Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p55
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 55/91)
Character Range: 157802–160838

accounting for such transactions.

BC41            The Board observed that 'significant' is a term used in other Standards, and considered its meaning therefore would be readily understandable by users of this Standard.  The Board also noted that expressing the scope of AASB 1058 by reference to transactions "significantly less than fair value …" means that transactions where the consideration is only marginally less than fair value are not expressly covered.  Therefore, such transactions may be accounted for consistently with the requirements of AASB 1058 or with the accounting applicable to for-profit entities.  Although this could mean less consistency in the accounting by not-for-profit entities for all asset transactions with consideration less than fair value, the Board regarded this approach as an appropriate balancing of the costs and benefits in accounting for transactions with consideration that is less than fair value, but not significantly less than fair value.

BC42            Some respondents to ED 260 were concerned that the Standard would require the not-for-profit recipient to make an assessment of the transferor's intentions in undertaking a transaction with the entity.  For this reason, in developing its articulation of a revised scope for AASB 1058, the Board wanted to avoid using language that implied a need to assess the vendor's intentions.  Accordingly, the Board decided to articulate in the scope that its interest is in transactions occurring principally to enable the entity to further its objectives.  The Board considered the term 'principally':

(a)                    provides a link between the significantly reduced purchase price (compared to fair value) and the purpose of that reduction being to enable a not-for-profit entity to further its objectives;

(b)                   is more likely to be better understood as it is also currently used in Commonwealth grant applications and in taxation law (for example, in relation to principal place of business); and

(c)                    is useful as there may be more than one reason for setting the terms and conditions of the transactions.

BC43            The Board considered using the term 'specifically' or 'particularly' in place of 'principally'.  However, the Board decided not to finalise the Standard using this language due to:

(a)                    the similarity of the term 'specifically' to 'sufficiently specific' (as used in AASB 15); and

(b)                   concern that the term 'particularly' is too broad, and could give rise to differences in practice as to whether certain transactions are within the scope of this Standard.

BC44            This Standard makes consequential amendments to AASB 16 Leases to require a not-for-profit lessee to measure the right-to-use asset in a lease at its fair value where the lease has been undertaken on significantly below-market terms and conditions principally to enable the entity to further its objectives.  AASB 117 is similarly amended in respect of the