Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p84
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 220120–223013

the asset's holder does not learn of this plan until later (because the sale process for the asset is conducted confidentially for some time). Similarly, until an asset is ready for sale in the condition intended by an entity's appropriate level of management, a higher and better use for the asset is unlikely to be evident;
(d)                   be potentially difficult and subjective to apply, because it would often be difficult in a public sector environment to determine exactly when an entity's appropriate level of management has become 'committed to a plan' to sell an asset, and consequently be likely to result in significant inconsistency in practice; and
(e)                    not be consistent with a GAAP/GFS harmonisation objective, because being 'committed to a plan to sell an asset' is not an explicit concept that can be applied from a macroeconomic statistics perspective.
BC62            For the reasons described in paragraph BC61, those respondents argued that this issue is a public-sector-specific issue that warrants deeming that a higher and better use than current use would not arise until an asset satisfies the criteria for classification as 'held for sale' under AASB 5.
BC63            In developing ED 320, the Board was concerned that waiting until all the criteria in AASB 5 for classifying an asset as 'held for sale' are met could deprive users of financial statements of a not-for-profit public sector entity of useful information about an alternative use having become an asset's highest and best use, as supported by the due diligence underpinning a decision by the entity's appropriate level of management to commit to a plan to take one of those steps. For example, if an appropriate level of management commits to begin using an asset (such as equipment) for a commercial purpose (eg by leasing out that equipment) while awaiting approval of the asset's sale, it could deprive users of information about the asset's value if an entity waits until the classification criteria for being 'held for sale' in AASB 5 are met before taking into account the commitment to change the asset's use.
BC64            On balance, the Board considered that the concerns noted in paragraph BC61 outweigh these concerns in paragraph BC63. In addition, the Board noted that:
(a)                    in the public sector, many non-financial assets other than land are specialised assets without alternative uses; and
(b)                   the requirements of AASB 5 are well understood by preparers and auditors of financial statements of not-for-profit public sector entities. Therefore, aligning the timing of potentially identifying a higher and better alternative use with the criteria in AASB 5 should reduce the time and effort by preparers and auditors and reduce inconsistency in application.
BC65            Therefore, the Board decided to issue for comment