Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p25
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 66846–69756

Basis for Conclusions on IFRS 13 that sometimes an observed market price – one for sale on a stand-alone basis – will not reflect an asset's fair value (because it does not reflect the value that the asset contributes to the entity, which is achieved by using the subject asset in combination with other assets). The IASB's rationale seems to provide a precedent for concluding that hypothetical not-for-profit public sector market participant buyers would be willing to pay more than a stand-alone selling price for an asset if the asset generates greater benefits when used in combination with other assets.
BC33            The Board considered that the comments in paragraphs BC78 and BC79 of the IASB's Basis for Conclusions on IFRS 13 suggest that the respondent's view noted in paragraph BC28(a) – that the same estimate of fair value should result for a given asset, regardless of whether the market approach, income approach or cost approach is used – would not always hold true.
BC34            As noted in paragraph BC28(b), the respondent expressed a view that users of financial statements should always be provided the opportunity to identify when an asset is not generating the return expected from the asset's highest and best use. The Board considered that this concern stems mainly from the different perceptions of what an asset's highest and best use is and the respondent's disagreement with the Board's view that other not-for-profit public sector entities should be considered market participants for a non-financial asset of a not-for-profit public sector entity held primarily for its service potential rather than to generate net cash inflows (the subject asset).  Under that Board view, another not-for-profit public sector market participant is likely to:
(a)                    be willing to pay a higher price, if necessary, for the subject asset than the amount on which an investment return is expected from any net cash inflows the subject asset generates; and
(b)                   continue the subject asset's current use (unless the presumption is rebutted) on the basis that the market participant 'stepping into the shoes' of the not-for-profit public sector entity holding the subject asset would use the asset to continue providing services to the community rather than for an alternative use.
BC35            As explained in paragraphs BC31and BC32 above, the Board's view is consistent with the view of the IASB in IFRS 13. Other respondents to ED 320/Fatal-Flaw Review draft expressed agreement with this view and support the Board's proposals. Accordingly, the Board decided to proceed with the modifications to AASB 13.

Comparison with IFRS 13
BC36            The Board observed that not-for-profit public sector entities complying with this Standard might not comply with IFRS 13.
BC37            This Standard makes the following modifications to the requirements