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8.6.2 Measurement at initial recognition

Recognition is the process of recognising the cost of the asset in the entity’s asset register and in financial statements.

The basis for initial measurement of the value of an asset is its cost. In respect of not-for-profit entities, where an asset is acquired at no cost, or for a nominal cost, the cost is its fair value as at the date of acquisition (AASB 116(15)) (AASB 2015d)1. See also AASB 13 for Fair Value Measurement, including the Fair Value Decision Tree developed in IPWEA (2015b).

Fair value is the amount for which an asset can be exchanged between knowledgeable, willing parties. ‘To establish a fair value, market-based evidence (including willing buyers and sellers) must be available’ (IPWEA 2015b). The process to be followed for the determination of a Fair Value of an asset is summarised in the Fair Value Decision Tree (IPWEA 2015b).

For most infrastructure assets and public-sector assets, a market type valuation is generally not available and DRC is considered to be the most appropriate basis of valuation (IPWEA 2015b).


  1. AASB 116, Property, Plant and Equipment, paras 15, 15.1, (AASB 2015d).