When measuring a liability at present values,the discount rate to be used,according to paragraph 47 of IAS 37,is:
A)the pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability.
B)the after-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability.
C)the pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability, and shall also reflect risks for which future cash flows have already been adjusted.
D)the pre-tax risk free rate.

Question

Quizplus · Accepted Answer

According to paragraph 47 of IAS 37, the discount rate to be used when measuring a liability at present values is "the pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability." This means that the rate should reflect the cost of borrowing today's money in the relevant currency, taking into account the risk (or uncertainty) of the future cash flows associated with the liability. The rate should not include any risks that have already been adjusted for in the future cash flows, and it should be a pre-tax rate (i.e. not adjusted for taxes).

When Measuring a Liability at Present Values,the Discount Rate to Be