Document ID: chunk:federal_register_of_legislation:F2021C00862:body:0:p11
Version: federal_register_of_legislation:F2021C00862
Segment Type: other
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Character Range: 27340–29822

also noted that the level of complexity in terms of the number of lines of credit and the number of group entities responsible for acquiring or constructing qualifying assets is likely to be greater than that of the for-profit sector.
     BC11 However, the Board also observed that the Standard envisages that entities may borrow centrally and acknowledges that this can create difficulties for determining whether a direct relationship between particular borrowings and a qualifying asset exists, and that the exercise of judgement would be required in such situations.

Measurement of property, plant and equipment by not-for-profit public sector entities
     BC12 The Board discussed the prevailing practice in the Australian not-for-profit public sector of revaluing property, plant and equipment subsequent to initial measurement and recognition. The Board noted that the relatively brief time for which government-constructed assets would be qualifying assets that are measured at cost means that any benefit from including capitalising borrowing costs in the initial measurement of an asset would be very limited, as capitalising borrowing costs is consistent with a cost measurement model. This is particularly the case in the context of long-lived assets such as infrastructure assets, on the basis that the relative time for which an asset is likely to be measured at fair value would be significantly longer than the time for which the asset is under construction (and measured at cost).

Balance of costs and benefits
     BC13 The Board concluded that it is appropriate to depart from its policy of transaction neutrality for cost-benefit reasons. The Board considered that the costs of requiring not-for-profit public sector entities to capitalise borrowing costs associated with qualifying assets would generally be at least as great as they are for private sector entities, but that any benefits would not be as great due to the prevalence in the public sector of the practice of revaluing property, plant and equipment to fair value.
     BC14 The Board observed that the relief in paragraphs Aus8.1 and Aus8.2 does not prevent a not-for-profit public sector entity from adopting an accounting policy of capitalising borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
  [1]  The FRSB has since been succeeded by the New Zealand Accounting Standards Board (NZASB).