41 - Agriculture to the valuation of growing forest stands and their accounting treatment in the Czech Republic," Journal of Forest Science, Czech Academy of Agricultural Sciences, vol. 62(9), pages 429-440.
    4. Rafael Todescato Cavalheiro & Régio Marcio Gimenes & Erlaine Binotto & Carlos Ricardo Fietz, 2019. "Fair Value of Biological Assets: An Interdisciplinary Methodological Proposal," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 23(4), pages 543-563.

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