{"id":"F2022L00705","name":"Accounting Standard AASB 2022-3 Amendments to Australian Accounting Standards – Illustrative Examples for Not-for-Profit Entities accompanying AASB 15","slug":"accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":102438,"registerId":"commonwealth-F2022L00705-current","compilationNumber":null,"startDate":"2026-04-03","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Obtaining a copy of this Accounting Stan","sectionType":"part","heading":"Obtaining a copy of this Accounting Standard","content":"# Obtaining a copy of this Accounting Standard\n\nThis Standard is available on the AASB website: www.aasb.gov.au.\n\nAustralian Accounting Standards Board\n\nPO Box 204\n\nCollins Street West\n\nVictoria 8007\n\nAUSTRALIA\n\nPhone: (03) 9617 7600\n\nE-mail: standard@aasb.gov.au\n\nWebsite: www.aasb.gov.au","sortOrder":0},{"sectionNumber":"Other enquiries","sectionType":"part","heading":"Other enquiries","content":"# Other enquiries\n\nPhone: (03) 9617 7600\n\nE-mail: standard@aasb.gov.au\n\nCOPYRIGHT\n\n© Commonwealth of Australia 2022\n\nThis work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission. Requests and enquiries concerning reproduction and rights should be addressed to The National Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Victoria 8007.\n\nISSN 1036-4803","sortOrder":1},{"sectionNumber":"Application","sectionType":"part","heading":"Application","content":"## Application\n\n2 The amendments set out in this Standard apply to entities and financial statements in accordance with the application of AASB 15 set out in AASB 1057 Application of Australian Accounting Standards.\n\n3 This Standard applies to annual periods beginning on or after 1 July 2022. Earlier application of this Standard is permitted.","sortOrder":2},{"sectionNumber":"Amendments to Australian illustrative ex","sectionType":"part","heading":"Amendments to Australian illustrative examples for not-for-profit entities accompanying AASB 15 Revenue from Contracts with Customers","content":"## Amendments to Australian illustrative examples for not-for-profit entities accompanying AASB 15 Revenue from Contracts with Customers\n\n4 Paragraph IE4A, a heading and Example 7A are added to the Australian illustrative examples for not-for-profit entities accompanying AASB 15 as follows:\n\nAccounting for upfront fees (paragraphs F5–F27)\n\nIE4A Example 7A illustrates application of the requirements of AASB 15 to transactions where a not-for-profit entity charges upfront fees to customers or members as part of the goods and services offered. The following are examples of upfront fees:\n\n(a) joining fees at clubs and membership bodies;\n\n(b) enrolment fees at schools; and\n\n(c) other establishment or set-up fees where the fee is paid at or near contract inception and the customer can renew the contract each year without paying an additional fee.\n\nWhere the goods or services to which the upfront fee relates are in the scope of AASB 15, the recognition of the upfront fee as revenue depends on whether the payment of the fee relates to a transfer of distinct goods or services to the customer that meets the definition of a performance obligation. In many cases, even though a non-refundable upfront fee relates to the activity that an entity is required to undertake to fulfil the contract, that activity may be an administrative task that does not necessarily result in the transfer of a promised good or service to the customer.\n\n  \n\nExample 7A—Upfront fee charged by an organisation\n\nAn organisation offers enrolment to prospective clients for the services it provides. Upon accepting an offer of enrolment, the prospective client must pay an upfront fee (sometimes referred to as an ‘acceptance fee’, ‘entry fee’ or ‘enrolment fee’). The enrolment form sets out the following terms and conditions relevant to the fee:\n\n• upon payment of the fee, future service is guaranteed for the client to commence in the agreed-upon year and on an ongoing basis;\n\n    • the fee is non-refundable and non-transferable; and\n\n• the fee is not offset against any future fees that are charged on an ongoing basis for continued access to the services.\n\nThe analysis below sets out the process followed by not-for-profit entities in determining the accounting treatment for upfront fees charged. The process does not specifically discuss any particular fee and is applied in the context of the relevant facts and circumstances of an entity’s upfront fees. Note: the term customer is used in the analysis to cover all counterparties to an agreement, for example members or students.\n\nAnalysis\n\nIs the contract within the scope of AASB 15 Revenue from Contracts with Customers?\n\nThe entity first considers whether the agreement with the customer is within the scope of AASB 15, by referring to AASB 15 paragraphs 9–21 and F5–F19 to determine whether there is a contract with a customer:\n\n• Is there a customer who has promised consideration in exchange for goods or services from the entity and is the promise to transfer goods or services sufficiently specific? (AASB 15, paragraphs 9, Aus9.1 and F5–F7)\n\n• Is there a written, oral or implied agreement, such as an application form or other document? (AASB 15, paragraphs 10 and F8–F9)\n\n• Does the agreement create enforceable rights and obligations for the parties? For example, could the customer either enforce the agreement or obtain other remedy under Australian law if the promised service was not delivered? (AASB 15, paragraphs 10 and F10–F18)\n\nIn many cases where there will be an ongoing relationship with the customer following payment of the upfront fee, such as annual fees to access a service, revenue would be recognised in accordance with AASB 15. If multiple agreements are in place, for example an agreement for a joining fee and a separate agreement for the annual membership fee, then the guidance in paragraph 17 of AASB 15 should be considered in relation to combining the agreements for accounting purposes.\n\nWhat are the performance obligations in the contract, and are the activities associated with the non-refundable upfront fee one of these performance obligations?\n\nThe entity considers the guidance on:\n\n• accounting for non-refundable fees in AASB 15, paragraphs B48–B51; and\n\n• identifying performance obligations in AASB 15, paragraphs 22–30 and F20–F27;\n\nto determine whether the upfront fee relates to the transfer of a good or service separate to the provision of services in the future.\n\nIn performing this analysis, the entity notes that performance obligations do not include activities that an entity must undertake to fulfil a contract (eg setting up a customer on the system, printing membership cards and similar) unless those activities transfer a good or service to the customer (AASB 15, paragraph 25). The non-refundable fee might cover internal administrative activities that enable the entity to provide future services to the customer. However, these activities do not transfer a promised good or service to the customer separate from the provision of future services and therefore do not satisfy a separate performance obligation (AASB 15, paragraph B51). If this is the case, the entity concludes that the non-refundable upfront fee – to the extent it relates to the internal administrative services – does not represent a payment for a separate performance obligation but is in substance an advance payment for future services.\n\nIn other circumstances, some or all of the upfront fee may relate to a separate performance obligation or obligations, whether satisfied at or near contract inception or otherwise.\n\nHow is the revenue for the upfront fee recognised?\n\nWhere the activity does not result in a transfer of a good or service to the customer that satisfies a separate performance obligation and the upfront fee is an advance payment for performance obligations to be satisfied in the future, the upfront fee is recognised as revenue as these future services are provided, that is, over the period in which the performance obligation is satisfied. If the entity has charged the non-refundable fee in part as compensation for costs incurred in setting up a contract (or other administrative tasks) and those setup activities are not a separate performance obligation, they should be disregarded when measuring progress towards completion of the services (AASB 15, paragraph B51). The revenue recognition period will extend beyond the initial contractual period if the entity grants the customer the option to renew the contract and that option provides the customer with a material right (eg no requirement to pay a further joining fee on renewal) (AASB 15, paragraphs B40 and B49). Annual fees charged to access the services will be recognised as revenue over the period that the services are provided.\n\nIn the circumstances where some or all of the upfront fee relates to a separate performance obligation or obligations, the relevant portion of the upfront fee is recognised as revenue when the separate performance obligations are satisfied.\n\nAccounting treatment\n\nThe organisation applies AASB 15 paragraphs 9–21 and F5–F19 and concludes that the agreement is within the scope of AASB 15, as:\n\n• there is a customer – the client – who has promised consideration in exchange for future services (an ordinary activity of the organisation) to be provided to a specified recipient (AASB 15, paragraphs 6 and F6–F7); and\n\n• a contract exists, as there is a written agreement (AASB 15, paragraphs 10 and F8–F9) that creates enforceable rights and obligations for the client to receive services in the agreed-upon years. Despite the fee being non-refundable, the client could either enforce the agreement or obtain remedy under Australian law if the organisation did not provide services in the agreed-upon years (AASB 15, paragraphs 10 and F10–F18).\n\nThe organisation considers the guidance on accounting for non-refundable fees in AASB 15 paragraphs B48–B51 and refers to paragraphs 22–30 and F20–F27 to assess whether the upfront fee relates to the transfer of a good or service separate to the provision of services in the future.\n\nThe organisation concludes that the non-refundable upfront fee does not relate to an activity that represents a separate performance obligation (AASB 15, paragraph 25), and therefore the fee is included in the consideration for the performance obligation(s) in the agreement (to provide future services). The upfront fee is treated as an advance payment for future services and is recognised as revenue over the period of the ongoing services (AASB 15, paragraphs 30 and B49).","sortOrder":3},{"sectionNumber":"Commencement of the legislative instrume","sectionType":"part","heading":"Commencement of the legislative instrument","content":"## Commencement of the legislative instrument\n\n5 For legal purposes, this legislative instrument commences on 30 June 2022.","sortOrder":4},{"sectionNumber":"Finalisation of the ED 318 proposals","sectionType":"part","heading":"Finalisation of the ED 318 proposals","content":"## Finalisation of the ED 318 proposals\n\nBC20 The Board received nine formal comment letters in response to ED 318. Following the consultation period, and after considering the comments received, the Board decided to proceed with issuing this Standard, with some changes from the proposals in ED 318.\n\nIncome of not-for-profit entities\n\nBC21 The feedback received indicated that, whilst respondents to ED 318 did not raise concerns with the illustrated application of the recognition and measurement requirements in the proposed amendments to the illustrative examples in AASB 15, some of the respondents suggested that the proposed Illustrative Example 7A is too generic and recommended that any changes be dealt with as part of the forthcoming post-implementation review of the guidance for not-for-profit entities in AASB 15. The Board considered this feedback and noted that the example is intended to assist not-for-profit entities with limited resources in the application of AASB 15 requirements. The Board therefore decided to add the proposed Illustrative Example 7A to AASB 15, incorporating some editorial improvements suggested by the respondents.\n\nBC22 Most respondents to ED 318 did not support the proposed amendment to AASB 1058 Illustrative Example 3, noting their concerns with the potential impact of the illustrated scenario and accounting analysis on current practice. A majority of the respondents indicated the amendments were not desirable at this time and recommended considering any amendments as part of the forthcoming post-implementation review of AASB 1058\\. After considering the feedback from stakeholders, the Board decided to retain Illustrative Example 3 in AASB 1058 without any amendment and to consider any changes as part of the post-implementation review.\n\nInitial measurement of right-of-use assets arising under concessionary leases\n\nBC23 Almost all respondents agreed with the Board’s decision to retain the accounting policy choice in AASB 16 paragraphs Aus25.1-Aus25.2 on an ongoing basis for not-for-profit private sector lessees to elect to initially measure a class of right-of-use assets arising under concessionary leases at cost or at fair value.\n\nBC24 The Board noted that some feedback received disagreed with the decision to consider outcomes of the concessionary leases part of the IPSASB’s current Leases project and the Board’s proposals in Exposure Draft ED 320 Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities before reconsidering the application of fair value for concessionary leases in the not-for-profit public sector. The Board acknowledged stakeholders’ concerns regarding the difficulty of measuring the fair value of historical concessionary leases when developing the ED 318 proposals. The Board concluded that it is still appropriate to defer a decision about the initial measurement of right-of-use assets arising under concessionary leases for not-for-profit public sector lessees until additional guidance on how to measure the fair value of such right-of-use assets is discussed.\n\nBC25 Accordingly, after considering the feedback to ED 318, the Board decided to proceed with the proposals in ED 318 to retain the accounting policy choice on an ongoing basis for not-for-profit private sector lessees and to defer consideration of the accounting policy choice for not-for-profit public sector lessees until the Board decides on any additional guidance for measuring the fair value of right-of-use assets under concessionary leases. This decision would be made after considering the outcomes of the concessionary leases part of the IPSASB’s current Leases project and the Board’s ED 320.\n\nEffective date\n\nBC26 The Board confirmed that the amendments would be effective for annual periods beginning on or after 1 July 2022, with earlier application permitted, as proposed in ED 318.","sortOrder":5}],"analysis":{"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The amendment does not broaden or change the core scope of AASB 15. It adds an illustrative example to clarify application of existing AASB 15 requirements to upfront fees charged by not‑for‑profit entities. The example is guidance (not a new recognition principle) and the Board retained existing positions on related matters (eg. AASB 1058 Example 3 and concessionary lease measurement deferrals), so the instrument does not materially change the law's scope beyond clarifying application."},"complexity_factors":["Standard is short in length (adds one illustrative example and related notes).","Multiple cross‑references to AASB 15 paragraphs (eg. paras 9–21, 22–30, B48–B51, F5–F27) increase interpretive dependency on the principal standard.","Judgemental decision tree with conditional branches (scope assessment → identification of performance obligations → allocation/recognition; renewals/material right considerations).","Examples involve context‑sensitive facts (enforceability, distinct goods/services, administrative vs substantive transfer) that require qualitative judgement.","Interplay with AASB 1058 and AASB 16 policy choices noted in BC paragraphs (adds cross‑project considerations).","Practical application may require system/controls changes to recognise revenue over multiple periods (implementation complexity for some entities)."],"plain_english_summary":"**What this instrument does (mechanically)\n\n- Adds a new illustrative example (Example 7A) to the Australian illustrative examples that accompany AASB 15 (Revenue from Contracts with Customers). The example explains how a not‑for‑profit entity should decide whether a non‑refundable upfront fee (for example, joining, enrolment or set‑up fees) is: (a) payment for a separate good or service (a separate \"performance obligation\") or (b) an advance payment for services to be delivered in the future.\n\n- Confirms the amendments apply in accordance with the application guidance in AASB 1057 and apply to annual reporting periods beginning on or after 1 July 2022 (earlier application permitted). (See: Application paras 2–3; Commencement para 5; IE4A / Example 7A.)\n\n- Explains the step‑by‑step decision process a not‑for‑profit should follow under AASB 15: first assess whether the contract is within the scope of AASB 15; then identify performance obligations (and whether setup or administrative activities transfer a promised good or service); then determine timing of revenue recognition depending on whether the fee is for a separate obligation or an advance for future services. (IE4A / Example 7A.)\n\nWho this affects\n\n- Primary: not‑for‑profit entities that charge upfront, non‑refundable fees (examples given: clubs/membership bodies, schools, other organisations charging enrolment or setup fees).\n- Secondary: auditors, accountants and financial statement users (donors, funders, grantors) who rely on consistent revenue recognition.\n\nWhy it matters (practical effect)\n\n- The example clarifies that routine administrative tasks (e.g. setting up a customer on a system, issuing membership cards) ordinarily do not themselves create a separate performance obligation. If the upfront fee relates only to such administrative tasks, it is generally treated as an advance for future services and recognised as revenue over the period those services are provided.\n- If part or all of the upfront fee does relate to a distinct good or service, that portion is recognised when that separate obligation is satisfied.\n- If the fee gives the customer a material right on renewal (for example, no further joining fee on renewal), the period over which revenue is recognised may extend beyond the initial contractual period.\n\nOfficial rationale and practical test\n\n- The Board states the purpose of adding the example is to help not‑for‑profit entities with limited resources apply AASB 15 consistently (BC21–BC22). The example is presented as guidance to help the entity exercise the judgments already required by AASB 15.\n\nCosts, incentives, trade‑offs and implementation considerations\n\n- Who pays and who decides: customers pay the upfront fees; the not‑for‑profit decides the accounting treatment by applying AASB 15 judgment, using the new example as guidance (IE4A). Financial statement users (and auditors) verify those judgements.\n- Incentives and behaviour changes: recognising an upfront fee as an advance (revenue over time) rather than immediate revenue will generally defer reported revenue and surplus into future periods. That may influence pricing, timing of fee structures, contract terms (e.g. explicit separate services), and renewal policies.\n- Compliance burden: entities must apply judgmental tests under AASB 15 (scope, enforceability, identification of performance obligations, material right on renewal). Smaller entities may need accounting expertise or system changes to allocate and recognise fees over time.\n- Implementation risk and uncertainty: borderline cases (whether an activity transfers a promised good or service, or whether a renewal option confers a material right) require judgement and may lead to inconsistent application across entities without careful documentation. Audit scrutiny of those judgements is likely to increase.\n- Effects on competition and private choice: the change is primarily about accounting presentation and timing; it does not restrict entities’ freedom to set contractual terms or prices. However, differences in reported timing of revenue between organisations could affect comparability for funders, potentially influencing funding or consumer choice.\n\nOther related decisions recorded in the explanatory material\n\n- The Board decided not to amend a separate illustrative example in AASB 1058 at this time and deferred some issues on concessionary leases and fair‑value measurement for not‑for‑profit public sector lessees for later consideration (BC22–BC25)."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"This standard remains tightly focused on its original purpose: providing illustrative guidance on upfront fees for not-for-profit entities under AASB 15. The Basis for Conclusions (BC22-BC25) explicitly notes that the Board decided NOT to expand the scope to amend AASB 1058 or address concessionary leases for public sector entities, deferring those issues to future reviews. The final standard is narrower than the original Exposure Draft (ED 318) proposals, which had contemplated broader amendments."},"complexity_factors":["Heavy cross-referencing to AASB 15 (Revenue from Contracts with Customers) with specific paragraph citations (e.g., paragraphs 9-21, B48-B51, F5-F27)","Nested conditional logic: the accounting treatment depends on whether activities constitute 'distinct' performance obligations, which itself depends on whether they transfer a good/service to the customer","Technical accounting terminology requiring understanding of 'performance obligations', 'distinct goods or services', 'material rights', and 'enforceable rights and obligations'","Multi-step analytical framework requiring entities to assess: (1) scope of AASB 15, (2) existence of performance obligations, (3) timing of revenue recognition","Integration with broader not-for-profit accounting framework including AASB 1058 (Income of Not-for-Profit Entities) and AASB 16 (Leases) as discussed in the Basis for Conclusions","Exception handling: specific guidance for when upfront fees relate to renewal options that provide material rights (extending recognition period beyond initial contract)"],"plain_english_summary":"This accounting update adds a worked example for not‑for‑profit organisations on how to treat one‑off upfront fees (joining, enrolment, set‑up). It clarifies that purely administrative fees are not separate performance obligations and must be recognised over the period services are provided, while fees that purchase a distinct good or service can be recognised when delivered.\n\nIt affects NFP clubs, schools, accountants and auditors, and prevents upfront cash from being recognised prematurely. Applies for years from 1 July 2022 (or earlier by choice)."}},"importantCases":[],"_links":{"self":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-","history":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-/history","analysis":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-/analysis","conflicts":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-/conflicts","importantCases":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-/important-cases","documents":"/api/acts/accounting-standard-aasb-2022-3-amendments-to-australian-accounting-standards-illustrative-examples-/documents"}}