Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p46
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 46/91)
Character Range: 132506–135517

accounting did not reflect the true underlying financial performance of the entity.  Accordingly, the Board considered that basing its project proposals on existing IPSAS would not meet its objective in undertaking this project; and

(b)                   the IPSASB is currently developing new standards-level requirements and guidance on revenue to amend or supersede that currently in IPSAS.  As part of that project, the IPSASB is expected to have regard to the requirements set out in IFRS 15.  The IPSASB is not expected to complete its project before 2019.  Having regard to the effective date of AASB 15, the Board considered that it is necessary for it to develop guidance at this time to assist not-for-profit entities in implementing AASB 15 in advance of the IPSASB project.

Extending the scope of AASB 120

BC15            As part of its deliberations about an appropriate approach, the Board observed that extending the scope of AASB 120 to not-for-profit entities would allow government grants to be accounted for under a strict transaction-neutral approach.  However, the Board was reluctant to do so, given the:

(a)                    limited scope of transfers addressed by AASB 120 compared to the varied transfers received by a not-for-profit entity; and

(b)                   application of the recognition and presentation requirements in that Standard could result in an entity's assets being materially understated.  For example:

(i)                     government grants of non-monetary assets may be measured at a nominal amount;

(ii)                   government grants relating to assets may be deducted in determining the carrying amount of the assets; and

(iii)                 grants are not to be recognised by an entity until there is reasonable assurance that the entity will comply with the conditions attaching to the grants and the grants will be received (however, conditions attaching to grants are relevant to whether liabilities exist, not to whether assets have been received).

BC16            The Board observed that extending the application of requirements in AASB 120 to all transfers of a not-for-profit entity would require a not-for-profit entity to defer income recognition for every form of transfer until there is reasonable assurance that the entity will comply with any conditions attached to the transfer.  AASB 120 does not define 'conditions', and consequently, the Board was concerned there would be inconsistency in application of the requirements.  For example, whether conditions include only performance conditions (as used in the IFRS for SMEs), akin to performance obligations of the form specified by AASB 15, or whether conditions include other conditions.  The Board also considered it unclear whether the 'conditions' of some transfers, for example, an endowment that must be used to provide an annual scholarship, could ever be said to be met.  Accordingly, the Board was not convinced that developing proposals based on AASB 120 would