BCZ12 Some argue that recoverable amount should be measured as the sum of undiscounted future cash flows from an asset. They argue that:
(a) historical cost accounting is not concerned with measuring the economic value of assets. Therefore, the time value of money should not be considered in estimating the amount that will be recovered from an asset.
(b) it is premature to use discounting techniques without further research and debates on:
(i) the role of discounting in the financial statements; and
(ii) how assets should be measured generally.
If financial statements include assets that are carried on a variety of different bases (historical cost, discounted amounts or other bases), this will be confusing for users.
(c) identifying an appropriate discount rate will often be difficult and subjective.
(d) discounting will increase the number of impairment losses recognised.
This, coupled with the requirement for reversals of impairment losses, introduces a volatile element into the inco
…