Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p50
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
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Character Range: 134300–136939

have a fair value of nil), it would be necessary to meet the criteria in paragraphs Aus29.1 and Aus29.2 for considering whether an asset's current use is not its highest and best use. If those criteria are met, the discussion in paragraphs BC115–BC119 would be relevant.
BC115        In relation to this issue generally, paragraphs BC72 and BC73 of the IASB's Basis for Conclusions for IFRS 13 use an example of a factory. Paragraph BC72 states that "The IASB concluded when developing the exposure draft [of IFRS 13] that measuring the factory at nil would not provide useful information when an entity is using that factory in its operations. In particular, users would want to see depreciation on that factory so that they could assess the economic resources consumed in generating cash flows from its operation." Prior to finalising IFRS 13, the IASB had exposed a proposed requirement for an entity to separate the fair value of the asset group into its current use and fair value components.
BC116        However, after considering responses from its stakeholders that preparing separate valuations for each asset in the group of assets would be costly, the IASB noted in paragraph BC73 of the IASB's Basis for Conclusions for IFRS 13 that "… when an entity uses a non-financial asset in a way that differs from its highest and best use (and that asset is measured at fair value), the entity must simply disclose that fact and why the asset is being used in a manner that differs from its highest and best use." That disclosure requirement is stated in IFRS 13 paragraph 93(i).
BC117        Therefore, when the highest and best use of land and improvements collectively within a group of assets of a not-for-profit public sector entity not held primarily for its ability to generate net cash inflows is different from their current use by the entity (after applying the principle in paragraphs Aus29.1 and Aus29.2 that an entity is required to consider whether an alternative use of an asset is the asset's highest and best use only when either the asset is classified as held for sale or held for distribution to owners in accordance with AASB 5 or it is highly probable that the asset will be used for an alternative purpose), the entity would nonetheless conform to the general principle that each asset's fair value is based on its highest and best use (which may mean that the factory in the IASB's example would be measured at nil), but include a disclosure note explaining why the asset is being used in a manner that differs from its highest and best use, in accordance with paragraph 93(i) of AASB 13.
BC118        The Board