Discounting: Its Role in Financial Reporting

Abstract

A number of recent accounting standards and discussion papers have implemented or discussed the process of discounting as part of the regulatory framework. The paper asserts that this has resulted in the piecemeal implementation of an interesting new measurement technique in financial reporting. It contends that the Accounting Standards Board should have examined the considerable body of research already published on the subject so as to ensure consistent application of the underlying concept and to conform with the ASB ’s own draft Statement of Principles. The paper then explores current practice in the United Kingdom/Ireland together with comparative practice in the United States to illustrate the divergences that currently exist and to suggest a possible framework for a future statement of best practice on the issue.