Highest and best use is the most profitable and legally permissible use of an asset, considering its physical possibilities, legal restrictions, and financial feasibility.
In simple words:
Use the asset in the way that creates the highest value.
ααΎααααΈααβ Fair Value αα non-financial asset ααΆα IFRS 13 ααααααΎ Highest and best us ααΆααΌαααααΆαα
αααααααΆ Property, Plant and Equipment ( IAS 16) ααΎααααΆαα Revaluation Model ααΌα
αααααααα’αααααααΌααα Fair Value ααααααΆα’ααααΎα αααααααααα’αααα’αΆα
ααααΎ Highest and best use
Example β Land
ABC owns a piece of land in a busy city area.
The land could be used for:
-a house β value = $200,000
-a warehouse β value = $300,000
-a 5-story office building β value = $600,000
-a shopping center β value = $800,000
If the shopping center is legally permitted, physically possible, and financially feasible:
Highest and best use = Shopping center
Because it produces the highest value of $800,000.
ααΆαααααα·ααααΆαα αααααααΎαα
ααααΈαα·αααΆα’ααααααααΎααααααα¬α’ααααααα