A net rate, discount less growth, applies to constant dollars; a gross rate discounts a nominally grown stream; consistent inputs give the same present value.
A single rate that combines growth and discounting: the difference between the rate at which the loss stream grows and the rate at which future amounts are discounted. It is applied to a loss stated in today's dollars and is the usual presentation where both rates are drawn from the same period.
The full nominal discount rate applied to a loss stream that has already been grown into future nominal dollars. It shows growth and discounting as two visible steps and is the presentation many readers expect when the growth rate differs by loss category.
| Dimension | Net Discount Rate | Gross Discount Rate |
|---|---|---|
| Loss stream | Stated in constant, present-day dollars | Projected in future nominal dollars |
| Rates shown | One number; the growth assumption is implicit | Two numbers; growth and discount both visible |
| Consistency risk | Low when both rates share a period and a basis | Higher if growth and discount come from different periods |
| Multiple loss categories | One net rate per category | One growth rate per category, one discount rate overall |
| Total offset | A net rate of zero: growth and discount cancel | Not a separate case; total offset is a net-rate convention |
A net rate suits a projection with one loss category and rates drawn from the same historical window, and it is the natural form where a venue directs a total-offset approach, under which the net rate is zero and the present value equals the undiscounted sum of the losses in today's dollars. The report should still show the two components so the reader can see what the net rate contains.
A gross presentation suits a report with several loss categories growing at different rates, such as wages, household replacement costs, and medical costs, because each category can be grown on its own series and the whole stream discounted at one rate. It also makes the growth assumption visible, which is where most cross-examination on discounting begins.
The two presentations are arithmetically equivalent when the assumptions are consistent: growing a stream at one rate and discounting it at another produces the same present value as applying the net of the two rates to the constant-dollar stream. The choice is about transparency and venue convention, not about the size of the number. The present value method page explains the mechanics; some jurisdictions fix the approach by case law, and the report follows the venue's rule and says so.
A convention under which the growth rate and the discount rate are assumed to cancel, so future losses are neither grown nor discounted and the present value equals the sum of the losses stated in today's dollars. Some states direct it by case law; elsewhere it is one assumption among several and must be justified.
Neither, if the assumptions are consistent. A net rate of two percent and a gross presentation with five percent growth and seven percent discount give the same result. Differences appear only when the two components are drawn from different periods or bases, which is a consistency problem rather than a presentation choice.
Yields on low-risk instruments are the mainstream basis because the award is meant to be invested safely, not speculatively. The report states the instruments, the maturities, and the period used, and shows the sensitivity of the result to reasonable alternatives.
Request a consultation on Net vs. Gross Discount Rate or call (201) 343-0700. Plaintiff and defense counsel.