Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p33
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 33/91)
Character Range: 96338–99503

the State Government is sufficiently specific so as to be able to determine when the obligation is satisfied.

    Consequently, the Local Government concludes that the grant is a contract with a customer as defined under AASB 15.  The cost to be incurred by the Local Government in providing the literacy programs can vary from the amount of the grant received.

    Accounting treatment

    In accordance with AASB 15, the Local Government:

                    identifies each performance obligation relating to the grant;

                    recognises a contract liability for its obligations under the agreement; and

                    recognises revenue as it satisfies its performance obligations.

    The journal entries for the accounting treatment (to the end of the first year) are:

     Initial recognition Debit Credit

     24 June 20X0

     Cash  90,000

     Contract liability  90,000

     Year 1

     30 June 20X1

     Contract liability 30,000

     Revenue  30,000

     Expenses – literacy program 32,000

     Cash  32,000

    Example 8C – Multi-year conditional grant

    This example contains the following additional facts:

                    the Local Government receives $30,000 in the first year; and

                    in the following years, the grant is paid in two equal portions, with each payment conditional on the Local Government's adequate progress toward advancing literacy in the previous year.

    In this case, the Local Government recognises a receivable for the first year's grant.  However, the Local Government has no control over the cash flows that are conditional on its future performance.  Accordingly, the Local Government will only recognise those future cash flows once the Local Government becomes unconditionally entitled to them.

    The journal entries for the accounting treatment for the first year's grant are:

     Initial recognition Debit Credit

     24 June 20X0

     Cash  30,000

     Contract liability  30,000

     Year 1

     30 June 20X1

     Contract liability 30,000

     Revenue  30,000

     Expenses – literacy program 32,000

     Cash  32,000

Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity (paragraphs 15–17)

IE6                 Examples 9 and 10 illustrate the requirements in AASB 1058 regarding a transfer of a financial asset to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity, and when revenue is recognised.  Example 11 illustrates a transfer to enable an entity to develop a non-financial asset that cannot be recognised under Australian Accounting Standards, and hence does not meet the criteria for the accounting for transfers of financial assets set out in paragraphs 15–17.

    Example 9—Cash grant for the construction of a recognisable asset – income recognised over time

    On 1 July 20X1, a private sector not-for-profit school, School A, receives a cash grant of $2 million from the State Government to build an early learning centre (ELC) on the school's land to the standard specified by government