Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p26
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 26/56)
Character Range: 331424–334371

'licence' in any IPSAS.

ABS GFS Manual
     BC24            In developing ED 283, the Board also considered the approach adopted in the ABS GFS Manual in respect of distinguishing licences from other arrangements. The Board noted the ABS GFS Manual defines the term 'licence' widely and infers that although a variety of arrangements could be referred to as licences, revenue from these arrangements could be taxes or administration fees depending on the level of work involved for the issuing public sector entity. Additionally, the Board noted the ABS GFS Manual does not identify the purpose of establishment of an arrangement as a basis for distinguishing a licence from a tax, and adopts the licensor's perspective in ascertaining the economic substance of the transaction. This approach is therefore inconsistent with the points of distinction implied by the definition of a tax in AASB 1058. Accordingly, the Board decided the approach adopted by the ABS GFS Manual would not be useful as a primary or singular point of distinction between a licence and tax, but may provide assistance when considering the purpose of the payment.

     BC25            Despite this, some respondents to ED 283 (including the ABS) preferred that the Board align with the ABS's definition of a licence for distinguishing licences from taxes. However, the Board reaffirmed its decision to not use proportionality of level of work to transaction price as a primary distinguishing feature as:

          (a)                    the Board observed that determining whether the revenue recognised is proportionate to the cost of a licensor's obligations is a difficult and subjective assessment that, based on feedback from preparers, might not be  applied consistently in the preparation of general purpose financial statements;

          (b)                   adopting the ABS GFS Manual approach could result in the majority of the arrangements in question being classified as a tax and accounted for in accordance with AASB 1058. AASB 1058 paragraph B28 specifically precludes taxes from giving rise to a contract liability or revenue recognised in accordance with AASB 15, as they do not promise to provide a good or service in an agreement that creates enforceable obligations. However, the Board noted that a proportion of the arrangements that would be classified as a licence under the guidance in this Standard are different in substance to taxes as:

               (i)                     they do create direct rights for the licensee (most commonly a right to perform) and obligations for the licensor to provide a good or service (also, most commonly, a right to perform); and

               (ii)                   the discretionary nature of licences indicates that the economic purpose of the transaction is to obtain the goods and services (most commonly a right to perform) from the licensor, and therefore it would be counter intuitive to the