Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p138
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 366338–369414

prevent an entity from selling the land), there are market transactions for other parcels of land that are suitable reference assets. Therefore, those stakeholders consider there are more relevant observable inputs for applying the market approach, rather than the cost approach, in measuring the fair value of land subject to such restrictions.
BC248        Some of the stakeholders referred to in paragraph BC247 also commented that any improvements (eg a hospital building) on a parcel of land reduce the land's service potential. They consider that improvements on land would reduce the options the not-for-profit public sector entity holder of the land has to use the land for another purpose, unless the improvements are demolished.

The Board's decision not to provide authoritative implementation guidance
BC249        Notwithstanding the interpretation of paragraphs BC78 and BC79 of IFRS 13 in paragraphs BC244 and BC245 by a minority of stakeholders, in which they concluded that the cost approach would often be appropriate in measuring the fair value of land subject to public-sector-specific legal restrictions, the Board noted that paragraph 61 of AASB 13 requires an entity to select measurement techniques:
(a)                    that are appropriate in the circumstances;
(b)                   for which sufficient data are available to measure fair value; and
(c)                    that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
BC250        Therefore, the Board considered that determining appropriate measurement techniques for measuring the fair value of an asset is best regarded as relating to detailed valuation assessments and should not be mandated in Australian Accounting Standards. Unless there is significant inconsistency in applying accounting principles in practice, there is no clear case for mandating the use of a particular valuation technique in measuring the fair value of a particular type or class of assets.
BC251        Despite the debate regarding fair value measurement of land subject to public-sector-specific legal restrictions, feedback from most stakeholders in targeted outreach and most feedback on ITC 45 indicated that, in practice, the fair value of each type or class of assets affected by this issue is being measured using a largely consistent approach – that is:
(a)                    for land subject to public-sector-specific legal restrictions, the market approach is used (although, as noted in paragraph BC253 below, at a more detailed level, different methods are being used to calculate the adjustments to reflect restrictions); and
(b)                   for improvements on such restricted land, the cost approach is generally used, and an adjustment is not deducted to reflect the effect of public-sector-specific legal restrictions because the existence of a public-sector-specific legal restriction does not affect the price that the entity would need to incur to replace the asset at the measurement date.
BC252        In addition, the Board noted that