Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p25
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 25/91)
Character Range: 74977–77718

cash) within the scope of AASB 9.

    The above fact pattern and analysis applies to Examples 6A and 6B, described below.

    Example 6A – Enforceable agreement, no specific performance obligations but restrictions on timing of expenditure

    This example contains the additional fact that Charity B's agreement with the grantor specifies that the grant must be used in accordance with the charity's overall objectives.  The agreement does not specify the services that the grant must be used for.

    Charity B analyses the terms of the grant agreement and notes:

                    the agreement is enforceable as the grantor can enforce its rights in the contract to require Charity B to return the cash of $2.4 million if Charity B does not spend the amount in the year ending 30 June 20X7;

                    the required use of the funds to further the entity's objectives is not sufficiently specific to know when goods or services have been transferred and the obligation satisfied; and

                    the time restriction on use of the funds is not sufficiently specific of itself to create a performance obligation to transfer goods or services to the grantor or a third party so that it can be identified when the obligation is satisfied.  When funds have been commingled with other funds, such as general purpose funds, used to fund administrative services as well as those related to the objectives of the entity, it is not possible to reliably determine what transfer of goods or services may have occurred using the specific funds.  The time restriction is also not sufficiently specific of itself to create a constructive obligation.

    Consequently, Charity B concludes that the transaction is not a contract with a customer as defined under AASB 15.  Because the $2.4 million grant is an asset the charity acquired for no consideration to further its objectives, the grant is within the scope of AASB 1058.

    Accounting treatment

    Charity B determines that there are no related amounts to recognise in accordance with paragraph 9.  Therefore, Charity B recognises income of $2.4 million in accordance with paragraph 10 of AASB 1058 on 31 May 20X6 on recognition of the financial asset in accordance with AASB 9.

    Furthermore, on 31 May 20X6, Charity B does not have a liability under AASB 9 for the potential breach of contract, as it has the discretion not to spend the grant money before 1 July 20X6.  If Charity B breaches the contract by spending the money before 1 July 20X6 or failing to spend the grant in full by 30 June 20X7, the breach is the obligating event giving rise to a liability (in this instance, a penalty).  For this reason, Charity B recognises the grant of $2.4 million