Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p57
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 146910–150018

or replace public transport assets. The policy is that at least 50% of federally co-funded asset acquisitions must be manufactured in Australia. The State Government controlling Department B has identified railway tracks as one of the asset types the replacement of which contributes to meeting that domestic 50% requirement.
Based on the Commonwealth Government's unlegislated policy regarding Australian-manufactured content, Department B assesses that replacement of the railway tracks would, in the ordinary course of operations, be achieved by their manufacture in Australia. There is no reasonably available information indicating that another market participant would acquire railway tracks overseas.
Estimating the replacement cost of a reference asset as at 30 June 20X1
In accordance with paragraphs F5 and F11(b), Department B estimates the cost currently required for a market participant buyer to acquire or construct a reference asset by using its own assumptions as a starting point and adjusting those assumptions to the extent that reasonably available information indicates that other market participants would use different data.
Since there is no reasonably available information indicating that another market participant would acquire railway tracks overseas, Department B uses the more expensive costs of Australian manufacture in its estimated replacement cost of reference railway tracks as at 30 June 20X1, notwithstanding the absence of a legal requirement for their manufacture in Australia.

     Site preparation costs (paragraph F12(c))

IE3                 In respect of a non-financial asset not held primarily for its ability to generate net cash inflows and measured under the cost approach in paragraphs B8 and B9, Example 4 illustrates how a particular entity treats site preparation costs, in accordance with paragraph F12(c), when measuring the fair value of assets using the cost approach.

Example 4 – Site preparation costs
Each Health Department of three jurisdictions was transferred land on 1 July 20X0 to be used to construct a remote airstrip for airborne health services.
The subject asset for each Health Department is the airstrip, and the valuation of land under the airstrip is not addressed in this example.

Each of those three Health Departments:

     (a)                    recognises airstrips and land under airstrips as separate classes of asset;

     (b)                   incurred $1,500,000 (excluding any site preparation costs) to construct the airstrip. The construction was completed in June 20X1;

     (c)                    measures the fair value of the airstrip at current replacement cost under the cost approach; and

     (d)                   determined that site levelling costs are not reflected (explicitly or implicitly) in the fair value measurement of the land under the airstrip because market participants acquiring the land for other purposes would not require a level site.

As at 30 June 20X1, the fair value of each Health Department's airstrip was estimated. For simplicity, the following common assumptions are made