Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p46
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 123910–126776

entity, such as using a parcel of land as a garbage tip, affect the physical characteristics of the asset that market participants would take into account when pricing the asset (eg using land as a garbage tip would limit the physically possible use of the land, as referred to in paragraph 28(a) of AASB 13).
BC101        In the case of cemetery land, even if the land were not legally restricted to being used only as a cemetery, the number of plots used for interred human remains would affect the cash-generating ability of the cemetery land because it reduces the number of remaining plots that a market participant could sell. This would be considered in measuring the fair value of cemetery land by reference, directly or indirectly, to the land's ability to generate net cash inflows or income.
BC102        The Board considered that any specific guidance regarding how physical constraints should be considered in estimating the fair value of an asset does not belong in principles-based Australian Accounting Standards.

Legally permissible use
BC103        Paragraph IE29 of the IASB's Illustrative Examples accompanying IFRS 13 (which can be accessed via the AASB's website) provides the following example of legally permissible uses of a non-financial asset:
          A donor contributes land in an otherwise developed residential area to a not-for-profit neighbourhood association. The land is currently used as a playground. The donor specifies that the land must continue to be used by the association as a playground in perpetuity. Upon review of relevant documentation (eg legal and other), the association determines that the fiduciary responsibility to meet the donor's restriction would not be transferred to market participants if the association sold the asset, ie the donor restriction on the use of the land is specific to the association. Furthermore, the association is not restricted from selling the land. Without the restriction on the use of the land by the association, the land could be used as a site for residential development. In addition, the land is subject to an easement (ie a legal right that enables a utility to run power lines across the land).
BC104        Consistent with the IASB's analysis in the illustrative example quoted in paragraph BC103, the Board noted that the fair value measurement of an asset:
(a)                    would not take into account a restriction that is specific to the entity holding the asset, ie would not transfer to market participants in a hypothetical sale transaction (eg the restriction on the use of land in the IASB's example); but
(b)                   would take into account the effect of restrictions that would transfer to market participants in a hypothetical sale transaction (eg the easement restriction in the IASB's example).

Prohibitions on sale
BC105        Paragraph