Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p6
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 6/56)
Character Range: 274726–277846

of AASB 15 for not-for-profit entities.

     BC17            The Board observed that not-for-profit entities might receive transfers of financial assets that the entity must use to acquire or construct a non-financial asset that the entity will control.  The Board noted various views on the requirements that should apply to these transfers, which could result in divergence in practice.  The Board considered that these transfers are an in-substance transfer of the underlying non-financial asset the entity must acquire or construct.  Accordingly, the Board decided to specify accounting requirements for these transfers in AASB 1058 and to clearly state that these transfers are not within the scope of AASB 15 for not-for-profit entities.

     BC18            The Board noted that paragraph 15 of AASB 15 specifies requirements for contracts with customers that do not meet the criteria in paragraph 9 of AASB 15.  For the purposes of the guidance the Board developed to accompany AASB 15 the Board noted, in particular, that some of the criteria in paragraph 9 relate to enforceable agreements and sufficiently specific performance obligations.  The Board considered that the requirements of paragraph 15 would create ambiguity in the context of AASB 1058 and the additional guidance the Board developed to accompany AASB 15.  Consequently, the Board decided to amend AASB 15 to state that any contract of a not-for-profit entity that is not enforceable or does not contain sufficiently specific performance obligations is not within the scope of AASB 15.  Moreover, not-for-profit entities would need to consider whether that contract should be accounted for in accordance with AASB 1058.  The Board noted that this amendment would help to avoid confusion and divergence in practice.

Terminology
     BC19            Not-for-profit entities often receive assets through grants and other transactions, where those transactions:

          (a)                    are not described as contracts, even though they may be part of agreements that specify the goods or services to be transferred by the recipient of the grant;

          (b)                   are not described as transactions with 'customers';

          (c)                    might impose an obligation to transfer goods or services; or

          (d)                   might require a not-for-profit entity to provide benefits to third party beneficiaries when they transfer promised goods or services.

     In these circumstances, the party, or parties, that should be regarded as the 'customers' might be unclear.

     BC20            The Board considered whether to make modifications to some terms in AASB 15 that would be clearer for not-for-profit entities to apply.  In developing ED 260 the Board decided to maintain a transaction-neutral approach to any 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