When measuring a liability at present values,the discount rate to be used,according to paragraph 47 of AASB 137,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.
E) The pre-tax rate for a government bond of the equivalent duration.

Question

Quizplus · Accepted Answer

According to paragraph 47 of AASB 137, when measuring a liability at present values, the discount rate to be used 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 capture the time value of money and the additional risks associated with the liability, but not consider risks for which future cash flows have already been adjusted. Therefore, option A is the most appropriate choice.

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