Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p122
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 322243–325314

the asset compared with the initial capitalisation of cost) would require the application of the 'calibration' techniques referred to in paragraph 64 of AASB 13. The stakeholder commented that, if calibration were required, the estimate of an asset's current replacement cost would be calibrated in such a manner that the estimate reflects actual transaction prices (ie excludes any cost components not yet incurred by the entity, such as those hypothetical costs to restore another entity's assets described above). Paragraph 64 of AASB 13 states that:
          If the transaction price is fair value at initial recognition and a valuation technique that uses unobservable inputs will be used to measure fair value in subsequent periods, the valuation technique shall be calibrated so that at initial recognition the result of the valuation technique equals the transaction price. Calibration ensures that the valuation technique reflects current market conditions, and it helps an entity to determine whether an adjustment to the valuation technique is necessary (eg there might be a characteristic of the asset … that is not captured by the valuation technique). After initial recognition, when measuring fair value using a valuation technique or techniques that use unobservable inputs, an entity shall ensure that those valuation techniques reflect observable market data (eg the price for a similar asset …) at the measurement date.
BC189        The Board considered the suggestion in paragraph BC188 and decided not to require estimates of a non-financial asset's current replacement cost to be restricted to actual transactions, as an application of paragraph 64 of AASB 13. This is because:
(a)                    the Board considers that many inputs to estimates of the current cost of restoring another entity's asset (eg current unit costs, including costs of labour and materials) are likely to be observable, whereas paragraph 64 of AASB 13 applies to valuation techniques that use unobservable inputs; and
(b)                   using costs of restoration work yet to be incurred involves neither of the circumstances specifically mentioned in paragraph 64 of AASB 13, namely:
(i)                     calibration being necessary to ensure the fair value estimate reflects current market conditions; and
(ii)                   the valuation technique does not capture a characteristic of the asset.
BC190        In relation to paragraph BC189(b), the Board noted that paragraphs BC143–BC146 of the IASB's Basis for Conclusions on IFRS 13 indicate that the valuation adjustments involving calibration relate to measurement uncertainty, mainly in respect of financial assets and liabilities. The two circumstances identified in IASB paragraph BC145 that are not confined to financial assets and liabilities are where:
(a)                    calibration is necessary to capture a characteristic of the asset or liability; and
(b)                   measurement uncertainty has arisen from a significant decrease in the volume or level of market activity for the