Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p32
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 32/91)
Character Range: 93570–96581

MOU and so recognises the grant as income in accordance with paragraph 10 of AASB 1058 on 24 June 20X0.

    The journal entry for the accounting is:

     24 June 20X0 Debit Credit

     Cash  90,000

     Income  90,000

    Example 8B – Enforceable and sufficiently specific performance obligation

    This example contains the following additional facts:

                    the MOU outlines the agreed activities of education programs that are tailored to the literacy needs of the students.  The Local Government is required to provide to the State Government an annual report on the activities undertaken and the progress of the program.  The Local Government is able to identify when its specific performance obligations are satisfied and expects to fulfil its promise to provide the agreed activities; and

                    the State Government can enforce the repayment of the grant if the specified activities are not undertaken by requiring direct repayment or otherwise deducting unspent monies from future funding.

    Scope and asset recognition

    The Local Government determines:

                    the $90,000 grant is an asset the Local Government acquired to further the objectives of the Local Government; and

                    it controls a financial asset ($90,000) within the scope of AASB 9.

    Based on the facts and circumstances, on gaining control of the grant, the Local Government determines that the grant agreement (the MOU) does not give rise to related amounts of the following types:

                    a contribution by owners, as the State Government does not control the Local Government;

                    a lease liability as defined in AASB 16, as the grant agreement is not a lease and does not contain a lease;

                    a financial liability within the scope of AASB 9, as there is no obligation to provide cash or another financial asset to other parties; and

                    a provision within the scope of AASB 137, as the agreement specifies legal obligations and there are no other sufficiently specific constructive obligations to consider.

    The Local Government analyses the terms and conditions of the grant, and notes:

                    the agreement is enforceable (refer to paragraphs F10–F18 of AASB 15), as the grantor can enforce its rights in the contract to require the Local Government to return the funds if the Local Government does not fulfil its specific performance obligations under the agreement (i.e. by providing literacy programs tailored to the needs of the students and annual reports to the State Government); and

                    the Local Government's obligation to transfer the specific services in return for the consideration from 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