Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p44
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 44/91)
Character Range: 126744–129846

leases with significantly below-market terms and conditions, such as 'peppercorn' leases where a nominal amount is made as payment to the lessor.  Some entities consider AASB 117 Leases takes precedence over AASB 1004 and accordingly, currently recognise such leases at nominal values; others consider the reverse applies and recognise such leases at fair value, together with a related contribution.  The Board decided its project should also clarify the accounting for such leases.

BC7               The Board also observed that various Australian Accounting Standards required a not-for-profit entity to recognise assets received at fair value (or current replacement cost, in relation to inventories) only where the asset had been acquired for no or nominal consideration (for example, AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets).  The Board perceived there to be a gap in the accounting for those transactions where an asset has been acquired for consideration that is below market but is more than nominal.  The Board noted that under existing recognition and measurement rules at that time, an entity would likely not have recognised any income on the transaction, but measured the asset acquired at the amount of the consideration transferred.  The Board considered that, in many instances, such transactions were unlikely to be conceptually different to those for which no consideration was transferred, and consequently decided to also consider the accounting for such transactions as part of this project.

Previous stages of this project

BC8               In previous stages of this project, the Board had previously exposed proposals on income recognition requirements for similar transactions as part of the following Exposure Drafts:

(a)                    ED 125 Financial Reporting by Local Governments (October 2003).  This ED also addressed other issues;

(b)                   ED 144 Proposed Guidance to accompany AASB 1004 Contributions (November 2005);

(c)                    ED 147 Revenue from Non-Exchange Transactions (Including Taxes and Transfers) (February 2006); and

(d)                   ED 180 Income from Non-exchange Transactions (Including Taxes and Transfers) (June 2009).

BC9               However, having regard to constituent feedback and developments in accounting internationally subsequent to the issue of each such Exposure Draft, the Board had decided not to finalise those previous Exposure Drafts.  The last such Exposure Draft, ED 180, was closely based on IPSAS 23 Income from Non-exchange Transactions (Taxes and Transfers).  At that time, the Board decided, having regard to feedback received on the ED and the progress the IASB was making on a project to replace IAS 18 Revenue, not to finalise the proposals set out in ED 180, but instead to refocus its project following issue of IFRS 15 Revenue from Contracts with Customers.

Alternative approaches considered

BC10            In developing this Standard, the Board considered whether to base the income recognition and measurement principles for a not-for-profit