Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p132
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 349721–352789

the Board to clarify in Australian Accounting Standards that obsolescence for fair value measurement is different from depreciation. Since paragraph B9 of AASB 13 specifies that obsolescence for fair value measurement under the cost approach is different from depreciation under AASB 116, the Board decided that additional guidance is not warranted. Paragraph B9 of AASB 13 states that: "Obsolescence … is broader than depreciation for financial reporting purposes (an allocation of historical cost) or tax purposes (using specified service lives)."
BC223        The Board observed that aspects in addition to the depreciation of an asset need to be considered in measuring the fair value of an asset. Paragraph 11 of AASB 13 specifies that fair value measurements take into account characteristics of an asset that market participants would take into account, including, for example, the condition and location of the asset, and any restrictions on the sale or use of the asset.

Method of depreciation
BC224        Regarding comments by some stakeholders that many entities are applying the straight-line depreciation method by default, the Board considers that AASB 116 addresses this issue adequately. Paragraph 60 of AASB 116 states that: "The depreciation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity."

Description used in disclosures of accumulated obsolescence
BC225        In relation to the requirement in paragraph 73(d) of AASB 116 to disclose accumulated depreciation for each class of property, plant and equipment, some stakeholders asked whether another description than 'accumulated depreciation' is permitted for disclosing the amount of accumulated obsolescence in financial statements. In accordance with the principle in paragraph 57(b) of AASB 101 that the use of other terms, line items or subtotals in financial statements is permitted where such presentation is relevant to the understanding of the entity's financial position or financial performance, the Board considered that using a term other than 'accumulated depreciation' to describe accumulated obsolescence would not be a breach of AASB 116.

Approaches to estimating the fair value of specific public sector assets
BC226        The Board was asked to provide guidance:
(a)                    on which types of public sector entity assets should be valued under the market, income or cost approach in AASB 13, respectively; and
(b)                   if the market approach is applied to measure the fair value of assets subject to public-sector-specific restrictions, on the quantum of the discounts deducted from the price of comparable assets that are not subject to those restrictions.
BC227        In relation to the request noted in paragraph BC226(a), the asset types on which stakeholders requested guidance include:
(a)                    freehold land for which there is an active and liquid market;
(b)                   land not held in freehold title;
(c)                    residential or