Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p77
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 77/91)
Character Range: 218173–221178

The Board noted that these disclosures provide useful information to users of a not-for-profit entity's financial statements and that similar disclosures would have been required had the agreement been determined to be within the scope of AASB 15.

Restrictions on the use of an asset

BC126        In its redeliberations, the Board discussed feedback querying whether AASB 1058 should require the disclosure of restrictions on the use and purpose of amounts recognised as income, including restrictions on an entity's ability to liquidate a related asset or to use it as security.  These constituents considered that the disclosure of restrictions is necessary to enable users of financial statements to understand the effects of inflows of resources on the financial position, financial performance and cash flows of the entity.  The Board agreed that it would be useful to a user of the financial statements of a not-for-profit entity, for example, to understand the nature and extent of externally imposed restrictions on resources controlled.  The Board noted these disclosures will go some way to addressing respondent concerns that the proposals in ED 260 do not permit the deferral of income to match expenses in all scenarios where a not-for-profit entity considers funds to have been fully committed to a specific purpose.

BC127        The Board observed that international standard-setters have specified varying disclosures in this regard.  The Board considered whether it would be appropriate to specify a particular disclosure in this Standard (for example, disclosure of components of equity divided into restricted and unrestricted amounts), but decided that the form of the disclosure should be determined by the not-for-profit entity.  This allows an entity to adopt an approach that best aligns with the manner in which it manages and presents its financial statements.  For the same reason, the Board decided not to define "externally imposed restrictions".

BC128        To assist users of the Standard, the Board decided to include examples of various forms the disclosure could take.  The Board acknowledged a concern some preparers have with the proposed Standard is that they consider the primary financial statements will continue to misrepresent to users the resources available to the entity (as the timing of income recognition may be in advance of the expenses the income received is meant to compensate).  In response to this feedback, the Board decided to specify in particular, that a not-for-profit entity may separately identify on the face of the statement of profit or loss and other comprehensive income, the amount of total comprehensive income that is:

(a)                    subject to externally imposed restrictions; and

(b)                   is not subject to any externally imposed restrictions (the 'unrestricted' amount).

Disclosing information about its externally imposed restrictions in this form allows entities to distinguish between 'committed' and