Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p81
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 217357–220473

age, expected total and remaining life where the adjustment for physical obsolescence is equivalent to the proportion of the expected total life consumed. Total expected life may be expressed in any reasonable way, including expected life in years, mileage, units produced, etc.
BC219        In relation to consideration of the replacement cost of a modern equivalent reference asset to estimate the fair value of the subject asset under the cost approach, a stakeholder commented that AASB 13 deals inadequately with the modern equivalent asset having more features and therefore a higher replacement cost than the subject asset, and requested the Board provides guidance on how to measure the adjustment for the difference in cost between the service levels provided by such a reference asset and the subject asset (which generally is a less-modern asset).
BC220        In respect of the requests noted in paragraphs BC218 and BC219, the Board observed that:
(a)                    paragraphs B8–B9 of AASB 13 do not distinguish curable and incurable physical obsolescence; and
(b)                   the IASB did not include guidance on how to measure obsolescence when the cost approach is applied. Implicit in IFRS 13 is a view that determining adjustments to the prices of modern equivalent reference assets is an application issue beyond the scope of IFRS. In the IASB's Report on its Post-implementation Review of IFRS 13 (December 2018), the IASB noted that many respondents asked it to develop additional guidance on the application of judgement regarding particular circumstances, and it decided not to develop additional guidance because, amongst other reasons:
(i)                     "the requirements are principle-based, and there will always be a need for exercise of judgement in making these assessments"; and
(ii)                   "the challenges raised are detailed valuation assessments and an accounting standard-setter may not be best placed to provide guidance in this area" (page 16).
BC221        The Board considered that the issues regarding the distinction between curable and incurable physical obsolescence and the measurement of functional obsolescence are not justifiable circumstances under the AASB Not-for-Profit Entity Standard-Setting Framework that would require amendments or guidance because they are not specific to not-for-profit or public sector entities. The Board concluded that the issues relate to detailed valuation assessments and enforcing consistent estimation of the pattern of obsolescence over time in the particular circumstances of each valuation is outside the scope of Australian Accounting Standards.

Distinguishing obsolescence from depreciation
BC222        Some stakeholders asked the Board to clarify in Australian Accounting Standards that obsolescence for fair value measurement is different from depreciation. Since paragraph B9 of AASB 13 specifies that obsolescence for fair value measurement under the cost approach is different from depreciation under AASB 116, the Board decided that additional guidance is not warranted. Paragraph B9 of AASB