Discount rates blogDec2020


Discount rate update – December 2020

Discount rate early warning – impairment in focus

The 31 Dec reporting season is fast approaching and the impact of COVID-19 on asset values remains a key issue highlighted by ASIC in its message to companies. With market conditions continuing to evolve rapidly in response to COVID-19 and other news, the goal of our discount rate update is to remove one uncertain element in the raft of subjective assumptions utilised by companies in their valuations and impairment testing.

In relation to focus areas for 31 December 2020 financial reports, ASIC Commissioner Cathie Armour said, “Entities with businesses adversely affected by the COVID-19 pandemic should continue to focus on the reporting of asset values and financial position.”

To assist with your planning, we provide an early update on how overall market discount rates have changed since 31 December 2019. It will be followed by a more detailed analysis of the appropriate parameters to build-up a discount rate as at 31 December 2020 shortly thereafter.

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Government bond yields have declined substantially since the onset of the pandemic, to 0.9% as at 30 November 2020. This has been more than offset by an increase in our assessed market risk premium (to a range of 7.0% to 7.5%) and reduced gearing levels, attributable to the uncertainty created by COVID-19. Whilst recent optimism has reduced the implied market risk premium slightly, overall market discount rates remain heightened compared to this time last year.

Given the increase in discount rates since December 2019, companies may have less headroom for impairment testing as at December 2020, particularly for companies adversely impacted by COVID-19. This will not of course be correct for all businesses and cash generating units given their individual circumstances but may serve as a guide.

Click here to download this update.



For further information on selecting an appropriate discount rate for your company or cash generating units please feel free to contact us.


leadenhall's market discount rate update 31 March 2024


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.