Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p44
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 118549–121449

asset should be adjusted down to reflect the excess operating costs compared with the modern equivalent asset used as a reference asset. The stakeholder requested the Board to clarify whether, if making such adjustments would result in a small estimated fair value, the asset's use could still be considered financially feasible under the new proposed paragraph Aus28.1, since it would require consideration of the cost of providing goods or services.
BC92            The Board noted that, under proposed paragraph Aus28.1, the cost of providing goods or services would be a consideration in determining whether market participants would be willing to invest in the asset's service capacity; the other consideration being the capability of the asset to be used to provide needed goods or services to beneficiaries.
BC93            Even if the subject asset is estimated to have a low fair value due to having higher operating costs than the modern equivalent reference asset, if it has been judged that market participants, including other not-for-profit public sector entities, would be willing to invest in the subject asset's service capacity considering also the capability of the asset to be used to provide needed goods or services to beneficiaries, then the asset's use would be considered financially feasible.
BC94            In addition, this Amending Standard would not modify the requirement in paragraph B9 of AASB 13 that, when the cost approach is applied, the asset's fair value measurement takes into account physical deterioration, functional (technological) obsolescence and economic (external) obsolescence. An asset's current replacement cost measured in accordance with paragraphs B8 and B9 of AASB 13 would be reduced by the effect of functional obsolescence because it reduces the amount market participant buyers would be willing to pay for the asset's service capacity.
BC95            If, for example, an asset is required by a not-for-profit public sector market participant buyer to provide needed goods or services, that market participant buyer would be willing to pay the necessary cost to acquire or construct the asset, but no more. In contrast, if a subject asset does not provide essential or highly desired goods or services, it might be concluded in the circumstances that the cost of acquiring or constructing the asset cannot be justified by a not-for-profit public sector market participant buyer. Depending on the other facts and circumstances, it might even be concluded that the only financially feasible use of the asset is to hold it for sale (this illustrates one of the reasons why, for assets of not-for-profit public sector entities not held primarily for their ability to generate net cash inflows, the Board decided not to constrain the selection of the market approach, income approach or cost approach).

Aspects of highest and best use for which