Document ID: chunk:federal_register_of_legislation:F2023C00402:front:0:p86
Version: federal_register_of_legislation:F2023C00402
Segment Type: other
Provision Reference: 
Character Range: 225319–228353

income.

    Example 5B – Enforceable agreement, performance obligations not sufficiently specific, individual researcher controls grant funds

    In this example, the facts of Example 5A apply, except that:

                    University G receives the grant funds to administer on behalf of a researcher named in the grant;

                    the named researcher may direct the use of the funds in accordance with the grant agreement; and

                    the funding arrangement is tied to the researcher, so that if the researcher moves from University G to another research institution, any unspent grant funds held by the university will be transferred to the other research institution.

    University G concludes that the arrangement is not a contract with a customer as defined in AASB 15, on the same basis as set out in Example 5A.

    University G notes that it merely administers the grant funds on behalf of the researcher. Accordingly, the university considers the arrangement under the requirements of AASB 9 Financial Instruments, noting it:

                    receives cash that it administers in accordance with the grant agreement (to which it is a party);

                    may invest the funds it holds as it considers appropriate, benefiting from any interest received and obliged to reimburse any losses incurred; and

                    agrees to expend those funds at the direction of the researcher.

    Accounting treatment

    University G recognises a financial asset of $2 million for the funds received, in accordance with paragraph 3.1.1 of AASB 9. The university then considers whether it has transferred the financial asset to the researcher, but notes that because it may invest the funds as it considers appropriate, the university retains substantially all the risks and rewards of ownership of the funds. Accordingly, the university continues to recognise the grant funds as a financial asset and recognises an equal amount as a financial liability to expend the grant funds at the researcher's direction, as required by paragraph 3.2.15 of AASB 9.

Allocating the transaction price to performance obligations (paragraphs F28–F32)

     IE4 Examples 6 and 7 illustrate the requirements of AASB 15 for accounting for the transaction or agreement, including assessing whether the transaction includes an element not related to performance obligations (eg a donation).

    Example 6—Performance obligation, transfer of goods without donation element

    Entity A (a not-for-profit entity) sells chocolates in a fundraising drive for a greater margin than a for-profit entity would typically generate by selling chocolates. In addition, buyers of the chocolates are often motivated by the not-for-profit entity's benevolent aims. The customer is entitled to a full refund of the purchase price if the chocolates were ordered and paid for in advance and either the delivered chocolates were spoiled or Entity A is unable to deliver the chocolates.

    Entity A determines