Fatal-Flaw Review Draft Standard: Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities

Wednesday, October 12, 2022

The AASB has issued a Fatal-Flaw Review Draft version of a proposed Standard that would amend AASB 13 Fair Value Measurement for application by not-for-profit public sector entities. Comments are due by 11 November 2022.

The proposed Standard would modify AASB 13 in relation to fair value measurements of non-financial assets of not-for-profit public sector entities not held primarily for their ability to generate net cash inflows. For those assets, the proposed Standard would:

specify that the asset’s current use is presumed to be its highest and best use unless it is highly probable at the measurement date that the asset will be sold, distributed, or used for an alternative purpose to its current use;
clarify that an asset’s use is ‘financially feasible’ if market participants would be willing to invest in the asset’s service capacity, considering both the capability of the asset to be used to provide needed goods or services to beneficiaries and the resulting cost of those goods or services;
specify that, if both the market selling price of a comparable asset and some market participant data required to measure the fair value of the asset are not observable, an entity uses its own assumptions as a starting point and adjusts those assumptions to the extent that reasonably available information indicates that other market participants would use different data; and
provide guidance on how the cost approach is to be applied in measuring their fair value.

The AASB decided to propose these amendments after considering feedback received on Exposure Draft ED 320 Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities.

The Fatal-Flaw Review Draft version of the proposed Standard AASB 2022-X Amendments to Australian Accounting Standards – Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities is open for comment until Friday, 11 November 2022. Please submit your comments to the AASB, via the AASB website or email.