Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p14
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 36599–39682

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 modern equivalent railway tracks would be 30% lower if they were manufactured overseas instead of in Australia. There is no legal requirement for the tracks to be manufactured in Australia. However, the Commonwealth Government provides significant funding assistance for both the public sector and the private sector to acquire or replace public transport assets. The policy is that at least 50% of federally co-funded asset acquisitions must be manufactured in Australia. The State Government controlling Department B has identified railway tracks as one of the asset types the replacement of which contributes to meeting that domestic 50% requirement.
Based on the Commonwealth Government's unlegislated policy regarding Australian-manufactured content, Department B assesses that replacement of the railway tracks would, in the ordinary course of operations, be achieved by their manufacture in Australia. There is no reasonably available information indicating that another market participant would acquire railway tracks overseas.
Estimating the replacement cost of a reference asset as at 30 June 20X1
In accordance with paragraphs F5 and F11(b), Department B estimates the cost currently required for a market participant buyer to acquire or construct a reference asset by using its own assumptions as a starting point and adjusting those assumptions to the extent that reasonably available information indicates that other market participants would use different data.
Since there is no reasonably available information indicating that another market participant would acquire railway tracks overseas, Department B uses the more expensive costs of Australian manufacture in its estimated replacement cost of reference railway tracks as at 30 June 20X1, notwithstanding the absence of a legal requirement for their manufacture in Australia.

     Site preparation costs (paragraph F12(c))

IE3                 In respect of a non-financial asset not held primarily for its ability to generate net cash inflows and measured under the cost approach in paragraphs B8 and B9, Example 4 illustrates how a particular entity treats site preparation costs, in accordance with paragraph F12(c), when measuring the fair value of assets using the cost approach.

Example 4 – Site preparation costs
Each Health Department of three jurisdictions was transferred land on 1 July 20X0 to be used to construct a remote airstrip for airborne health services.
The subject asset for each Health Department is the airstrip, and the valuation of land under the airstrip is not addressed in this example.

Each of those three Health Departments:

     (a)                    recognises airstrips and land under airstrips as separate classes of asset;

     (b)                   incurred $1,500,000 (excluding any site preparation costs)