Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p31
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 31/91)
Character Range: 90890–93821

receive a multi-year cash grant of $90,000 from the State Government, which is received in full on 24 June 20X0.  The grant is to fund education programs over three years commencing 1 July 20X0, with the objective of increasing the literacy of students of a specific rural area.

    The fact pattern and analysis applies to Examples 8A–8C, described below.

    Example 8A – Enforceable, no sufficiently specific performance obligation

    This example contains the following additional facts:

                    the MOU does not specify the activities the grant must be used for, other than an education program to increase literacy in a particular area; and

                    the State Government can enforce the repayment of the grant if the entity does not apply the funds to relevant education programs.

    Scope and asset recognition

    The Local Government determines:

                    the $90,000 grant is an asset the Local Government acquired to further the objectives of the Local Government; and

                    it controls a financial asset ($90,000) within the scope of AASB 9.

    Based on the facts and circumstances, on gaining control of the grant, the Local Government determines that there are no related amounts under paragraph 9 of AASB 1058 as the grant does not give rise to:

                    a contribution by owners, as the State Government does not control the Local Government;

                    a contract with a customer within the scope of AASB 15.  The agreement is enforceable as the grantor can enforce its rights in the contract to require the Local Government to return the funds if the Local Government does not undertake relevant programs.  However, the Local Government's performance obligation to provide relevant education programs is not sufficiently specific to be able to determine when the obligation is satisfied.

                    a lease liability as defined in AASB 16, as the grant agreement 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; or

                    a provision within the scope of AASB 137, as the agreement does not set out specific constructive obligations.

    The Local Government concludes that the grant is an asset acquired for consideration that is significantly less than the fair value of the grant principally to further its objectives, and so the grant is within the scope of AASB 1058.

    Accounting treatment

    The Local Government determines that there are no related amounts to recognise under the MOU and so recognises the grant as income in accordance with paragraph 10 of AASB 1058 on 24 June 20X0.

    The journal entry for the accounting is:

     24 June 20X0 Debit Credit

     Cash  90,000

     Income  90,000

    Example 8B – Enforceable