Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p69
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 69/91)
Character Range: 196143–199092

outside the scope of its current project; and

(b)                   agreements in which different parties pay collectively for a specified good or service are not limited to not-for-profit entities.

Transfers for the purpose of enabling an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity

BC95            Some respondents to ED 260 sought clarification on whether a transfer made for the purposes of enabling an entity to acquire or construct a recognisable non-financial asset for its own use would be recognised as income immediately, or whether a contract liability determined in accordance with AASB 15 arises.  The Board noted that these concerns specifically related to whether a transfer of financial assets to enable an entity to acquire or construct a non-financial asset would result in a transfer of goods or services to the transferor or another party.  If such a transfer does not result in the transfer of goods or services to the transferor or another party it will be outside the scope of AASB 15 and no contract liability is recognisable; and consequently, under the proposals, the transfer recognised as income on receipt.

BC96            The Board heard feedback from constituents from the university sector that universities presently recognise a cash grant received to build an educational facility at the time of receiving the grant (that is, on gaining control).  Some constituents hold the view that this accounting treatment does not appropriately reflect the relationship of the grant and its related expenditure as the related expenditure is recognised over a number of reporting periods as the educational facility is built.

BC97            The Board discussed whether such transfers were within the scope of AASB 15, as had been suggested by ED 260.  The Board considered that in the absence of guidance, diverse practice may arise in this regard, for example, some may consider that:

(a)                    the construction or acquisition of a recognisable non-financial asset on behalf of the grantor is an activity representing services being transferred to the grantor, similar to research activities undertaken on behalf of the grantor but benefiting the community at large.  Under this view, an entity would conclude there had been a transfer of goods or services to the transferor or another party;

(b)                   the construction or acquisition of the recognisable non-financial asset is not an activity representing services being transferred to the grantor as the asset remains with the not-for-profit entity.  Under this view, an entity would conclude that the transfer is not a contract with a customer within the scope of AASB 15; and

(c)                    AASB 15 applies, but does not require any originally transferred cash and an associated contract liability to be recognised.  Instead, the underlying recognisable non-financial asset and