BC90 In revising IAS 36, the Board considered the requirement in the previous version of IAS 36 for:

(a) income tax receipts and payments to be excluded from the estimates of future cash flows used to measure value in use; and

(b) the discount rate used to measure value in use to be a pre‑tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

BC91 The Board had not considered these requirements when developing the Exposure Draft. However, some field visit participants and respondents to the Exposure Draft stated that using pre‑tax cash flows and pre‑tax discount rates would be a significant implementation issue for entities. This is because typically an entity’s accounting and strategic decision‑making systems are fully integrated and use post‑tax cash flows and post‑tax discount rates to arrive at present value measures.

BC92 In considering this issue, the Board observed that the definition of value in use in the previous version of IAS 36 and the associated requirements on measuring value in use were not sufficiently precise to give a definitive answer to the question of what tax attribute an entity should reflect in value in use. For example, although IAS 36 specified discounting pre‑tax cash flows at a pre‑tax discount rate - with the pre‑tax discount rate being the post‑tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows - it did not specify which tax effects the pre‑tax rate should include. Arguments could be mounted for various approaches.