Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p68
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 181947–184854

to represent the only manner in which AASB 13 could be applied.
BC176        Some stakeholders commented that the treatment of costs to remove and dispose of unwanted existing structures on land in order to hypothetically construct a reference asset at the measurement date should be consistent with the treatment of costs of dismantling and removing an item of property, plant and equipment and restoring the site on which it is located (paragraph 16 of AASB 116 identifies this latter type of costs as part of the cost of an item of property, plant and equipment). Those stakeholders commented that if there is no present obligation for an entity to incur costs to remove and dispose of unwanted existing structures on land in order to hypothetically construct the subject asset at the measurement date, such costs should not be included in an asset's current replacement cost. Some other stakeholders asked for clarification of the relationship between those costs and the costs of dismantling and removing an item of property, plant and equipment and restoring the site on which it is located.
BC177        The Board observed that, in contrast with costs to remove and dispose of unwanted existing structures on land, the costs of dismantling and removing an item of property, plant and equipment and restoring the site on which it is located are end-of-economic-life costs. Those latter costs would not merit inclusion in the asset's current replacement cost because the market participant buyer of the subject asset logically would not pay for those costs, which in turn is because possessing the subject asset would not save the market participant buyer from having to incur those end-of-economic-life costs.
BC178        However, the Board also observed that Illustrative Example 2 accompanying AASB Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities states that, if an asset's valuation does not include an amount for these end-of-economic-life costs for which the entity has recognised a provision, the carrying amount of the asset will need to be adjusted by adding back an appropriate amount for the provision (Interpretation 1 paragraph IE7(b)). The IFRS Interpretation Committee's Basis for Conclusions on the IFRS Interpretation adopted as AASB Interpretation 1 states that the provision is accounted for separately from the valuation of the asset to ensure it is not counted twice (paragraph BC25(a)).

Disruption costs, including costs to restore another entity's assets
BC179        The Board was asked to clarify whether the subject asset's current replacement cost should include the cost to restore another entity's asset that would be disrupted during the hypothetical construction of the subject asset (eg drainage works of another entity disrupted when replacing a road). The Board decided to develop proposed guidance on such restoration costs