Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p45
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 121194–124135

not-for-profit public sector entities not held primarily for their ability to generate net cash inflows, the Board decided not to constrain the selection of the market approach, income approach or cost approach).

Aspects of highest and best use for which no additional guidance is warranted

Physically possible use
BC96            As stated in paragraph 22 of AASB 13, fair value measurement of an asset is based on the assumptions that market participants would use when pricing the asset. Specifically, when the presumption that an asset's current use is its highest and best use is rebutted, to identify the highest and best use of an asset, an entity takes into account the use of the asset that is physically possible, legally permissible and financially feasible.
BC97            Stakeholders requested guidance regarding whether, and if so how, physical constraints should be considered when measuring an asset's fair value. These physical constraints can be:
(a)                    naturally occurring, for example land under water (eg marine parks) and old growth forests (eg national parks), where both examples are of assets that are not readily replaceable or cannot be relocated to an alternative location; and
(b)                   the result of the entity's activities, for example:
(i)                     land that has been used as a council garbage tip, where the resulting risk of methane emissions might limit the land's potential uses to being suitable only for conversion to parkland; and
(ii)                   cemetery land, where the issue is not only the legal restriction for use as a cemetery but involves human remains that cannot be moved to another location should the entity be required to 'replace the service potential' embodied in the cemetery.
     These physical constraints are discussed in paragraphs BC98–BC102.

Naturally occurring physical constraints
BC98            The Board concluded that a naturally occurring physical constraint leading to an inability in practice (rather than hypothetically) to replace or relocate the asset, such as a marine park, does not of itself preclude measuring the asset at fair value because a fair value measurement assumes a hypothetical transaction.
BC99            However, for some marine parks and old growth forests there might be insufficient market data available to enable reliable estimates of the asset's fair value. The Board noted that paragraph 31 of AASB 116 specifies that for an asset to be subsequently measured at a revalued amount, the fair value of the asset must be able to be measured reliably.

Physical constraints resulting from the entity's activities
BC100        The Board noted that some activities of the 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