Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p7
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 7/56)
Character Range: 277565–280690

modifications it might consider to AASB 15.  In this context, the Board reviewed the definitions of a 'customer' and of a 'contract' to determine whether a modification was necessary or whether additional not-for-profit guidance would be sufficient.

     BC21            The Board concluded that these aspects do not warrant using different terms other than 'contract' and 'customer' because additional guidance on how those terms apply in a not-for-profit context would provide sufficient direction for entities while maintaining the Board's transaction-neutral approach.  Accordingly, in ED 260 the Board decided to clarify those terms in a not-for-profit entity context.  Feedback on ED 260 indicated broad support for the proposed clarifications, and therefore the Board decided to finalise its proposals in that regard.

Customer
     BC22            In a contract with a customer, the customer may direct that goods or services are to be provided to third party beneficiaries (whether employees, other individuals or the community at large) on the customer's behalf.  The Board noted the IASB's considerations in its Basis for Conclusions to IFRS 15, specifically paragraphs BC54 and BC55 where the IASB argued that the definition of a 'customer' could extend beyond the parties specifically identified in a contract, thereby potentially satisfying the definition of a 'customer' to be in scope of IFRS 15.  The Board noted that the IASB's considerations highlighted in paragraphs BC54 and BC55 concur with the Board's views.  However, the Board noted that while the IASB expressed this view in its Basis for Conclusions to IFRS 15, not-for-profit entities would need more authoritative guidance.

     BC23            Consistent with the IASB's conclusions, the Board acknowledged that identifying the 'customer' in a contract may not always be straightforward for not-for-profit entities.  For example, the Board noted that not-for-profit entities routinely receive grants where the grantor requires the entity to provide services to unspecified third parties.  In all other respects the grant would be within the scope of AASB 15.  In this example, it is unclear whether those unspecified third parties could be considered 'customers' in the contract or whether the grantor is the customer.

     BC24            The Board clarified that in contracts with customers, the customer is usually the party that has contracted with the entity for those goods or services and promises consideration in exchange for those goods or services, regardless of whether there are third party beneficiaries.  Although this principle applies to entities in both the for-profit and not-for-profit sectors, the Board decided to add not-for-profit entity clarification of this principle, in view of:

          (a)                    the likely greater prevalence of third party beneficiaries in contracts entered by not-for-profit entities; and

          (a)                    uncertainty about this issue expressed to the Board in its project outreach activities.

Contract
     BC25            The Board noted that a 'contract' is