Document ID: chunk:federal_register_of_legislation:F2023C00402:front:0:p78
Version: federal_register_of_legislation:F2023C00402
Segment Type: other
Provision Reference: 
Character Range: 203513–206536

refer to other enforceability mechanisms. Despite the statement that the MOU is not legally binding, the parties have indicated in their discussions their intention to rely upon it. The not-for-profit entity has commenced providing services under the MOU and has reported to Local Government A on its first two months' work.

    Given the intention of the parties to rely upon the MOU, and the actions of the not-for-profit entity in reliance on the MOU, the MOU is enforceable despite the statement that it is not legally binding and the absence of a refund obligation or other enforcement requirements.

    Example 2—Research activities—Transfer of intellectual property

    University A receives a cash grant from a donor, Road Safety Authority B, of $1.2 million to undertake research that aims to observe and model traffic flows and patterns through black-spot intersections and to develop proposals for improvements to the road system.

    The terms of the grant are:

                    a period of three years;

                    the return of funds that are either unspent or not spent in accordance with the agreement;

                    annual progress reports and a final report are required;

                    publication of research results in conference presentations and/or scholarly journals; and

                    the transfer of the intellectual property (IP) rights arising from the research activity to the donor, Authority B.

    University A concludes its arrangement with donor B is a contract with a customer as defined in AASB 15. This is on the basis that:

                    University A's promise of specified research and transfer of the resulting IP is enforceable as the grant is refundable if the research is not undertaken;

                    University A identifies that its promise to transfer the IP created through the research to the donor is sufficiently specific to be a performance obligation. The university determines that the research services are required to develop the IP in order to fulfil the contract and therefore do not, of themselves, give rise to a transfer of goods or services to the donor; and

                    University A determines that the requirements for annual progress reports, a final report and publication of research results are an acquittal process that will assist it to measure its progress towards satisfaction of the performance obligation, rather than a separate performance obligation or obligations.

    Accounting treatment

    In accordance with AASB 15, University A allocates the cash grant to its identified performance obligation and recognises the financial asset (cash) and a contract liability of $1.2 million on initial recognition.

    University A concludes that the performance obligation is satisfied over time as the university's performance creates or enhances an asset (knowledge – the IP) that the donor controls as the asset is created or enhanced (AASB 15, paragraph 35(b)). Accordingly,