Document ID: chunk:federal_register_of_legislation:F2024C00046:body:0:p85
Version: federal_register_of_legislation:F2024C00046
Segment Type: other
Provision Reference: 
Character Range: 222749–225518

timing of potentially identifying a higher and better alternative use with the criteria in AASB 5 should reduce the time and effort by preparers and auditors and reduce inconsistency in application.
BC65            Therefore, the Board decided to issue for comment a Fatal-Flaw Review draft version of the Standard to propose that an entity is not required to consider whether an asset's highest and best use differs from its current use unless the asset has met the criteria for classification as 'held for sale' under AASB 5 or it is highly probable that the asset will be used for an alternative purpose to its current use.
BC66            In reaching its decision referred to in paragraph BC65, the Board considered the other alternative to the ED proposals expressed by respondents, namely, identifying a higher and better use of an asset upon formal approval of selling the asset or distributing it to owners. The Board concluded that this other alternative would not sufficiently address the concerns expressed by respondents regarding the proposal in ED 320, because formal approval of sale or distribution to owners can precede sale by an extended period. In contrast, the AASB 5 criteria for an asset being 'held for sale' include that the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.
BC67            Consistent with ED 320, and in contrast with AASB 5, the Board considered that it is not essential that a potential higher and better alternative use of an asset is identified only through a future sale of the asset: the asset's higher and better alternative use could be identified through future redeployment for an alternative purpose. Substantially the same point for requiring an entity to consider whether a higher and better alternative use of an asset might have arisen should apply to assets that would be sold or redeployed.

Proposal in Fatal-Flaw Review draft Standard
BC68            The Board noted that paragraphs 7 and 8 of AASB 5 require all the following criteria to be met for an asset to be classified as 'held for sale':
(a)                    the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;
(b)                   the appropriate level of management is committed to a plan to sell the asset;
(c)                    an active programme to locate a buyer and complete the plan has been initiated;
(d)                   the asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value;
(e)                    the sale should be expected to qualify for recognition as a completed sale within one year from the date of