Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p21
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 21/56)
Character Range: 317171–320449

The Basis for Conclusions was originally published with AASB 2018-4 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Public Sector Licensors.

Introduction
     BC1               This Basis for Conclusions summarises the Australian Accounting Standards Board's considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.

Reasons for issuing this Standard
     BC2               Constituents' feedback received during the AASB's Service Concession Arrangements: Grantors project (which addressed some public sector licences) identified there was a risk that revenue from licences issued by not-for-profit (NFP) public sector licensors could be materially understated (revenue is deferred when it should be recognised immediately) or overstated (revenue is recognised immediately when it should be recognised over time) in the absence of guidance on how AASB 15 Revenue from Contracts with Customers applies.

     BC3               AASB 15 provides specific guidance on accounting for revenue arising from the issuance of intellectual property (IP) licences. However, as AASB 15 is generally expressed from the perspective of for-profit entities in the private sector, the Board received feedback that it is unclear whether the guidance in AASB 15 could be applied to account for revenue from licences issued by not-for-profit public sector licensors, particularly in the case of non-IP licences and non-contractual licences arising from statutory requirements.

     BC4               When commencing this project the Board noted diversity in practice in relation to the accounting for revenue from licences, in particular non-IP licences (eg casino and gaming licences). Later investigation indicated that whilst the qualitative number of licence transactions is significant, the quantitative impact is unlikely to be significant to the public sector.

     BC5               The Board had previously considered the accounting for revenue from licences issued by not-for-profit public sector licensors as part of its projects relating to:

          (a)                    AASB 1059 Service Concession Arrangements: Grantors (see paragraphs BC38–BC39); and

          (b)                   AASB 1058 Income of Not-for-Profit Entities (see paragraph BC40).

     BC6               In both instances, the Board deferred its deliberations pending a specific project to research the extent to which these types of licences exist, as well as the current and potential accounting treatment.

     BC7               Consequently, the Board decided to add to its 2017-2019 Work Program a project to clarify the accounting for revenue from licences issued by not-for-profit public sector licensors. The Board decided the project should address:

          (a)                    the nature of the right created by a licence – whether the licence confers the right to use or access a licensor's asset, or confers a right to perform an activity where there is no licensor asset involved, and whether