Determining the capitalization interest rate on the basis of the weighted average cost of capital (WACC) is a central requirement of IDW. This requires, among other things, the determination of the base interest rate for a (quasi-) risk-free capital market investment.
The term base interest rate is understood to mean the long-term achievable return on public bonds without default risk (see IDW S.1 Tz. 116 ff.). In accordance with IDW requirements (FN 08/2016), interest rates of less than 1.0% must be rounded to 0.10% point. For interest rates greater than 1.0%, the FAUB's original recommendation, which is rounded to 0.25% point, applies.
Background information
With the IDW S1 standard (IDW Standard: Principles for Conducting Business Valuations — IDW S 1 i.d.F. 2008), the Institute of Auditors (IDW S 1 i.d.F. 2008) has codified requirements for the valuation of companies, which has established itself as a standard in practice as well as in court disputes. These requirements were supplemented by IDW RS HFA 10 (IDW Statement on Accounting: Application of the principles of IDW S 1 when valuing investments and other company shares for the purposes of annual financial statements under commercial law), which describes how the determined company values are incorporated into accounting. The IDW recommends using capital market data published by the Bundesbank for the calculation (see IDW: How is the base interest rate determined in the context of objectified company valuations? in IDW Questions and Answers: On the practical application of the principles for carrying out company valuations in accordance with IDW S 1 in accordance with IDW S 1 in 2008/F & A to IDW S 1 in accordance with 2008).