Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p18
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 18/91)
Character Range: 55905–59027

They are intended to illustrate how a not-for-profit entity might apply some of the requirements of AASB 1058 Income of Not-for-Profit Entities to particular types of transactions, on the basis of the limited facts presented.  Although some aspects of the examples might be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern need to be evaluated when applying AASB 1058.

Recognition and measurement of income and related amounts (paragraphs 9–22)

IE2                 Examples 1–8 illustrate the requirements in AASB 1058 for identifying related amounts and income to be recognised in accordance with paragraphs 9 and 10 on the initial recognition of an asset.  The following requirements are illustrated in the examples in identifying related amounts in the form of:

(a)                    contributions by owners, in accordance with AASB 1004;

(b)                   a financial instrument, in accordance with AASB 9;

(c)                    a lease liability arising in a lease contract, in accordance with AASB 16; and

(d)                   revenue or a contract liability arising from a contract with a customer, in accordance with AASB 15.

Contributions by owners

    Example 1—Contributions by owners – transfer of cash appropriation

    A Government department transfers cash appropriations of $730,000 to its controlled entity and designates the transfer before it occurs as an equity contribution in accordance with paragraph 8(c) of AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities, as identified in AASB 1048 Interpretation of Standards.

    Scope and asset recognition

    The controlled entity determines:

                    the cash appropriation is an asset acquired by the controlled entity for no consideration to further the objectives of the controlled entity.  Accordingly, the appropriation is within the scope of AASB 1058; and

                    it controls a financial asset within the scope of AASB 9.

    Accounting treatment

    In accordance with paragraph 9, the related amount for the cash asset is a contribution by owners, which is recognised in equity, as it meets the requirements of AASB Interpretation 1038 and AASB 1004.

    The journal entry on initial recognition by the controlled entity is:

      Debit Credit

     Cash  730,000

     Equity – contributed capital  730,000

    Example 2—Contributions by owners to a private sector not-for-profit entity

    Charity P makes a contribution of $500,000 to establish Company S, which operates child care centres.  There are no repayment terms to the contribution and there are no goods or services to be provided to Charity P in return for the contribution.  Company S is a company limited by guarantee with required member contributions of $10.  Charity P controls the voting rights and in accordance with AASB 10 Consolidated Financial Statements consolidates Company S.

    Scope and asset recognition

    Company S determines:

                    the cash from the contribution is an asset acquired by Company S