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Explain the discount rate to be used

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Problem 1: When measuring a liability at present values, the discount rate to be used, according to paragraph 47 of AASB 137, is:

Option 1: the pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability

Option 2: the after-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability

Option 3: the pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability, and shall also reflect risks for which future cash flows have already been adjusted

Option 4: the pre-tax risk free rate

Problem 2: In determining the amount to be assigned to the equity component of a compound financial instrument, you must:

Option 1: adds the face value of the financial liability to the fair value of the compound financial instrument as a whole

Option 2: deducts the face value of the financial liability from the fair value of the compound financial instrument as a whole

Option 3: deducts the face value of the financial liability from the face value of the compound financial instrument as a whole

Option 4: deducts the fair value of the financial liability from the fair value of the compound financial instrument as a whole

Reference no: EM132623853

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