Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p55
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 141716–144554

paragraph F9(a), Council A applies judgement in determining which costs to include in a reference road as at the measurement date (30 June 20X2).
Council A concludes that each of the estimated costs listed above (which total $22,200,000) and the other necessarily incurred costs analysed below should be included in reference road's replacement cost because all components of the road, including the once-only earthworks and formation works, would need to be undertaken in a hypothetical construction of a reference road at the measurement date. This is because the cost to a market participant buyer to acquire or construct a substitute road of comparable utility at the subject road's existing location would include each of those costs, including any intrinsically linked disruption costs (eg traffic control and detour costs).
Costs of removal and disposal of unwanted existing structures
In addition, Council A includes the estimated costs of removal and disposal of unwanted existing structures at $2,000,000 as at 30 June 20X2 in the reference road's replacement cost. This is because it is reasonable to expect that a market participant buyer would need to incur such costs if it was to construct a substitute road at the subject road's existing location, since there is no vacant land available in the area.
Disruption costs
Since there is no reasonably available information indicating that another market participant would construct a road at the location of the Council's road during the daytime, Council A uses the more costly night-time disruption costs of $1,000,000 in its estimated replacement cost of the reference road as at 30 June 20X2 rather than the lower daytime costs.
Consequently, Council A measures the gross replacement cost of the reference road as at 30 June 20X2 as $25,200,000 (ie $22,200,000 + $2,000,000 + $1,000,000).

Example 2 – Difference in the asset's operating environment affecting the reference asset's gross replacement cost
A local government (Council B) applies the revaluation model after recognition of each class of property, plant and equipment, as referred to in paragraph 31 of AASB 116.
Council B recognises buildings and land under buildings as separate classes of assets. It measures the fair value of its buildings using the cost approach. The measurement of accumulated obsolescence and the valuation of land are not addressed in this example.
As at 30 June 20X2, Council B uses the following assumptions in measuring one of its buildings at fair value:
    * when the building was originally constructed by Council B (20 years ago), there were no internet cables underneath the site;
    * ten years ago, another entity installed internet cables with protective pipes under the site where Council B's building is located;
    * Council B determined that, if its building was to