Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p108
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 285134–288000

For example, the Application Guidance included in the New Zealand Accounting Standard for Public Benefit Entities entitled PBE IPSAS 17 Property, Plant and Equipment states that:
          If depreciated replacement cost is used to measure the fair value of property, plant and equipment: (a) The value of the land shall reflect the fair value of the actual land held, in terms of both its size and location; … (paragraph AG2)
          In instances where land is underutilised, the fair value of the land shall be determined by reference to the highest and best use of such land.  For example, in a case where specialised facilities are located in a prime central business district site but the operation would be able to run from a smaller sized and/or less valuable alternative site offering the same service potential, the fair value of the land would be the market value of the entire central business district-located site. (paragraph AG9)
BC144        Similarly, some stakeholders argued that, from the perspective of market participants, the property in a more expensive location provides superior services. For example, an office space in a central business district location provides greater service capacity than office space in an inner suburb by having greater proximity to stakeholders and urban infrastructure, and by assisting the entity to attract and retain staff. These stakeholders are also of the view that if the property's service capacity can be relocated to another location, then the highest and best use of the current property is not limited to its existing use; and therefore, should be valued at its current location, reflecting its highest and best use.
BC145        Having regard to these conflicting views, the Board noted that it could theoretically be argued that the current replacement cost of an item of real property of a not-for-profit public sector entity should be measured as follows:
(a)                    if the real property needs to remain in its existing location due to legal restrictions or operational requirements, the property's current replacement cost should be based on replacement in the existing location; and
(b)                   if the real property does not need to remain in its existing location, the property's current replacement cost should be measured in the location that results in the higher of the following measures:
(i)                     the price a market participant would be prepared to pay to remove the improvements and then sell the property as a vacant site for an alternative use – reflecting the property's existing location. This is because an asset's fair value can never be less than the price for which that asset could be sold at the measurement date (excluding transaction costs); and
(ii)                   the price a market participant would be prepared to pay to replace