According to IFRS 13, what is meant by "highest and best use" of a non-financial asset?

The concept of "highest and best use" in IFRS 13 refers specifically to the use of a non-financial asset that would maximize its value from the perspective of market participants. This definition encompasses a broader range of considerations than merely focusing on financial metrics or legal permissions.

When evaluating an asset's highest and best use, one must consider what potential uses are both physically possible and financially feasible, while also being legally permissible. However, the definitive aspect lies in how market participants would view the most advantageous use of the asset, taking into account factors like demand, market trends, and alternative uses that may be more beneficial.

This understanding is critical, especially in the context of fair value measurement, as it helps establish a clearer picture of the asset's potential income generation capabilities and ultimately influences investment decisions. By focusing on market participants' perspectives, this definition provides a comprehensive framework that aligns with the intentions of IFRS 13 to ensure that fair value assessments reflect current market realities.