Document ID: chunk:federal_register_of_legislation:F2022L00705:reg:5:p2
Version: federal_register_of_legislation:F2022L00705
Segment Type: reg
Provision Reference: reg 5 (pt 2/6)
Character Range: 15351–18360

Board's proposals with respect to the amendments finalised in this Standard were exposed for public comment in January 2022 through Exposure Draft ED 318 Illustrative Examples for Income of Not-for-Profit Entities and Right-of-Use Assets arising under Concessionary Leases.

     BC8               The significant issues considered by the Board in developing ED 318 are addressed in the following sections.

Income of not-for-profit entities
BC9               In developing ED 318, the Board considered comments from stakeholders that Illustrative Example 3A in AASB 1058 may lead to diversity in the recognition of financial liabilities as it does not explain adequately whether recognition of a financial liability is required for any funding received by an entity that is subsequently directed to other recipients and income recognised for the portion retained.
BC10            The Board also noted concerns about the diversity of practice in accounting for upfront fees received by not-for-profit entities. Where the not-for-profit entity recognised revenue within the scope of AASB 15 and a non-refundable upfront payment is charged to the customer, AASB 15 paragraphs 22–30, B48–B51 and F20–F27 require an entity to assess whether the upfront fees relate to the transfer of a promised good or service. If the upfront fees do relate to a transfer of goods or services, revenue is recognised over the time the service or goods are provided rather than on receipt of the funds.
BC11            Stakeholders raised this issue from the perspective of diversity in practice, where some entities are deferring revenue (and recognising a contract liability in accordance with AASB 15) and other entities are continuing to recognise revenue on receipt of fees which, prima facie, look very similar. Stakeholders also indicated that the principle of deferral is confusing to boards, management committees, members and other users as the amounts received are not refundable. Stakeholders requested further guidance to clarify the principle and why a contract liability is recognised when the funds will never be repaid.
BC12            The Board considered the stakeholder comments and assessed the feedback with reference to the AASB Not-for-Profit Entity Standard-Setting Framework. Whilst the original conclusions in Illustrative Example 3A in AASB 1058 are appropriate, the Board proposed amending the example to clarify the conclusion further and adding an additional example to illustrate a contrasting scenario. The Board also proposed adding an additional illustrative example to AASB 15 (Example 7A) to address the issues that stakeholders raised regarding upfront fees received that are in the scope of AASB 15. The Board did not propose amendments to AASB 15 and AASB 1058 in regard to other comments received from stakeholders and decided to consider that feedback in the forthcoming post-implementation review of AASB 1058 and guidance for not-for-profit entities in AASB 15. The Board also decided to