Document ID: chunk:federal_register_of_legislation:F2023L00010:body:0:p47
Version: federal_register_of_legislation:F2023L00010
Segment Type: other
Provision Reference: 
Character Range: 126492–129362

of land in the IASB's example); but
(b)                   would take into account the effect of restrictions that would transfer to market participants in a hypothetical sale transaction (eg the easement restriction in the IASB's example).

Prohibitions on sale
BC105        Paragraph 28(b) of AASB 13 is silent regarding whether prohibitions on the sale of an asset are to be considered in identifying an asset's highest and best use; that paragraph specifies only that certain restrictions on the use of the asset should be taken into account when identifying an asset's highest and best use. Some stakeholders requested guidance on the highest and best use of a non-financial asset of a not-for-profit public sector entity not held primarily for its ability to generate net cash inflows that the entity is prohibited from selling, and how that prohibition should be taken into account in measuring the asset's fair value.
BC106        The Board noted that the fair value of an asset is based on a hypothetical sale transaction, notwithstanding any prohibition on the asset's sale. The restrictions taken into account when determining an asset's highest and best use are those that transfer upon the asset's sale to the hypothetical market participant. Therefore, a prohibition on sale of such an asset is not a factor in the determination of its highest and best use, and consequently should be disregarded when measuring the asset's fair value.

Legal restrictions on an asset's use
BC107        Some stakeholders requested guidance regarding restrictions relating to caveats attached to land, such as where biodiversity rights have been sold through a biodiversity scheme and the land cannot be used for another purpose. The Board considered that if the caveats would remain attached to the land upon its sale to a market participant, such caveats should be considered in identifying the asset's highest and best use.

'Implied restrictions' on an asset's use
BC108        Some stakeholders have informed the Board that sometimes a non-financial asset of a not-for-profit public sector entity not held primarily for its ability to generate net cash inflows, although not subject to any legal restrictions, is subject to an 'implied restriction' limiting the asset's use to its current use – that is, where there is no legal restriction imposed on the asset but, because of social or political expectations or other factors, the not-for-profit public sector entity holding the asset would be unable to use the asset for an alternative use.
BC109        Those stakeholders consider that those assets with implied restrictions would never be sold by the entity holding them because of the legal mandates applying generally to the not-for-profit public sector entity. Therefore, they consider that the entity can use those assets only for their current use. They argued