Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p51
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 51/91)
Character Range: 146445–149533

to the Standard to assist entities in understanding whether the accounting for income arising from an arrangement was likely to be addressed by AASB 15 or by this Standard; and

(f)                    costs of educating users of the financial statements of the new approach.

BC30            The Board considered some of the benefits of the revised requirements to be:

(a)                    the approach adopted in AASB 1058 and AASB 15 (as amended by AASB 2016-8) best responds to constituent concerns about the operation of the income recognition requirements formerly set out in AASB 1004, compared to the alternatives considered (see paragraphs BC10–BC17 above);

(b)                   the Board's policy of transaction neutrality means that the application of AASB 15 to not-for-profit entities needed to be addressed at this time; however the concept of performance obligations in AASB 15 has enabled a fundamental change to income recognition for not-for-profit entities.  The performance obligation approach is more comprehensible than the reciprocal approach of AASB 1004;

(c)                    AASB 1058 and AASB 15 (as amended by AASB 2016-8) provide a better reflection of the underlying substance of transfers made to a not-for-profit entity recipient – under the revised principles, in general, income is deferred where an entity has a contractual obligation to deliver specified goods or services;

(d)                   there will be greater transparency of an entity's assets and liabilities which results in better accountability and stewardship.  Assets will be measured at fair value (or current replacement cost, in relation to inventories) at initial recognition where the asset has been acquired for consideration that is significantly less than its fair value, or if no consideration was provided, and the difference is principally to enable the entity to further its objectives.  This helps address the current ambiguity in accounting by a not-for-profit lessee for leases with significantly below-market lease payments and for other assets where the consideration is more than nil or nominal amount but significantly less than the asset's fair value;

(e)                    while the principles in this Standard do not completely address constituent concerns about potential misrepresentation of the not-for-profit entity's financial position and financial performance to users, the Board has managed this through encouraging entities to disclose information distinguishing for users amounts that are restricted in their use (but which may have been recognised as income immediately in accordance with this Standard).  The Board considered that, as there is no contractual liability, the entity has the ability to use the assets acquired in alternative ways if that best reflects the needs of the entity, although the entity may currently have every intention of continuing to use the assets acquired in a designated way;

(f)                    the revised principles are more conceptually consistent with the Framework for the Preparation and Presentation