Document ID: chunk:federal_register_of_legislation:F2022L00705:reg:4:p1
Version: federal_register_of_legislation:F2022L00705
Segment Type: reg
Provision Reference: reg 4 (pt 1/4)
Character Range: 3594–6543

4                        Paragraph IE4A, a heading and Example 7A are added to the Australian illustrative examples for not-for-profit entities accompanying AASB 15 as follows:

     Accounting for upfront fees (paragraphs F5–F27)

     IE4A Example 7A illustrates application of the requirements of AASB 15 to transactions where a not-for-profit entity charges upfront fees to customers or members as part of the goods and services offered. The following are examples of upfront fees:

               (a)                    joining fees at clubs and membership bodies;

               (b)                   enrolment fees at schools; and

               (c)                    other establishment or set-up fees where the fee is paid at or near contract inception and the customer can renew the contract each year without paying an additional fee.

          Where the goods or services to which the upfront fee relates are in the scope of AASB 15, the recognition of the upfront fee as revenue depends on whether the payment of the fee relates to a transfer of distinct goods or services to the customer that meets the definition of a performance obligation. In many cases, even though a non-refundable upfront fee relates to the activity that an entity is required to undertake to fulfil the contract, that activity may be an administrative task that does not necessarily result in the transfer of a promised good or service to the customer.

    Example 7A—Upfront fee charged by an organisation

    An organisation offers enrolment to prospective clients for the services it provides. Upon accepting an offer of enrolment, the prospective client must pay an upfront fee (sometimes referred to as an 'acceptance fee', 'entry fee' or 'enrolment fee'). The enrolment form sets out the following terms and conditions relevant to the fee:

      •  upon payment of the fee, future service is guaranteed for the client to commence in the agreed-upon year and on an ongoing basis;

    •          the fee is non-refundable and non-transferable; and

      •  the fee is not offset against any future fees that are charged on an ongoing basis for continued access to the services.

    The analysis below sets out the process followed by not-for-profit entities in determining the accounting treatment for upfront fees charged. The process does not specifically discuss any particular fee and is applied in the context of the relevant facts and circumstances of an entity's upfront fees. Note: the term customer is used in the analysis to cover all counterparties to an agreement, for example members or students.

    Analysis

    Is the contract within the scope of AASB 15 Revenue from Contracts with Customers?

    The entity first considers whether the agreement with the customer is within the scope of AASB 15, by referring to AASB 15 paragraphs 9–21 and F5–F19 to determine whether there is a contract with a customer:

      •  Is there a