Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p126
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 333063–336065

in subsequent measurements of an asset that necessarily takes a substantial period of time to get ready for its intended use. This is because the price that market participant buyers would pay for an asset is unaffected by accounting policies adopted in respect of that asset. The recognition of initial costs and subsequent measurement are fundamentally different processes. Therefore, there should be no presumption that the treatment of borrowing costs should be consistent for both. The Board observed that paragraph B4 of AASB 13 identifies a range of circumstances in which an asset's fair value at initial recognition can differ from its transaction price, indicating that items of comprehensive income can arise from differences between the transaction price reflected in initial measurement and fair value.

Which entity's borrowing rate should be used?
BC201        The Board was also asked to provide guidance to not-for-profit public sector entities about which entity's borrowing rate should be used to measure those borrowing costs, if borrowing costs were to be included in the asset's current replacement cost. Where the cost approach is used, if borrowing costs or other finance costs are included in the asset's fair value measurement, under the guidance in paragraphs F5 and F6:
(a)                    if all relevant information about market participant assumptions needed to estimate the fair value of the asset is reasonably available, including information about finance costs assumptions, the entity would use those assumptions in measuring the fair value of the asset; or
(b)                   if some relevant information about market participant assumptions needed to estimate the fair value of the asset is not reasonably available, the entity's own assumptions would be used as a starting point to determine the amount of finance costs to include in the asset's current replacement cost. The entity would adjust those assumptions for any reasonably available information about any different data used by other market participants relating to borrowing and other finance costs.
BC202        However, in respect of the situation described in paragraph BC201(b), the Board observed that, in most cases in which the asset subject to measurement has specialised features, information about other market participants' finance costs (including borrowing costs) specific to constructing the subject asset is unlikely to be reasonably available because applicable finance costs would depend on the financial circumstances of the constructor of the asset. When information about other market participants' finance costs is not reasonably available, the holder of the asset would use its own assumptions in estimating the amount of any finance costs to include in the subject asset's current replacement cost (if the entity determines that finance costs should be included in that asset's current replacement cost).
BC203        One respondent to ED 320 requested the Board to clarify