Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p54
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 54/91)
Character Range: 155037–158072

more than no or nominal cost, but significantly less than fair value

BC37            In ED 260, the Board proposed that, if:

(a)                    a vendor in a transaction in which a not-for-profit entity acquires an asset, or

(b)                   a lessor, in a finance lease entered into by a not-for-profit entity;

     makes a donation in the sale or lease contract, the not-for-profit entity should measure the cost of the asset at fair value.  Accordingly, a broader range of assets may need to be measured at fair value on initial recognition than currently required, and a corresponding amount may be recognised as income to the extent no related liabilities or equity contributions arise on the transaction.

BC38            The Board decided to finalise its proposals in this regard, largely as proposed, by way of consequential amendments to various other Australian Accounting Standards.  The Board's considerations in forming this decision are set out in paragraphs BC60–BC68 below.

Significantly less than fair value principally to enable the entity to further its objectives

BC39            Having regard to feedback received, in its redeliberations the Board decided to finalise these proposals, but to shift the focus of AASB 1058 away from emphasising the identification of donations, grants and similar transfers towards requiring an entity to identify whether an asset (other than volunteer services) was acquired for consideration that was significantly less than fair value principally to enable the entity to further its objectives.  The Board considered this does not change the scope exposed in ED 260, but:

(a)                    avoids inadvertently limiting the extent of transactions that might give rise to income on initial recognition of an asset; and

(b)                   gives entities a clear indication of the transactions that are captured within the scope of AASB 1058;

(c)                    has the benefit of not requiring the entity to make an assessment of the transferor's intent; and

(d)                   continues to exclude acquisitions of assets at discounts attributable to auction, distress sale and trade discount pricings.

BC40            In developing its articulation of a revised scope for the Standard, the Board was conscious it did not intend for this Standard to apply to transactions such as trade discounts and distress sales, for which the consideration paid for an asset may be significantly below the asset's fair value.  The Board's view is that such discounts, where made available to all market participants (or a particular market segment) regardless of the participants' objectives, are not specific to the not-for-profit sector: other Australian Accounting Standards specify the accounting for such transactions.

BC41            The Board observed that 'significant' is a term used in other Standards, and considered its meaning therefore would be readily understandable by users of this Standard.  The Board also noted that expressing the scope of