The UK Shareholders letter to the IASB is now published here, in response to the Board’s public consultation on its activities and its work plan for the next five years.
Naturally we argue that discount rates should loom large in the Board’s forthcoming work.
In the Appendix, we reject the Board’s argument that we should discount liabilities by more than the risk free rate, their thinking being that a liquid bond has an embedded option to sell the bond at market, an illiquid bond does not contain that option, ergo the illiquid bond should be cheaper.
Their thinking is utterly fallacious, for the reasons given in the Appendix. Perhaps I shouldn’t call it ‘thinking’. Wittgenstein “Thought can never be of anything illogical, since, if it were, we should have to think illogically” (Tractatus 3.03).
Other comment letters are listed here.