Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p74
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 231253–234222

unobservable inputs;
(b)                                 the inputs selected should be consistent with the characteristics of the asset or liability that market participants would take into account in a transaction for the asset or liability; and
(c)                                 the fair value hierarchy (Level 1, 2 and 3 inputs) prioritises the inputs to the valuation techniques, not the valuation techniques used to measure fair value.

Market approach
     BC55            The Board noted service concession assets are subject to terms and conditions determined on a project by project basis and are rarely exchanged between willing sellers and buyers. Accordingly, it is highly unlikely that the market approach would be applicable to measuring service concession assets, although this would depend on the facts and circumstances.

Income approach
     BC56            The income approach converts future amounts (eg cash flows or income and expenses) to a single current (ie discounted) amount. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts (AASB 13, paragraph B10).

     BC57            Service concession assets are used to provide goods or services to achieve public service objectives and consequently the prices that might be charged for those goods or services may be regulated. Price regulation would have the effect of restricting the future cash flows that could be obtained from the assets. The fees the operator can charge users may be at a significant discount and hence this would not reflect the fair value of the asset based on what a market participant may choose to charge under commercial terms. Service potential (ie capacity to provide future services) rather than future economic benefits (ie future cash flows) is likely to drive decisions regarding service concession assets.

     BC58            The Board considered whether the grantor's contractual obligation to make a predetermined payment or series of payments to the operator under the financial liability model could be a measure of the fair value of the asset. Where the grantor's payments to the operator represent the price that the operator expects for the construction, development, acquisition or upgrade of a service concession asset based on the expectations of the cash flows which could be generated by the asset, this method may be appropriate for determining fair value at initial recognition as a surrogate for the income approach. However, the cash payments promised to the operator under the financial liability model might have no direct relationship to the cash flows expected to be generated from the asset (for example, the grantor may choose not to charge users) and the income approach would not be appropriate.

     BC59            The Board noted some may view the grant of a right to the operator to earn revenue from third-party users of the asset as a restriction that a