Q: Impairment of Real Estate

[UglyChristmasSweater]

for a rental property, you calculate impairment by looking at fair value, but fair value is calculated as the sum of future cash flows "undiscounted and without interest charges". (IASA yellow brick, pg 2-8)

My question regarding the part in quotes: Are those two different things? If you were talking about a mortgage payment I would think that meant the sum of all the principle portions of the future payments, but this is talking about the rental income, unless I am mistaken.

[BassFreq]

My interpretation is that the author was trying to be thorough and complete. "Undiscounted" would mean don't reduce (through present valuing) the value by interest that could be achieved by investing cash from future cash flows (whether for rental income or sale or other) into an alternative investment.

"Without interest charges" then means don't increase the value by (by bringing it back to today's PV value) for expected future related expenses (like property taxes).