Discount rates down, impairment in focus, resources

LATEST NEWS

December 2019 discount rate update

Discount rates down, impairment in focus

December 2019 discount rate update – our latest article on how to assess your discount rates identified that:

  • Impairment testing and asset values continue to be one of the key focus areas for ASIC in relation to the 31 December 2019 reporting period, with many businesses applying more rigour in their assessment of discount rates.
  • The cost of capital has declined over the period due to a reduction in the equity market risk premium (EMRP) and credit spreads. All other things being equal, this will lead to higher asset values.
  • It’s increasingly important for businesses to understand and be able to justify changes that are occurring in their projected cash flows and WACC as well as ensuring cross-checks to market metrics (such as market capitalisation and EBIT multiples) are undertaken where observable.

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OTHER NEWS

leadenhall's market discount rate update 31 March 2024

STABLE MARKET DISCOUNT RATES

Markets have declined over the last quarter as persistent inflation and the potential for further rate rises continue to weigh on the ASX 200. These fears have seen a rapid increase in government bond yields over the last month. With market conditions continuing to evolve rapidly, we have provided an update on our assessment of discount rates as at 30 September 2023.

Appraisal Foundation brief Professional Interactions Unique to Fair Value for Financial Reporting

Guidance regarding interactions between auditors and valuers

The Appraisal Foundation recently issued for comment a draft valuation brief titled Professional Interactions Unique to Fair Value for Financial Reporting. The article made several practical recommendations that are applicable to almost all auditor and valuer interaction.

Discount Rate 31 Dec 2023

Market Discount Rates – 31 December 2023

Optimism around the easing of inflation and potential interest rate cuts led to a rally in equity markets towards the end of December 2023. With markets continuing to fluctuate significantly, the selection of a reasonable discount rate remains a key consideration, whether for the purpose of financial reporting or for any valuation analysis.