Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p60
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 160914–163824

F11(a) to Appendix F of AASB 13.

Nature of costs included in current replacement cost (paragraphs F8–F15)
BC148        The Board was asked to clarify which costs should be included in the current replacement cost of an asset held by a not-for-profit public sector entity when applying the cost approach under paragraphs B8–B9 of AASB 13, particularly where such an asset is constructed by or on behalf of the entity (ie not replaced in a single transaction). Specifically, stakeholders requested the Board to clarify whether the following costs should (among other costs) be included in the current replacement cost of the asset subject to measurement (the subject asset):
(a)                    costs of parts of an asset not expected to actually be replaced in the future, because they are not expected to wear out, but that would need to be incurred in a hypothetical acquisition or construction of the subject asset by a market participant buyer;
(b)                   site preparation costs, including costs of removal and disposal of unwanted existing structures on land; and
(c)                    intrinsically linked disruption costs, including costs of restoring another entity's asset that would be disrupted in a hypothetical replacement of the subject asset (the nature of disruption costs is explained in paragraph BC179).
BC149        Stakeholders also requested the Board to clarify, when identifying the component costs to include in an asset's current replacement cost, whether it should always be assumed that the asset would be replaced in the most economical manner, even if the entity would, in its ordinary course of operations, be required to incur additional costs.
BC150        The majority of respondents to ED 320 expressed in-principle support for most of the proposed implementation guidance on the nature of the costs to include in the current replacement cost of an asset, but also expressed concerns about the practical challenges of applying that proposed guidance. The Board considered the feedback and revised the guidance to address those concerns.
BC151        In particular, the Board observed that respondents' concerns about the difficulty of identifying and measuring some costs are mainly related to assets within the scope of the guidance in paragraph 89 of AASB 13 – when the market selling price of a comparable asset and at least some other market participant data are not observable. The Board added paragraph F5 to require an entity to use its own assumptions as a starting point and adjust them only to the extent that reasonably available information indicates that other market participants would use different data. In addition, the Board decided to provide a practical expedient in paragraph F14 whereby an entity need not undertake exhaustive efforts to obtain information about the costs referred to in paragraph BC148, provided that the entity includes