Document ID: chunk:federal_register_of_legislation:F2023C00402:front:0:p88
Version: federal_register_of_legislation:F2023C00402
Segment Type: other
Provision Reference: 
Character Range: 230823–233730

and

                    income of $350, in accordance with AASB 1058 – the residual of $350 is a result of a transaction where the consideration provided by the entity ($250) is significantly less than the fair value of the asset (cash of $600) principally to enable Entity B to further its objectives and therefore AASB 1058 applies, with immediate recognition of income.

    A refund obligation is recognised only to the extent that the entity does not expect to retain the refundable amount. Entity B therefore does not recognise the refund obligation of $300 unless the dinner is cancelled or is expected to be cancelled. In that case, and subsequent to the initial accounting above, Entity B would then recognise in respect of each ticket:

                    the reversal of the contract liability of $250 (debit), as settlement is no longer expected;

                    a reduction in cash of $300 (credit), being the refund to the ticket holder; and

                    the difference of $50 (debit) is either an expense or a reduction of donation income previously recognised.

    This results in a net donation of $300 per ticket, reflecting the net cash received for each ticket after the refund has been made.

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