Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p71
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 71/91)
Character Range: 201565–204604

example, a not-for-profit entity whose mission is to provide housing services may receive a grant to construct public housing, however, the not-for-profit entity would not itself occupy the building when constructed.  The Board observed its intention was for the scope of the accounting specified to include such transfers.  In finalising AASB 1058, the Board decided to refer instead to "a recognisable non-financial asset to be controlled by the entity" and to add guidance to clarify the types of arrangements that could be within scope.

BC102        The Board also discussed whether the specified accounting could apply also in instances where the non-financial asset acquired is a resource controlled that meets the definition of an asset but that is not permitted to be recognised by an Accounting Standard.  For example, a not-for-profit entity may be provided a grant to conduct research services with any detailed research data collected and rights to any commercial use of the data retained by the not-for-profit entity.  AASB 138 Intangible Assets does not permit research activity to be recognised as an asset.

BC103        The Board considered whether to:

(a)                    limit the application of paragraphs 15–17 of the Standard to only grants (and other transfers) to develop a non-financial asset that qualifies for recognition under another Australian Accounting Standard; or

(b)                   clearly articulate that the application of paragraphs 15–17 of the Standard includes grants (and other transfers) to develop a non-financial asset for which recognition is prohibited by another Australian Accounting Standard.

BC104        The Board discussed the scope of these paragraphs having regard to grants received to conduct specified research activity; the related intellectual property of which may or may not be controlled by the not-for-profit entity recipient.  The Board observed that extending the application of paragraphs 15-17 of the Standard to include grants (and other transfers) to develop a non-financial asset for which recognition is prohibited by another Australian Accounting Standard would be consistent with the underlying principle being that the grantor intended to transfer a good (rather than a financial asset) to the not-for-profit recipient.  However, the Board was concerned that extending the paragraphs in this manner would:

(a)                    create ambiguity in the distinction between a service and a good, and lack of clarity as to whether an implicit good component in a contract needs to be separately identified from the service.  The Board observed that many service contracts in both the not-for-profit and for-profit sector arguably give rise to (unrecognised) knowledge or expertise to the service renderer;

(b)                   result in a lack of comparability, as some constituents may contend that all the value in such a contract is attributable to the unrecognised good acquired; while others contend that the value remains with the service rendered