Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p60
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 60/91)
Character Range: 171751–174692

Standard).  The Board noted that this view is consistent with the requirement in paragraph 66 of AASB 15 for an entity to measure any non-cash consideration at fair value to determine the transaction price in respect of a contract in which a customer promises consideration in a form other than cash.

BC62            The Board exposed this view as part of ED 260.  The Board observed that this proposal was not limited to acquisitions of assets at no cost or for nominal consideration.  Consequently, in ED 260 the Board proposed:

(a)                    extending the scope of the corresponding requirements in AASB 102, AASB 116, AASB 138, AASB 140 and AASB 141 that specify that the cost of an asset is measured at its fair value (or current replacement cost, in relation to inventories) as at the date of acquisition if the asset was acquired at no cost or for nominal consideration;

(b)                   some finance lease assets of lessees would consequently be initially measured at fair value, rather than at the lower of the fair value of the leased property and the present value of the minimum lease payments (see AASB 117).  The Board observed its proposed modification of the leasing requirements in this regard would achieve consistency with the Standards referred to in paragraph BC62(a); and

(c)                    other assets recognised in accordance with Part B of ED 260 would also be required to be initially recognised at fair value.

BC63            The Board considered that the previous limitation on the use of fair value (or current replacement cost, in relation to inventories) to measure cost (ie when assets are acquired at no cost or for nominal consideration) was too narrow, for the following reasons:

(a)                    significant donations made by vendors are not recognised when the consideration paid by the entity is greater than nominal;

(b)                   as a consequence of (a), donations are treated inconsistently (for example, because a cash donation is recognised but a donation in the form of a discount on an asset purchase is not); and

(c)                    the different treatment of donated assets, according to whether consideration is greater than 'nominal', means that it is important to identify when consideration is 'nominal'; however, that term is undefined and its application may require subjective assessments.

BC64            Accordingly, the Board considered further modification of the asset measurement requirements set out in Australian Accounting Standards may be warranted.  The Board proposed this modification in ED 260 as it considered the benefits of further modifying IFRS requirements in this regard to outweigh any additional costs to a not-for-profit entity, having regard to the scale of such transactions in the not-for-profit sector and noting that the modification would improve comparability by requiring consistent accounting for transactions