Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p15
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 39371–42377

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 for each of those three Health Departments:
     (a)                    it is assumed that the value of land in the proximity of the airstrip, and any site preparation costs, did not change between 1 July 20X0 and the measurement date of 30 June 20X1;

     (b)                   the cost to construct the airstrip did not change since its construction;

     (c)                    in relation to the requirements of paragraph F14, data are reasonably available for the site preparation costs and costs of constructing the airstrip; and

     (d)                   any profit margin on the entity's own site preparation costs that would be demanded by external contractors and would increase the amount that not-for-profit public sector market participant buyers would be prepared to pay for the subject asset (as reflected in the asset's current replacement cost) is ignored.

The site preparation costs determined in accordance with paragraph F12(c) are analysed for the following assumed facts for the Health Department of each jurisdiction:
Jurisdiction A

The transferred land (airstrip site) was undulating, and the Health Department incurred a cost of $3,000,000 to level the site. Available land in the proximity of the airstrip site was also undulating.

Jurisdiction B

The airstrip site was undulating, and the Health Department incurred a cost of $3,000,000 to level the site. Available land in the proximity of the airstrip site was level. The Health Department would not have chosen a parcel of undulating land, but the land was transferred to it.

Jurisdiction C

The airstrip site was level. Available land in the proximity of the airstrip site was undulating.

Site preparation cost assessments as at 30 June 20X1
Jurisdiction A
It would be expected that another market participant buyer would need to incur a cost of $3,000,000 to level the reference parcel of land to be a fit-for-purpose site for the modern equivalent airstrip, since the only available land in the proximity is also undulating. Using the cost approach, the Health Department in Jurisdiction A