The Choice of Discount Rate for External Reporting Purposes: Considerations for Standard Setting

32 Pages Posted: 23 Apr 2003

See all articles by Leonard Eckel

Leonard Eckel

University of Waterloo - School of Accounting and Finance

Steve Fortin

University of Waterloo - School of Accounting and Finance

Kathryn Fisher

Independent Economic & Environmental Consultant

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.

JEL Classification: G12, M21, M41

Suggested Citation

Eckel, Leonard and Fortin, Steve and Fisher, Kathryn, The Choice of Discount Rate for External Reporting Purposes: Considerations for Standard Setting. Accounting Forum, Vol. 27, pp. 28-59, 2003. Available at SSRN: https://ssrn.com/abstract=376502

Leonard Eckel (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Steve Fortin

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Kathryn Fisher

Independent Economic & Environmental Consultant ( email )

Dundas, Ontario
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
29
Abstract Views
3,024
PlumX Metrics