Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p63
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 63/91)
Character Range: 179817–182875

as a beneficiary in that Will.  The Board considered that until no other party holds a right to challenge the Will, the entity does not have an enforceable right to receive the bequeathed items, and that it is likely that a not-for-profit entity does not gain control of the asset until such time.  Consistent with its decision to exclude asset recognition criteria from this Standard, the Board decided not to include guidance on when an entity may gain control of a bequest.

BC70            In commenting on the Exposure Draft, respondents also expressed concerns about the accounting for endowments made for the perpetual benefit of the entity.  Respondents sought clarification of the accounting for such endowments, including:

(a)                    the form, if any, of the asset controlled; and

(b)                   whether the endowment is a contract with customer within the scope of AASB 15, or is recognised as income immediately on obtaining control.

BC71            The Board decided there was no need to develop any new principles in relation to endowments.  Also, consistent with its decision to exclude asset recognition criteria from this Standard, the Board decided not to include guidance on when an entity may gain control of an endowment.  However, having regard to the concerns raised by constituents, the Board decided to include illustrative examples to assist an entity in understanding whether a contract liability may need to be recognised on gaining control of an endowment.

Transactions including a contract with a customer

BC72            A customer may enter into a contract with a not-for-profit entity with a dual purpose of obtaining goods or services and to help the not-for-profit entity achieve its objectives.  The Board considered that such a contract should be separated into component parts to faithfully represent the impact of the transaction on the entity's financial performance.

BC73            The Board initially explored using a measurement-driven 'residual' approach to identify donation components of contracts with customers.  Under this approach,

(a)                    performance obligations of a not-for-profit entity arising from a particular contract would be measured at the stand-alone selling price for the unit of account for the usual sale of the promised goods or services; and

(b)                   the residual after deducting the measure of the performance obligations in (a) above from the total contract consideration (ie transaction price) would be recognised immediately as donation income.

BC74            The Board decided not to proceed with this approach having regard to:

(a)                    the risk of mistakenly identifying donation components in contracts with customers, because of measurement error; and

(b)                   the time and cost of estimating the aggregate of the stand-alone selling prices of the promised goods or services separately from the transaction price would often exceed the benefits to users.

BC75            Consequently, in ED 260