Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p31
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 82616–85545

with any modification to AASB 13 that would constrain identifying a higher and better alternative use of an asset considered that the hypothetical transaction underpinning the fair value concept in AASB 13 should be supported by actual market activity or the generation of actual cash flows that support assumptions about what that market activity might be. They consider that if an asset's fair value measurement does not reflect its market value, it would inadvertently affect an entity's assessment of the true cost of the assets being deployed for service delivery.
BC53            That respondent was concerned that the ED proposals would affect fair value measurements of some public sector assets due to:
(a)                    the subjective assessment by an entity's management of whether an asset is held primarily for its ability to generate net cash inflows;
(b)                   the decision by the entity's management about how the asset will be used; and
(c)                    the notion of a hypothetical not-for-profit public sector entity market participant buyer being ethereal and lacking market activity on which to base a fair value estimate.
BC54            In response to that respondent's concerns, as noted in paragraphs BC31 and BC32, the Board observed that the notion of hypothetical not-for-profit public sector market participant buyers is key to not measuring the fair values of many specialised public sector entity assets at scrap value. This is supported by the IASB's Basis for Conclusions on IFRS 13, paragraph BC78, which states that "… In effect, the market participant buyer steps into the shoes of the entity that holds that specialised asset." Also, the IASB noted in paragraph BC79 of its Basis for Conclusions that sometimes an observed market price – one for sale on a stand-alone basis – will not reflect an asset's fair value (because it does not reflect the value that the specialised asset contributes to the entity, which is achieved by using the specialised asset in combination with other assets).
BC55            The Board considered that the IASB's rationale provides an equivalent precedent for hypothetical not-for-profit public sector market participant buyers existing for public sector entity assets at a higher level of aggregation than the unit of account for observed sales of individual public sector assets. In addition, the Board concluded that fair value estimates for non-financial assets not held primarily for their ability to generate net cash inflows should not depend on the net cash inflows expected to be generated by those assets.
BC56            The Board acknowledged the concern (noted in paragraph BC38(b)) that limiting the circumstances in which the current use presumption may be rebutted could result in some fair value measurements being non-compliant with IFRS 13 because they might delay the identification of a higher and better alternative