Document ID: chunk:federal_register_of_legislation:F2023C00402:front:0:p89
Version: federal_register_of_legislation:F2023C00402
Segment Type: other
Provision Reference: 
Character Range: 233465–236427

offer of enrolment, the prospective client must pay an upfront fee (sometimes referred to as an 'acceptance fee', 'entry fee' or 'enrolment fee'). The enrolment form sets out the following terms and conditions relevant to the fee:

                    upon payment of the fee, future service is guaranteed for the client to commence in the agreed-upon year and on an ongoing basis;

                    the fee is non-refundable and non-transferable; and

                    the fee is not offset against any future fees that are charged on an ongoing basis for continued access to the services.

    The analysis below sets out the process followed by not-for-profit entities in determining the accounting treatment for upfront fees charged. The process does not specifically discuss any particular fee and is applied in the context of the relevant facts and circumstances of an entity's upfront fees. Note: the term customer is used in the analysis to cover all counterparties to an agreement, for example members or students.

    Analysis

    Is the contract within the scope of AASB 15 Revenue from Contracts with Customers?

    The entity first considers whether the agreement with the customer is within the scope of AASB 15, by referring to AASB 15 paragraphs 9–21 and F5–F19 to determine whether there is a contract with a customer:

                    Is there a customer who has promised consideration in exchange for goods or services from the entity and is the promise to transfer goods or services sufficiently specific? (AASB 15, paragraphs 9, Aus9.1 and F5–F7

                    Is there a written, oral or implied agreement, such as an application form or other document? (AASB 15, paragraphs 10 and F8–F9)

                    Does the agreement create enforceable rights and obligations for the parties? For example, could the customer either enforce the agreement or obtain other remedy under Australian law if the promised service was not delivered? (AASB 15, paragraphs 10 and F10–F18)

    In many cases where there will be an ongoing relationship with the customer following payment of the upfront fee, such as annual fees to access a service, revenue would be recognised in accordance with AASB 15. If multiple agreements are in place, for example an agreement for a joining fee and a separate agreement for the annual membership fee, then the guidance in paragraph 17 of AASB 15 should be considered in relation to combining the agreements for accounting purposes.

    What are the performance obligations in the contract, and are the activities associated with the non-refundable upfront fee one of 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