Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p56
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 56/91)
Character Range: 160591–163562

the right-to-use asset in a lease at its fair value where the lease has been undertaken on significantly below-market terms and conditions principally to enable the entity to further its objectives.  AASB 117 is similarly amended in respect of the leased asset recognised in a finance lease.  The Board observed that the lease payments (the consideration) to acquire the asset in such transactions will be significantly less than the asset's fair value.  Consequently, leases undertaken on significantly below-market terms and conditions principally to enable the entity to further its objectives are within the scope of AASB 1058.

Scope exclusions

BC45            While not wanting to limit the extent of transactions that might give rise to income on initial recognition of an asset, the Board acknowledged that in some cases other Standards provide more detailed income recognition requirements.  Accordingly, the Board decided to exclude transactions within the scope of the following Standards from AASB 1058:

(a)                    AASB 3 Business Combinations;

(b)                   AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts; and

(c)                    AASB 112 Income Taxes.

BC46            The Board expects it would be rare for a not-for-profit entity to acquire an asset for consideration in the form of share-based payment valued significantly below the asset's fair value, on terms made principally in order to further the entity's objectives.  However, the Board decided to exclude AASB 2 Share-based Payment from this Standard for avoidance of doubt.

BC47            The Board also decided to exclude, from the scope of AASB 1058:

(a)                    licences outside the scope of AASB 15 (see paragraph BC48 below); and

(b)                   restructures of administrative arrangements within the scope of AASB 1004 Contributions (see paragraph BC49).

BC48            In its redeliberations on the ED, the Board discussed a concern that AASB 1058 would apply to a transfer of a licence to a not-for-profit entity, where that transaction is not within the scope of AASB 15.  The Board heard that the accounting for licences in the public sector is a significant issue, and observed that the Board had not before considered whether public sector licences should be accounted for in accordance with AASB 1058, or whether the licences are more appropriately accounted for by analogy to AASB 15.  The Board signalled its intention to undertake a separate project on the accounting for public sector licences, and as it did not want to presuppose the accounting outcomes of that project, decided to exclude licences that are outside the scope of AASB 15 from this Standard.  The Board noted that not-for-profit entities with such licences should develop an accounting policy in accordance with AASB 108, and that this policy could extend to applying the accounting set out in AASB 1058