Document ID: chunk:federal_register_of_legislation:F2023C00402:front:0:p90
Version: federal_register_of_legislation:F2023C00402
Segment Type: other
Provision Reference: 
Character Range: 236104–239016

these performance obligations?

    The entity considers the guidance on:

                    accounting for non-refundable fees in AASB 15, paragraphs B48–B51; and

                    identifying performance obligations in AASB 15, paragraphs 22–30 and F20–F27;

    to determine whether the upfront fee relates to the transfer of a good or service separate to the provision of services in the future.

    In performing this analysis, the entity notes that performance obligations do not include activities that an entity must undertake to fulfil a contract (eg setting up a customer on the system, printing membership cards and similar) unless those activities transfer a good or service to the customer (AASB 15, paragraph 25). The non-refundable fee might cover internal administrative activities that enable the entity to provide future services to the customer. However, these activities do not transfer a promised good or service to the customer separate from the provision of future services and therefore do not satisfy a separate performance obligation (AASB 15, paragraph B51). If this is the case, the entity concludes that the non-refundable upfront fee – to the extent it relates to the internal administrative services – does not represent a payment for a separate performance obligation but is in substance an advance payment for future services.

    In other circumstances, some or all of the upfront fee may relate to a separate performance obligation or obligations, whether satisfied at or near contract inception or otherwise.

    How is the revenue for the upfront fee recognised?

    Where the activity does not result in a transfer of a good or service to the customer that satisfies a separate performance obligation and the upfront fee is an advance payment for performance obligations to be satisfied in the future, the upfront fee is recognised as revenue as these future services are provided, that is, over the period in which the performance obligation is satisfied. If the entity has charged the non-refundable fee in part as compensation for costs incurred in setting up a contract (or other administrative tasks) and those setup activities are not a separate performance obligation, they should be disregarded when measuring progress towards completion of the services (AASB 15, paragraph B51). The revenue recognition period will extend beyond the initial contractual period if the entity grants the customer the option to renew the contract and that option provides the customer with a material right (eg no requirement to pay a further joining fee on renewal) (AASB 15, paragraphs B40 and B49). Annual fees charged to access the services will be recognised as revenue over the period that the services are provided.

    In the circumstances where some or all of the upfront fee relates to a separate performance obligation or obligations, the relevant portion of the