Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p12
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 12/56)
Character Range: 291874–295037

than the for-profit sector, and may raise issues regarding which terms and conditions attached to assets transferred to a not-for-profit entity give rise to performance obligations.  The Board decided to propose a principle in ED 260 that to qualify as a performance obligation, a not-for-profit entity's enforceable promise to transfer goods or services must be sufficiently specific to allow the entity to determine when the performance obligation is satisfied, as this indicates the transfer of goods or services is not at the discretion of the provider.

     BC40            The Board also decided to propose not-for-profit entity guidance:

          (a)                    noting that applying the 'sufficiently specific' criterion requires judgement; and

          (b)                   identifying particular conditions to consider in determining whether a promise is 'sufficiently specific' to qualify as a performance obligation.

     BC41            The Board considered whether to identify particular conditions as essential for treating a promise to transfer a good or a service as 'sufficiently specific'.  The Board concluded that:

          (a)                    no particular condition regarding a promise to provide a good or service would ensure the proposed principle in paragraph BC39 is met; and

          (b)                   prescribing condition(s) that are necessary to make a promise 'sufficiently specific' might arbitrarily and unintentionally exclude some performance obligations from being identified as such.

     BC42            For example, the Board:

          (a)                    noted that paragraph 26 of AASB 15 states that: "Depending on the contract, promised goods or services may include, but are not limited to … (e) providing a service of standing ready to provide goods or services (for example, unspecified updates to software that are provided on a when-and-if-available basis) or of making goods or services available for a customer to use as and when the customer decides"; and

          (b)                   concluded that, if particular aspects of a 'sufficiently specific' promise were to be mandatorily present, a not-for-profit entity's promise to provide a service of standing ready to provide an unspecified good or service might be treated as 'insufficiently specific' to qualify as a performance obligation.  This outcome would be inconsistent with the Board's policy of transaction neutrality.

     BC43            One of the aspects to consider in assessing whether a promise is 'sufficiently specific' to qualify as a performance obligation is a specified period over which promised goods or services must be transferred.  In relation to that aspect, the Board concluded that a condition that a transfer of assets to a not-for-profit entity relates to a particular time period does not, of itself, meet the 'sufficiently specific' criterion – the nature or type of goods or services to be transferred by that entity over that time period must also be specified.  This is because time does not require an outflow of resources embodying economic benefits (the definition of a liability in