Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p70
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 70/91)
Character Range: 198818–201833

not a contract with a customer within the scope of AASB 15; and

(c)                    AASB 15 applies, but does not require any originally transferred cash and an associated contract liability to be recognised.  Instead, the underlying recognisable non-financial asset and income is recognised as the asset is constructed, akin to treating the transaction as an in-substance transfer of the underlying asset as consideration for the construction or acquisition service.

BC98            For avoidance of doubt, the Board decided to identify the accounting that applies to such transfers.  In its redeliberations, the Board observed that in such arrangements, in substance, the transferor had intended to transfer a recognisable non-financial asset to the not-for-profit entity.  The Board considered that an in-substance transfer of a good for use by the entity itself should not result in income until the recipient has satisfied its obligation to construct or acquire the asset.  That is, the timing of income recognition should reflect the entity receiving the asset directly, rather than the cash to construct or acquire the asset.  Accordingly, the Board decided that the accounting for such transactions should reflect that of the approach in AASB 15.  However, given the diverse views as to whether AASB 15 applies, the Board decided to specify instead requirements in AASB 1058 to mirror, to the extent appropriate, the accounting that would be achieved had the transaction been accounted for had it been incontestably a contract with a customer within the scope of AASB 15.

BC99            The Board sought feedback on its proposals in this regard as part of the public 'fatal flaw' review of the draft Standard.  Respondents to the draft Standard were generally supportive of the proposal to include specific requirements for such arrangements.

BC100        The Board discussed the following concerns about the proposal:

(a)                    what is meant by 'own use';

(b)                   whether the specified accounting could apply also in instances where the non-financial asset acquired is a resource controlled that meets the definition of an asset but that is not permitted to be recognised by an Accounting Standard; and

(c)                    whether the specified accounting should be extended to apply also in instances where a non-financial asset (for example, construction materials) are made available to the entity, instead of cash or another financial asset.

BC101        The Board discussed feedback seeking clarification whether the specified accounting could apply to instances where an asset is constructed as directed but used by others as part of furthering the not-for-profit entity's objectives.  For example, a not-for-profit entity whose mission is to provide housing services may receive a grant to construct public housing, however, the not-for-profit entity would not itself occupy the building when constructed.  The Board observed its intention was for the scope