Determining an appropriate discount rate is a complex area and can be an area of significant estimation uncertainty and a source of errors in financial reporting, FRC warned.

Discounted cash flows and discount rates are commonly used when accounting under International Financial Reporting Standards (IFRS).

The challenge is partly because the reporting requirements relating to discount rates differ across IFRS standards, some do not include any explicit requirements, and many require judgment to be applied in determining the construction of the appropriate discount rate.