Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p64
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 171545–174373

not expire over time (ie 'once-only costs'). This issue has been the subject of debate and inconsistent practice (for example, the current replacement cost of some roads has been estimated by excluding the cost of design work, earthworks and formation costs because those components do not wear out or become otherwise obsolete, and therefore do not require replacement in the future).
BC163        The Board concluded it would be inappropriate to exclude any costs from an estimate of an asset's current replacement cost on the grounds that they relate to parts of an asset that are not expected to actually be replaced in the future. For the reasons described in paragraphs BC153–BC155, an estimate of an asset's current replacement cost should include all necessary costs intrinsically linked to hypothetically acquiring or constructing a reference asset at the measurement date, reflecting that the hypothetical acquisition or construction costs are incurred by a market participant buyer that does not possess the subject asset at the measurement date.
BC164        Current replacement cost assumes hypothetical replacement or reconstruction of a reference asset, and is not limited to costs of replacements the entity expects to incur in the future (which is a matter of budgeting rather than measurement of existing resources). To exclude any costs from an estimate of an asset's current replacement cost on the grounds that they relate to parts of an asset that are not expected to actually be replaced in the future would imply that the fair value of an asset measured under the cost approach would be zero if, at the measurement date, the holder of the asset expects the asset neither to be replaced at the end of its useful life nor to have components replaced during its remaining useful life.
BC165        One respondent to ED 320 and some other stakeholders requested clarification of the 'starting point' for identifying once-only costs. For example, they commented that the 'starting point' that should be the focus of measuring the current replacement cost of parts of an asset could be the conditions prevailing at the site of the subject asset when it was initially acquired or constructed (but with the resulting costs measured using prices current at the measurement date), a vacant site with all site preparation works completed, or some other as-yet undefined point.
BC166        The Board considers that this question has conceptual and practical dimensions. From a conceptual viewpoint, paragraphs B8 and B9 of AASB 13 state that the cost approach to measuring an asset's fair value reflects the amount that would be required currently to replace the asset's service capacity. Therefore, in concept, the 'starting point' for considering the costs to include in an asset's current replacement cost is the