Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p28
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 28/91)
Character Range: 82705–85605

of AASB 1058; and

                    it controls a financial asset ($160,000) within the scope of AASB 9.

    Based on the facts and circumstances, on gaining control of the donations, Charity C determines that the donations do not give rise to related amounts of the following types:

                    a contribution by owners, as the donors do not have an ownership interest in Charity C, or if they are owners, the donations were not made in their capacity as owners;

                    a lease liability as defined in AASB 16, as the agreement Charity C enters into with the donors with respect to the donations 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 provides legal obligations and there are no other constructive obligations to consider – there is no constructive obligation as past practice indicates water wells have been built in a number of different developing countries and the possible obligation to build water wells is not sufficiently specific to know when those funds received have been spent on water wells, or whether they have been spent on other purposes.

    Charity C assesses whether it has any related amounts in the form of revenue from a contract with a customer in accordance with AASB 15.  Charity C determines its arrangement with donors is not an enforceable agreement in accordance with paragraph 10 of AASB 15 as there is no return obligation, and although management intends to spend the monies to build wells in a particular country, there is no public statement that would establish an enforceable contractual arrangement.  The Board noting that the donation is to be spent on water wells is not sufficiently specific to enable enforcement of the contract, and there is no return obligation if not spent on water wells.

    Accounting treatment

    Accordingly, Charity C recognises the donations as income when it gains control of the donated cash, in accordance with AASB 1058.

    The journal entry for the initial recognition (in aggregate) is:

      Debit Credit

     Cash  160,000

     Income  160,000

    Voluntary disclosure of restrictions

    Although not an enforceable performance obligation, Charity C determines the donor expectations that the donations are intended to be used for the purpose of building water wells represents a restriction that is externally imposed on the donations.  Consequently, Charity C elects to disclose the following information regarding the externally imposed restrictions on the donations by dividing total comprehensive income into restricted and unrestricted amounts in the statement of profit or loss and other comprehensive income in accordance