Which of the following factors should be considered when determining the appropriate discount rate when calculating the value in use under IAS 36?
A. 10.00% rate specific to the asset that is based on current market rate
B. 8.00% nominal rate, which assumes no level of inflation
C. 6.50% rate that reflects the post-tax return
D. 6.00% rate based on existing capital structure
When determining the appropriate discount rate for calculating the value in use under IAS 36, the rate should reflect the time value of money as well as the risks associated with the expected cash flows of the asset. Therefore, the choice of discount rate should incorporate the risk inherent in the asset's cash flows and not just be based on the entity's overall capital structure or a nominal rate unrelated to the asset's specifics. Thus, the most appropriate factor to consider would be:
A. 10.00% rate specific to the asset that is based on current market rate.
Hence, the correct answer reflecting the principles of IAS 36 would be: A. 10.00% rate specific to the asset that is based on current market rate
