Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p135
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 358038–361003

legislation specific to public sector entities or directions from Ministers) prohibiting the entity from using the land and improvements on land for a purpose other than its current use. For example, a not-for-profit public sector entity might be subject to a legal restriction prohibiting it from using a hospital and the hospital land for a purpose other than as a hospital.
BC236        This section of the Basis for Conclusions (paragraphs BC237–BC259) discusses public-sector-specific legal restrictions that are expected to be transferred to other not-for-profit public sector market participants in a hypothetical sale transaction. Legal restrictions that would not transfer to other market participants in a hypothetical sale transaction are not considered in fair value measurement of an asset.
BC237        The Board noted that in many cases, the current zoning of the land would reflect the land's public-sector-specific legal restrictions, such as having a community zoning that restricts a parcel of land to be used for community purposes. However, there might be situations in which land is zoned for a commercial purpose, but the not-for-profit public sector entity holding the land is subject to legislation preventing that entity from using any of its non-financial assets for a commercial purpose.
BC238        Panel members and other stakeholders who responded to ITC 34 originally asked the Board to provide guidance on:
(a)                    how public-sector-specific legal restrictions that would be expected to transfer to other public-sector market participants should be treated when measuring the fair value of land and improvements on land that are not held primarily for their ability to generate net cash inflows; and
(b)                   which measurement techniques should be used in measuring the fair value of such land.
BC239        Stakeholders informed the Board that the fair value of some land subject to public-sector-specific legal restrictions and not held primarily for its ability to generate net cash inflows has been valued at a very low amount; sometimes a nominal amount (eg $1 for some restricted land). They questioned whether measuring such restricted land at such a low value appropriately reflects the service potential of the restricted land. This question was asked in the context of paragraph Aus49.1 of the Framework for the Preparation and Presentation of Financial Statements (applicable to not-for-profit entities), which states that 'future economic benefits' or 'service potential' can be described as 'the scarce capacity to provide benefits to the entities that use them'.
BC240        The Board did not form a view on whether measuring such restricted land at a low amount or nominal amount would reflect the capacity of the restricted land available to provide benefits to the holder of the land (or to provide services to the community). The Board is undertaking a project to adapt its Conceptual