Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p13
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 34047–36858

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 be replaced as at the measurement date of 30 June 20X2, the other entity's pipes that protect the internet cables would be disrupted;
    * the gross replacement cost necessary to restore those pipes disrupted during the hypothetical replacement of the components of Council B's building is $500,000; and
    * Council B is not part of a group of entities that prepares consolidated financial statements.
Restoration costs for disrupted assets of another entity
Since Council B determined that if its building was to be replaced as at 30 June 20X2, the other entity's pipes would be disrupted, when measuring the fair value of Council B's building under the cost approach in accordance with paragraphs F9(a) and F12(a), the reference building's gross replacement cost would include the $500,000 restoration cost for the pipes.
The restoration cost is included despite the fact that Council B did not incur those costs when it originally constructed the building. This is because fair value measurements consider the conditions of the asset as at the measurement date and, in its circumstances, Council B determined that the cost to a market participant buyer to acquire or construct a substitute building at the existing location would necessarily include those restoration costs. In addition, because Council B is not part of a group of entities that prepares consolidated financial statements, the 'same group' scope exclusion for such costs in paragraph F12(a) does not apply to Council B.

Example 3 – Whether to adjust the entity's own assumptions in measuring a non-financial asset
The Transport Department of a State Government (Department B) estimates the fair value of its railway tracks as at 30 June 20X1 using the cost approach. Department B determined that there are no observable market prices for completed suitable railway tracks, and not all other market participant data required to measure the fair value of railway tracks are observable.
The cost currently required to acquire or construct Department B's