39An entity shall disclose:

39 An entity shall disclose: (a) a summary of the recurrent, capital or other major categories of amounts authorised for expenditure (including parliamentary appropriations), disclosing separately: (i) the original amounts appropriated; and (ii) the total of any supplementary amounts appropriated and amounts authorised other than by way of appropriation (eg by the Treasurer, other Minister or other legislative authority); (b) the expenditures in respect of each of the items disclosed in (a) above; and (c) the reasons for any material variances between the amounts appropriated or otherwise authorised and the resulting associated expenditures, and any financial consequences for the entity of unauthorised expenditure. 40 For the purposes of resource allocation decisions, including assessments of accountability, this Standard requires that users of financial statements of government departments and other public sector entities that obtain part or all of their spending authority for the period from a parliamentary appropriation be provided with information about the amounts appropriated or otherwise authorised for the entity’s use, and whether the entity’s expenditures were as authorised. This information may be based on acquittal processes applied by an entity. When spending limits imposed by parliamentary appropriation or other authorisation have not been complied with, information regarding the amount of, and reasons for, the non-compliance is relevant for assessing the performance of management, the likely consequences of non-compliance, and the ability of the entity to continue to provide services at a similar or different level in the future. 41 Broad summaries of the major categories of appropriations and associated expenditures, rather than detailed reporting of appropriations for each activity or output, is sufficient for most users of such an entity’s financial statements. Determining the level of detail and the structure of the summarised information is a matter of judgement. To develop effective disclosures, entities also subject to AASB 1055 Budgetary Reporting might consider the variance disclosure requirements in that Standard at the same time. ## Commencement of the legislative instrument 42 \[Repealed\] ## Recognition and measurement of an asset Recognition and measurement of an asset ### Recognition and measurement of an asset 8 Except as set out in paragraphs 18–22, an entity shall apply the requirements of other Australian Accounting Standards (as relevant) to an asset arising from a transaction within the scope of this Standard. Examples include: (a) AASB 9 Financial Instruments (eg cash received); (b) AASB 16 Leases; (c) AASB 116 Property, Plant and Equipment; and (d) AASB 138 Intangible Assets. ## Recognition and measurement of income an Recognition and measurement of income and related amounts (paragraphs B12—B31) ### Recognition and measurement of income and related amounts (paragraphs B12–B31) 9 On initial recognition of an asset, an entity shall recognise any related contributions by owners, increases in liabilities, decreases in assets, and revenue (‘related amounts’) in accordance with other Australian Accounting Standards. For example, related amounts may take the form of: (b) revenue or a contract liability arising from a contract with a customer, in accordance with AASB 15; (c) a lease liability in accordance with AASB 16; (d) a financial instrument, in accordance with AASB 9; or (e) a provision, in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. 10 Except as set out in paragraphs 15–17, an entity shall recognise income immediately in profit or loss for the excess of the initial carrying amount of an asset over the related amounts recognised in accordance with paragraph 9. 11 Appendix F Australian Implementation Guidance for Not-for-Profit Entities of AASB 15 provides guidance on the identification of a contract with a customer in a not-for-profit entity context. The Appendix also clarifies the measurement of revenue and contract liabilities where the transaction price includes an amount that would otherwise be separately recognised and accounted for as income immediately in accordance with this Standard. 12 For the purposes of this Standard, income is determined as the difference between the consideration for an asset and the asset’s fair value, after recognising any other related amounts. An entity applies judgement in determining the extent to which the acquisition of an asset gives rise to income as specified by this Standard or to revenue, a liability or a contribution by owners recognised in accordance with another Australian Accounting Standard. 13 An entity might acquire an asset and also recognise related amounts that in total exceed the initial measurement of the asset. In such cases, the entity shall reassess whether it has appropriately identified and measured all the related amounts. If an excess remains after restating any related amounts, the entity shall recognise an expense immediately in profit or loss for the excess of the related amounts over the carrying amount of the asset acquired. An entity does not adjust the excess against the recognised related amounts. 14 An entity shall subsequently apply the requirements of other Australian Accounting Standards applicable to the related amounts referred to in paragraph 9. ## Transfers to enable an entity to acquire Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity #### Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity 15 A transfer of a financial asset to enable an entity to acquire or construct a recognisable non-financial asset that is to be controlled by the entity is one that: (a) requires the entity to use that financial asset to acquire or construct a recognisable non-financial asset to identified specifications; (b) does not require the entity to transfer the non-financial asset to the transferor or other parties; and (c) occurs under an enforceable agreement. 16 An entity shall recognise a liability for the excess of the initial carrying amount of a financial asset received in a transfer to enable the entity to acquire or construct a recognisable non-financial asset that is to be controlled by the entity over any related amounts recognised in accordance with paragraph 9. The entity shall recognise income in profit or loss when (or as) the entity satisfies its obligations under the transfer. 17 In such circumstances, the transferor has in substance transferred a recognisable non-financial asset to the entity. The entity recognises the financial asset received in accordance with AASB 9 and subsequently recognises the acquired or constructed non-financial asset in accordance with the applicable Australian Accounting Standard (eg AASB 116 for property, plant and equipment). This Standard requires the entity to initially recognise a liability representing the entity’s obligation to acquire or construct the non-financial asset and, if applicable, other performance obligations under AASB 15, which involve the transfer of goods or services to other parties. The liability in relation to acquiring or constructing the non-financial asset is initially measured at the carrying amount of the financial asset received from the transferor that is not attributable to related amounts for performance obligations under AASB 15, contributions by owners, etc. The liability is recognised until such time when (or as) the entity satisfies its obligations under the transfer. ## Volunteer services Volunteer services 18 Local governments, government departments, general government sectors (GGSs) and whole of governments shall recognise an inflow of resources in the form of volunteer services as an asset (or an expense, when the definition of an asset is not met) if: (a) the fair value of those services can be measured reliably; and (b) the services would have been purchased if they had not been donated. 19 Any not-for-profit entity (including those listed in the preceding paragraph) may, as an accounting policy choice, elect to recognise volunteer services, or a class of volunteer services, if the fair value of those services can be measured reliably, whether or not the services would have been purchased if they had not been donated. 20 Some volunteer services, such as professional services, might have readily observable market prices. In such circumstances, obtaining a reliable measure of fair value would be relatively straightforward. An entity is not required to perform an exhaustive search for volunteer services that might meet the recognition criteria in this Standard. Volunteer services that would have been purchased if they were not donated should be readily identifiable from the entity’s operational requirements. 21 Recognised volunteer services shall be measured at fair value. 22 On the initial recognition of volunteer services as an asset or an expense, an entity shall recognise any related amounts in accordance with paragraph 9 (such as contributions by owners or revenue) and the applicable Australian Accounting Standards. The entity shall recognise the excess of the fair value of the volunteer services over the recognised related amounts as income immediately in profit or loss. ## Disclosure Disclosure 23 The objective of the disclosure requirements is for an entity to disclose sufficient information to enable users of financial statements to understand the effects of volunteer services and other transactions where an entity acquires an asset for consideration that is significantly less than fair value principally to enable the entity to further its objectives on the financial position, financial performance and cash flows of the entity. Paragraphs 24–41 specify requirements relating to this objective. 24 An entity shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. An entity shall aggregate or disaggregate disclosures so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of items that have substantially different characteristics. 25 An entity need not disclose information in accordance with this Standard if it has provided the information in accordance with another Standard. 26 An entity shall disclose income recognised during the period, disaggregated into categories that reflect how the nature and amount of income (and the resultant cash flows) are affected by economic factors. An entity considers disclosing separately the following categories of income: (a) grants, bequests and donations of cash, other financial assets and goods; (b) recognised volunteer services; and (c) for government departments and other public sector entities, appropriation amounts recognised as income, by class of appropriation. 27 To assist users to make informed judgements about the contribution of volunteer services and inventories to the achievement of the entity’s objectives during the reporting period, and the entity’s dependence on such contributions for the achievement of its objectives in the future, an entity is encouraged to disclose qualitative information, by major class of transaction, about the nature of the entity’s dependence arising from: (a) volunteer services it receives, including those not recognised; and (b) inventories held but not recognised as assets during the period. ## Non-contractual income arising from stat Non-contractual income arising from statutory requirements ### Non-contractual income arising from statutory requirements 28 An entity shall disclose income arising from statutory requirements (such as taxes, rates and fines) recognised during the period, disaggregated into categories that reflect how the nature and amount of income (and the resultant cash flows) are affected by economic factors. 29 To meet the objective in paragraph 23, an entity shall consider disclosing information about assets and liabilities recognised at the reporting date in accordance with this Standard, including the amounts of: (a) receivables that are not a financial asset as defined in AASB 132 Financial Instruments: Presentation (eg income tax receivable from a taxpayer), and: (i) interest income recognised in relation to such receivables during the period; and (ii) impairment losses recognised in relation to such receivables during the period; and (b) financial liabilities relating to prepaid taxes or rates for which the taxable event has yet to occur, and the future period(s) to which those taxes or rates relate. 30 Other information that may be appropriate for an entity to disclose includes, for each class of taxation income that the entity cannot measure reliably during the period in which the taxable event occurs (see paragraphs B28–B31): (a) information about the nature of the tax; (b) the reason(s) why that income cannot be measured reliably; and (c) when that uncertainty might be resolved. ## Transfers to enable an entity to acquire Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity ### Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity 31 An entity shall disclose the opening and closing balances of financial assets arising from transfers to enable an entity to acquire or construct recognisable non-financial assets to be controlled by the entity and the associated liabilities arising from such transfers, if not otherwise separately presented or disclosed. An entity shall also disclose income recognised in the reporting period arising from the reduction of an associated liability. 32 An entity shall disclose information about its obligations under such transfers, including a description of when the entity typically satisfies its obligations (for example, as the asset is constructed, upon completion of construction or when the asset is acquired). 33 An entity shall disclose an explanation of when it expects to recognise as income any liability for unsatisfied obligations as at the end of the reporting period. An entity may disclose this information in either of the following ways: (a) on a quantitative basis using the time bands that would be most appropriate for the duration of the remaining obligations; or (b) through qualitative information. 34 An entity shall disclose the judgements, and changes in the judgements, made in applying this Standard that significantly affect the determination of the amount and timing of income arising from transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity. In particular, an entity shall explain the judgements, and changes in the judgements, made in determining the timing of satisfaction of obligations (see paragraphs 35 and 36). 35 For obligations that an entity satisfies over time, an entity shall disclose both of the following: (a) the methods used to recognise income (for example, a description of the output methods or input methods used and how those methods are applied); and (b) an explanation of why the methods used provide a faithful depiction of the entity’s progress toward satisfying its obligations. 36 For obligations satisfied at a point in time, an entity shall disclose the significant judgements made in evaluating when it has satisfied its obligations. ## Restrictions Restrictions ### Restrictions 37 An entity is encouraged to disclose information about externally imposed restrictions that limit or direct the purpose for which resources controlled by the entity may be used. For example, an entity may elect to disclose an explanation of the judgements used in determining whether funds are restricted and any of, or any combination of, the following: (a) assets to be used for specified purposes; (b) components of equity divided into restricted and unrestricted amounts; and (c) total comprehensive income divided into restricted and unrestricted amounts – either on the face of the statement of profit or loss and other comprehensive income or in the notes. ## Compliance with parliamentary appropriat Compliance with parliamentary appropriations and other related authorities for expenditure ### Compliance with parliamentary appropriations and other related authorities for expenditure 38 Paragraphs 39–41 apply only to government departments and other public sector entities that obtain part or all of their spending authority for the period from a parliamentary appropriation. The amounts disclosed in accordance with paragraphs 39–41 include any amounts appropriated in respect of which the entity recognises revenue or other income in accordance with another Australian Accounting Standard. 39 An entity shall disclose: (a) a summary of the recurrent, capital or other major categories of amounts authorised for expenditure (including parliamentary appropriations), disclosing separately: (i) the original amounts appropriated; and (ii) the total of any supplementary amounts appropriated and amounts authorised other than by way of appropriation (eg by the Treasurer, other Minister or other legislative authority); (b) the expenditures in respect of each of the items disclosed in (a) above; and (c) the reasons for any material variances between the amounts appropriated or otherwise authorised and the resulting associated expenditures, and any financial consequences for the entity of unauthorised expenditure. 40 For the purposes of resource allocation decisions, including assessments of accountability, this Standard requires that users of financial statements of government departments and other public sector entities that obtain part or all of their spending authority for the period from a parliamentary appropriation be provided with information about the amounts appropriated or otherwise authorised for the entity’s use, and whether the entity’s expenditures were as authorised. This information may be based on acquittal processes applied by an entity. When spending limits imposed by parliamentary appropriation or other authorisation have not been complied with, information regarding the amount of, and reasons for, the non-compliance is relevant for assessing the performance of management, the likely consequences of non-compliance, and the ability of the entity to continue to provide services at a similar or different level in the future. 41 Broad summaries of the major categories of appropriations and associated expenditures, rather than detailed reporting of appropriations for each activity or output, is sufficient for most users of such an entity’s financial statements. Determining the level of detail and the structure of the summarised information is a matter of judgement. To develop effective disclosures, entities also subject to AASB 1055 Budgetary Reporting might consider the variance disclosure requirements in that Standard at the same time. ## Commencement of the legislative instrume Commencement of the legislative instrument ## Commencement of the legislative instrument 42 \[Repealed\] ## Chart 1 — Transactions other than Volunt Chart 1 — Transactions other than Volunteer Services ### Chart 1 – Transactions other than Volunteer Services  ## Chart 2 — Volunteer Services Chart 2 — Volunteer Services ### Chart 2 – Volunteer Services  Scope (paragraph 7) B2 This Standard provides guidance for transactions where on initial recognition of an asset the consideration for that asset was significantly less than fair value principally to enable the entity to further its objectives, and for volunteer services. Examples include: (a) cash and other assets received from grants, bequests or donations; (b) receipts of appropriations by government departments and other public sector entities; (c) receipts of taxes, rates or fines; and (d) assets acquired for nominal or low amounts. B3 Where an asset is acquired for consideration that is significantly less than fair value but that difference is not principally related to furthering the entity’s objectives, the transaction is not within the scope of this Standard. Examples of such transactions include: (a) distress sales; and (b) trade discounts. B4 When assessing whether the consideration for an asset is less than fair value principally to enable the entity to further its objectives, the entity may consider whether another entity could have obtained the asset under the same terms and conditions. If those terms and conditions are generally not available to other entities of the same class/nature, it is more likely that the difference between the consideration for the asset and the fair value of the asset acquired is principally for enabling the entity to further its objectives. For example, trade discounts available to all not-for-profit entities, but not to for-profit entities, are not considered principally to further the specific not-for-profit entity’s objectives. B5 Where the consideration provided under a transaction solely involves performance obligations recognised in accordance with AASB 15, the asset is not acquired for consideration that is significantly less than fair value. Therefore, the transaction is not within the scope of this Standard. B6 Transfers with consideration significantly less than fair value primarily to enable a not-for-profit entity to further its objectives may be called grants, bequests, donations or appropriations and are usually made voluntarily. Such transfers could be in the form of cash or another financial asset, goods, or volunteer services, and may or may not be made with restrictions or conditions on their use. Transactions may include elements with consideration that is significantly less than fair value primarily to enable the not-for-profit entity to further its objectives and other elements with consideration at fair value. For example, a donation by a customer may be present in a contract in which a customer promises consideration in exchange for goods or services (eg a fundraising dinner). B7 Volunteer services are services transferred by individuals or other entities without charge or for consideration significantly less than the fair value of those services. Whether such services (when recognised in accordance with paragraphs 18 and 19) are recognised as an asset or an expense depends on the entity’s determination whether it is probable that economic benefits will flow to the entity beyond the current accounting period. In many instances, the economic benefits of volunteer services will be consumed as the services are acquired. In some cases, the volunteer services will contribute to the development of an asset and be included in the carrying amount of that asset. B8 Entities may be recipients of volunteer services under voluntary or compulsory schemes operated in the public interest, for example: (a) technical assistance from other governments or international organisations; (b) persons convicted of offences who are required to perform community service for the entity; (c) hospitals receiving the services of volunteers; (d) schools receiving voluntary services from parents as teachers’ aides or as board members; and (e) local governments receiving the services of volunteer firefighters. B9 Entities may also be recipients of volunteer professional services that support their broader activities. For example, charities and religious organisations may receive free professional accounting or legal services. B10 Government appropriations, which establish the authority to spend money for particular purposes, are a form of a transfer made voluntarily as the government is not compelled to make particular payments of amounts appropriated. B11 Taxes, rates and fines are forms of transfers made compulsorily. Recognition and measurement of income and related amounts (paragraphs 9–17) B12 An entity recognises related contributions by owners, liabilities and revenue (‘related amounts’) on initial recognition of an asset in accordance with another Australian Accounting Standard where the consideration for that asset is significantly less than fair value principally to further the entity’s objectives. B13 Any income recognised in accordance with paragraph 10 is strictly the residual of the difference between the fair value of the asset recognised and the consideration for that asset, after deducting any other related amounts described in paragraph 9. However, income is not recognised under paragraph 10 where another Standard addresses the accounting for the difference, such as the “day one gain/loss” requirements in AASB 9. Refund obligations B14 An entity typically has the ability, through its own actions, to avoid the circumstances that would give rise to a breach of conditions or requirements in an agreement necessitating a return of funds received. In such cases, liabilities recognised in accordance with other Standards do not include refund obligations that apply in the event of a breach, unless the breach has occurred or is expected to occur. For example, a grant agreement may require the funds provided to an entity to be spent only in a particular period, failing which repayment to the grantor will be required. As the entity has the discretion whether to spend funds received in advance of the specified period, a refund liability is not recognised unless the entity breaches the condition or a breach is expected. Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity B15 An entity that receives a financial asset, such as cash, in a transfer to enable the entity to acquire or construct a recognisable non-financial asset to be controlled by the entity shall apply the requirements of AASB 9 to that financial asset. The acquisition or construction of the non-financial asset is accounted for separately to the transfer of the financial asset, in accordance with other Standards. If the non-financial asset is not permitted to be recognised by another Standard (eg knowledge or intellectual property developed through research, which cannot be recognised as an asset in accordance with AASB 138), paragraphs 15–17 do not apply. The key criterion is that the recognisable non-financial asset will be under the control of the entity (ie for its own use) – it will not be transferred to the transferor or other parties. Therefore, the transfer of the financial asset (or the relevant part) to the entity does not occur under a contract with a customer and is not subject to AASB 15. However, the recognisable non-financial asset could increase the entity’s ability or capacity to provide goods or services to other parties pursuant to other transactions, which are separate to the transfer that enabled the entity to acquire or construct the non-financial asset for its own use. B16 On initial recognition of the financial asset, the entity recognises the requirement to acquire or construct the recognisable non-financial asset as an obligation and considers whether there are other conditions that give rise to performance obligations that require the entity to transfer goods or services to other entities (which are accounted for under AASB 15). The obligation to acquire or construct the non-financial asset is accounted for similarly to a performance obligation under AASB 15. For each obligation, the entity shall determine whether the obligation would be satisfied over time or at a point in time. If an entity does not satisfy an obligation over time, the obligation would be satisfied at a point in time. B17 An entity shall apply a single method of measuring progress for each obligation satisfied over time and the entity shall apply that method consistently to similar obligations and in similar circumstances. At the end of each reporting period, an entity shall remeasure its progress towards complete satisfaction of each obligation that is satisfied over time, and shall recognise income over time on that basis. Endowments B18 An endowment is a transfer of an asset to an entity for the ongoing support of the entity’s objectives, and may (but not necessarily) be made as part of a bequest. An endowment may be made for the perpetual benefit of the entity in that the transfer is made with a requirement for the principal to be preserved, and only income earned on investment activity to be available for use in furthering the entity’s objectives. B19 An endowment may include conditions pertaining to investment of the principal and the purpose to which investment income must be applied. For example, an endowment made to a university may be made on condition that the principal is invested and the investment income used for annual scholarships. An entity shall consider whether the conditions of the transfer give rise to any related contribution by owners, liabilities or revenue that is recognised at the same time as the entity recognises an asset. For example, an entity may determine the conditions give rise to a financial liability within the scope of AASB 9 for the obligation to provide a financial asset into the future, or a contract liability within the scope of AASB 15 for unperformed performance obligations relating to the transfer of goods or services under the terms of the endowment. Bequests B20 A bequest is a transfer made according to the provisions of a deceased person’s will. Whether the initial recognition of bequeathed items as assets in accordance with another Standard simultaneously gives rise to the recognition of income will depend on whether the entity recognises a liability, or other related amounts, as a result of the bequest. For example, the terms of a bequest may establish a contract between an entity and the estate that is within the scope of AASB 15 and give rise to a contract liability. Provisions Constructive obligations B21 When an entity recognises an asset in accordance with another Australian Accounting Standard for consideration that is significantly less than fair value principally to enable the entity to further its objectives, the entity applies paragraph 9 to recognise any related amounts. When applying that paragraph, an entity considers whether a provision should be recognised in accordance with AASB 137 for a constructive obligation. B22 Critical to recognising a provision for a constructive obligation, an entity must demonstrate that its published policies, past practices or current statements are sufficiently specific to raise a valid expectation on the part of other parties that the entity will discharge its responsibilities under those policies, practices or statements. Determining whether an entity’s policies, practices or statements are sufficiently specific to create such an expectation among other parties is a matter of judgement. However, it is unlikely that an entity’s charter or stated objectives would satisfy the definition of a constructive obligation. B23 An established pattern of past practices might also create a valid expectation among other parties that the entity will continue to adhere to those practices in the future. While entities might establish a general pattern for utilising assets received, they often do not adhere to those patterns to such a degree as to create a valid expectation among other parties. Legal obligations B24 Contractual terms (implicit or explicit), legislation or another operation of the law might create a legal non-financial obligation for an entity. In these circumstances an entity applies AASB 137 to recognise a provision, if any, arising from those legal obligations. B25 Provisions might arise from terms included in a lease, such as an obligation to return or restore the leased asset in its original condition. Paragraphs 24 and 25 of AASB 16 provide guidance on accounting for an obligation to maintain, or restore, assets to conditions specified in a lease. Where such an obligation exists, the obligation is also accounted for in accordance with AASB 137. Parliamentary appropriations as income B26 The nature of parliamentary appropriations, and the circumstances that give rise to a government department’s recognition of such appropriations, can vary across different jurisdictions in Australia, and may vary for different types of appropriations within a particular jurisdiction. Similarly, the nature and content of appropriation legislation, the manner in which government departments’ activities are funded, and the mechanisms by which parliament and the government ensure that the government departments’ use of public funds is appropriate and consistent with government priorities as sanctioned by parliament, can change over time. Accordingly, the extent to which amounts appropriated for a government department’s use are recognised as income of a particular reporting period is determined by reference to the characteristics of the appropriation process and the circumstances in which the government department recognises appropriated amounts. B27 For example, the parliamentary appropriation process currently adopted in some jurisdictions in Australia is such that the government departments do not gain control of funds appropriated for their use until obligations are incurred or expenditures are made by the government department. In these jurisdictions, appropriations recognised as income are in the nature of a recovery of costs incurred for the acquisition of goods and services or for amounts otherwise expended. Non-contractual income arising from statutory requirements B28 Taxes, rates and fines do not give rise to a contract liability or revenue recognised in accordance with AASB 15, even when they are raised in respect of specific goods or services. This is because the entity does not promise to provide goods or services in an agreement that creates obligations enforceable against the entity by legal or equivalent means. B29 Taxes, rates and fines are not contributions by owners acting in their capacity as owners. Payable tax credits and other tax relief B30 Amounts of tax relief that enter directly into the calculation of a taxpayer’s tax liability (including tax allowances, exemptions and deductions, and ‘non-payable tax credits’) are treated as reductions in income (ie foregone income), rather than expenses. A ‘non-payable tax credit’ is a tax credit limited to the amount of the taxpayer’s tax liability for the period. An example of tax relief that enters directly into the calculation of a taxpayer’s tax liability is where taxpayers are permitted tax deductions for self-education expenses. These types of concessions are available only to taxpayers. If an entity (including a natural person) does not pay tax, it cannot access the concession. B31 In contrast, a payable tax credit is a tax credit that is not limited to the amount of the taxpayer’s tax liability for the period; that is, any excess of the tax credit over the tax liability for the period would be payable to the taxpayer. Such tax credits might be payable to taxpayers as part of a programme in which the same amount of benefit is paid to taxpayers and non-taxpayers alike (the latter being payable exclusively in the form of a cash benefit). For example, a government may use the tax system as a convenient method of paying benefits to taxpayers, which would otherwise be paid using another payment method, such as writing a cheque, directly depositing the amount in a taxpayer’s bank account, or settling another account on behalf of the taxpayer. For example, a government may pay part of an individual’s health insurance premiums, to encourage the uptake of such insurance, either by reducing the individual’s tax liability (by providing payable tax credits), making a payment by cheque or by paying an amount directly to the insurer. In these cases, the amount is payable irrespective of whether the individual pays taxes. Consequently, this amount is an expense of the government and is recognised separately from its tax income. Tax income is measured gross of any expenses incurred by granting payable tax credits. Volunteer services (paragraphs 18–22) B32 A not-for-profit entity that makes an accounting policy choice to recognise volunteer services under paragraph 19 shall only change its accounting policy if the change meets the criteria in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (paragraph 14). That is, an entity can change an accounting policy only if the change: (a) is required by an Australian Accounting Standard; or (b) results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows. ## Appendix EAustralian simplified disclosu Appendix EAustralian simplified disclosures for Tier 2 entities # Appendix E Australian simplified disclosures for Tier 2 entities > Note: This appendix is an integral part of the Standard. AusE1 Paragraphs 23–41 do not apply to entities preparing general purpose financial statements that apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities. ## Illustrative examples Illustrative examples # Illustrative examples > Note: These illustrative examples accompany, but are not part of, AASB 1058. They illustrate aspects of AASB 1058, but are not intended to provide interpretative guidance. IE1 The following examples portray hypothetical situations. They are intended to illustrate how a not-for-profit entity might apply some of the requirements of AASB 1058 Income of Not-for-Profit Entities to particular types of transactions, on the basis of the limited facts presented. Although some aspects of the examples might be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern need to be evaluated when applying AASB 1058. Recognition and measurement of income and related amounts (paragraphs 9–22) IE2 Examples 1–8 illustrate the requirements in AASB 1058 for identifying related amounts and income to be recognised in accordance with paragraphs 9 and 10 on the initial recognition of an asset. The following requirements are illustrated in the examples in identifying related amounts in the form of: (b) a financial instrument, in accordance with AASB 9; (c) a lease liability arising in a lease contract, in accordance with AASB 16; and (d) revenue or a contract liability arising from a contract with a customer, in accordance with AASB 15. Contributions by owners Example 1—Contributions by owners – transfer of cash appropriation A Government department transfers cash appropriations of $730,000 to its controlled entity and designates the transfer before it occurs as an equity contribution in accordance with paragraph 8(c) of AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities, as identified in AASB 1048 Interpretation of Standards. The controlled entity determines:  the cash appropriation is an asset acquired by the controlled entity for no consideration to further the objectives of the controlled entity. Accordingly, the appropriation is within the scope of AASB 1058; and  it controls a financial asset within the scope of AASB 9. In accordance with paragraph 9, the related amount for the cash asset is a contribution by owners, which is recognised in equity, as it meets the requirements of AASB Interpretation 1038 and AASB 1004. The journal entry on initial recognition by the controlled entity is: Cash 730,000 Equity – contributed capital 730,000 Example 2—Contributions by owners to a private sector not-for-profit entity Charity P makes a contribution of $500,000 to establish Company S, which operates child care centres. There are no repayment terms to the contribution and there are no goods or services to be provided to Charity P in return for the contribution. Company S is a company limited by guarantee with required member contributions of $10. Charity P controls the voting rights and in accordance with AASB 10 Consolidated Financial Statements consolidates Company S. Company S determines:  the cash from the contribution is an asset acquired by Company S for no consideration to further the objectives of Company S. Accordingly, the cash injection is within the scope of AASB 1058; and  it controls a financial asset within the scope of AASB 9. In accordance with paragraph 9, the related amount for the cash asset is accounted for as a contribution by owners. Charity P is a member (owner) of Company S, and the transfer is from an owner acting in their capacity as an owner. No services are required of Company S as a result of the contribution, nor is there an obligation to repay the funds. The journal entry on initial recognition by Company S is: Cash 500,000 Equity – contributed capital 500,000 Financial instruments, bequests and endowments IE3 Examples 3 and 4 illustrate the requirements of paragraphs 9 and 10 in AASB 1058 for the accounting treatment for financial instruments, bequests and endowments. Examples 3A and 4 illustrate the identification of related amounts in the form of a financial instrument, in accordance with AASB 9. Receiving a bequest or endowment in the form of cash, or paying out the principal and/or interest in the form of cash, requires the application of the financial instrument accounting requirements in AASB 9. Example 3—Endowment made to a university An alumnus transferred $2 million cash to University A as an endowment. Under the terms of the endowment:  the $2 million cash can be invested at the university’s discretion;  subject to preserving the real value of the principal, all income generated from investing the principal is required to be applied towards cash scholarships of $20,000 per student for the student to use at their discretion; and  if the university breaches the terms of the endowment, the university is required to return the real value of the principal to the alumnus. University A determines:  it has an enforceable agreement with the alumnus, as the university can be required to return the endowment in the event it breaches the terms under which it was given;  the $2 million endowment is an asset the university acquired for no consideration to further the objectives of the university. Accordingly, the endowment is within the scope of AASB 1058; and  it controls a financial asset ($2 million) within the scope of AASB 9. Example 3A – Financial instrument (cash scholarships, not goods or services) Based on the facts and circumstances outlined above, as the income generated from the principal amount (excluding the income required to preserve the real value of the principal) must be applied towards funding cash scholarships at some time in the future (at its discretion), the university considers whether it has incurred a financial liability under AASB 9 as a related amount. The university also considers whether derecognition of the financial asset is appropriate under Chapter 3 ‘Recognition and derecognition’ of AASB 9, instead of the recognition of a financial liability. In this example, no transfer of specific goods or services is required under the terms of the endowment. The scholarship is paid in cash rather than through the provision of goods or services. Accordingly, the university determines that it does not have a contract with a customer (the alumnus) that would be accounted for in accordance with AASB 1058. Similarly, the endowment does not give rise to the following types of related amounts:  a contribution by owners, as the alumnus does not control or have an ownership interest in the university;  a lease liability as defined in AASB 16, as the endowment does not provide a right to use a specified asset; and  a provision within the scope of AASB 137, as the agreement provides legal obligations and there are no other constructive obligations that are sufficiently specific to consider. In accordance with paragraph 9, University A accounts for the endowment under AASB 9. In accordance with paragraph B13, any difference between the $2 million financial asset recognised and a related financial liability recognised would be accounted for under AASB 9. Paragraph 10 of AASB 1058 does not apply in this case. Example 3B – Income (provision of services, no sufficiently specific performance obligation) In this example, the facts of Example 3 apply, except that:  University A is required to provide free student accommodation each year for one student for one year, for as long as University A continues to operate as a university and subject to the real value of the principal of $2 million being preserved;  income generated from investment of the principal may be applied to provide the student accommodation; and  any excess income generated from the investment of the principal is permitted to be spent on other university activities. Based on these facts and circumstances, on gaining control of the endowment of $2 million, University A determines that there are no related amounts for the $2 million as the endowment does not give rise to:  a contribution by owners, as the alumnus does not control or have an ownership interest in University A;  a contract with a customer within the scope of AASB 15. Although the promise to provide student accommodation is a promise to transfer goods or services, it is not a sufficiently specific performance obligation relating to the controlled asset. While the promise to provide student accommodation is distinct and the university can identify at the end of each year whether or not it has delivered the accommodation for one student, it cannot identify when its obligation is fully satisfied and cannot allocate the transaction price as the promise is continuous as long as University A continues to operate as a university. University A must be able to identify when the performance obligation is satisfied for the promise to be identified as sufficiently specific (paragraph F20 of AASB 15);  a lease liability as defined in AASB 16, as the endowment agreement does not provide a right to use a specified asset (the accommodation provided can vary from year to year);  a financial liability within the scope of AASB 9 as there is no obligation to provide cash or other financial assets to other parties, only accommodation; or  a provision within the scope of AASB 137, as the agreement provides legal obligations and there are no other constructive obligations that are sufficiently specific to consider. In accordance with paragraph 10, the endowment of $2 million is accounted for by University A as income immediately in profit or loss on recognition of the financial asset in accordance with AASB 9. Income 2,000,000 Example 3C – Contract liability under AASB 15 In this example, the facts of Example 3B apply, except that University A is required to provide the annual scholarship for one student’s accommodation for a defined period of 30 years. University A determines:  it controls a financial asset ($2 million) within the scope of AASB 9; and  on gaining control of the endowment, the university does not have related amounts in the form of contributions by owners, a lease liability, a financial liability or a provision. However, the promise to provide student accommodation is a sufficiently specific performance obligation related to the asset that AASB 15 applies, as the obligation to provide student accommodation for one student each year is distinct, and the university is able to identify that its obligation under the agreement will be satisfied by the end of 30 years (paragraph F20 of AASB 15). The endowment is also an enforceable agreement. Accordingly, as the consideration provided for the endowment is solely a performance obligation within the scope of AASB 15, AASB 1058 does not apply. On recognition of the endowment financial asset in accordance with AASB 9, University A also recognises a contract liability in a contract with a customer in accordance with AASB 15 for its performance obligation to transfer an annual scholarship for 30 years. University A recognises income immediately in profit or loss for any excess of the fair value of the cash transferred ($2 million) over the contract liability recognised in accordance with paragraph 106 of AASB 15. Contract liability 1,850,000 Income 150,000 Example 4—Refundable prepaid local government rates Local Council A calculates the rates it charges local residents on an annual basis approximately two months prior to the annual period to which the rates relate. Residents and other ratepayers are able to pay their rates in advance on a quarterly or annual basis. Rate payments received before the annual rateable period begins are fully refundable up to the beginning of the rateable period for which the payment is made. For example, if the Council receives a payment in May 20X6 for the rateable period from 1 July 20X6 to 30 June 20X7, the receipt is refundable in May and June 20X6. The following transactions have occurred during May and June 20X6, in aggregate:  ratepayers prepaid 20X6/X7 rates of $120,000; and  refunds of prepaid rates totalling $7,000 were paid to ratepayers. On receipt of prepaid rates, the Council determines that it has acquired cash (a financial asset) for no consideration to further the objectives of the Council. Accordingly, the transaction is within the scope of AASB 1058, and the Council seeks to identify any related amounts for recognition. As the taxable event for the rates has not yet occurred (see AASB 9, Appendix C), the prepaid rates are refundable at the request of the ratepayer. Until the taxable event occurs, the prepaid rates do not have the character of non-contractual amounts arising from statutory requirements. Therefore, during the refundable period, the rates received in advance give rise to a financial liability that is within the scope of AASB 9\. This is the related amount to be recognised in accordance with paragraph 9. On recognition of the prepaid-rates financial asset, in accordance with paragraph 9 the Council also recognises the related amount of the financial liability in accordance with AASB 9, and no income is recognised by the Council. Following the occurrence of the taxable event on 1 July 20X6, the financial liability is extinguished and the Council recognises income for the prepaid rates that have not been refunded. The journal entries for the accounting (aggregating the journal entries in May and June 20X6 for individual transactions) are: Receipt of prepaid rates (aggregate) Cash 120,000 Financial liability 120,000 Refunds of prepaid rates (aggregate) Financial liability 7,000 Cash 7,000 Taxable event occurs 1 July 20X6 Financial liability 113,000 Income 113,000 Leases IE4 Example 5 illustrates the requirements in AASB 1058 regarding the recognition of a lease liability in accordance with AASB 16. Example 5—Lease with significantly below-market minimum lease payments Charity A (lessee) enters a 30 year lease with a local government (the lessor) for the use of a facility. The lease contract specifies lease payments of $100 per annum. At the inception of the lease, the entity assesses the terms and conditions of the lease, including restrictions, and determines the fair value of the right to use the facility for 30 years is $360,000. The leased premises must be used to provide services to the homeless, or else Charity A will no longer be able to use the facility. There are no other conditions specified in the lease contract. Charity A determines:  the $360,000 right-of-use asset is an asset the charity acquired for consideration significantly below fair value to further the objectives of the charity. Accordingly, the asset is within the scope of AASB 1058; and  it controls a leased asset ($360,000) within the scope of AASB 16. On recognition of the right-of-use asset, Charity A determines the lease does not give rise to related amounts of the following types:  a contribution by owners, as the local government does not have an ownership interest in Charity A;  a contract with a customer in accordance with AASB 15, because the lease liability arises from a lease contract within the scope of AASB 16 and there are no other sufficiently specific performance obligations requiring transfers of goods or services to the local government or others associated with the lease contracts. Use of the facility to provide services to the homeless is not sufficiently specific to identify when the services have been provided. Accordingly, AASB 15 does not apply;  a provision within the scope of AASB 137, as the agreement provides legal obligations and there are no other constructive obligations that are sufficiently specific to consider; and  a financial instrument, because lease contracts within the scope of AASB 16 are scoped out of AASB 9. In accordance with AASB 16, Charity A recognises a right-of-use asset of $360,000 and a lease liability of $1,537, being the present value of the future lease payments discounted at Charity A’s incremental borrowing rate of 5% per annum (as the interest rate implicit in the lease is not readily determinable). Charity A also recognises the difference of $358,463 between the fair value of leased asset and the lease liability as income at inception of the lease in accordance with paragraph 10 of AASB 1058. Right-of-use asset 360,000 Lease liability 1,537 Income 358,463 Contract with a customer – revenue and income IE5 Examples 6–8 illustrate the requirements in AASB 1058 regarding recognition of revenue and a contract liability in accordance with AASB 15\. To be in the scope of AASB 15, the contract must: (a) be enforceable; (b) contain performance obligations to transfers goods or services to another party that are sufficiently specific to enable determination of when the obligation has been satisfied; and (c) not result in the goods or services specified being retained by the entity, ie the goods or services will be transferred to the customer or to other parties on behalf of the customer. Example 6—Enforceable agreement, performance obligations and restrictions on timing of expenditure Charity B receives a government grant of $2.4 million on 31 May 20X6, which is refundable if the money is not spent in the period 1 July 20X6 to 30 June 20X7. Charity B determines:  the $2.4 million grant is an asset the charity acquired to further the objectives of the charity; and  it controls a financial asset ($2.4 million cash) within the scope of AASB 9. The above fact pattern and analysis applies to Examples 6A and 6B, described below. Example 6A – Enforceable agreement, no specific performance obligations but restrictions on timing of expenditure This example contains the additional fact that Charity B’s agreement with the grantor specifies that the grant must be used in accordance with the charity’s overall objectives. The agreement does not specify the services that the grant must be used for. Charity B analyses the terms of the grant agreement and notes:  the agreement is enforceable as the grantor can enforce its rights in the contract to require Charity B to return the cash of $2.4 million if Charity B does not spend the amount in the year ending 30 June 20X7;  the required use of the funds to further the entity's objectives is not sufficiently specific to know when goods or services have been transferred and the obligation satisfied; and  the time restriction on use of the funds is not sufficiently specific of itself to create a performance obligation to transfer goods or services to the grantor or a third party so that it can be identified when the obligation is satisfied. When funds have been commingled with other funds, such as general purpose funds, used to fund administrative services as well as those related to the objectives of the entity, it is not possible to reliably determine what transfer of goods or services may have occurred using the specific funds. The time restriction is also not sufficiently specific of itself to create a constructive obligation. Consequently, Charity B concludes that the transaction is not a contract with a customer as defined under AASB 15. Because the $2.4 million grant is an asset the charity acquired for no consideration to further its objectives, the grant is within the scope of AASB 1058. Charity B determines that there are no related amounts to recognise in accordance with paragraph 9. Therefore, Charity B recognises income of $2.4 million in accordance with paragraph 10 of AASB 1058 on 31 May 20X6 on recognition of the financial asset in accordance with AASB 9. Furthermore, on 31 May 20X6, Charity B does not have a liability under AASB 9 for the potential breach of contract, as it has the discretion not to spend the grant money before 1 July 20X6. If Charity B breaches the contract by spending the money before 1 July 20X6 or failing to spend the grant in full by 30 June 20X7, the breach is the obligating event giving rise to a liability (in this instance, a penalty). For this reason, Charity B recognises the grant of $2.4 million as income as at 31 May 20X6. If Charity B breaches the contract, it recognises a liability and equivalent expense for the amount due for repayment when the breach occurs. The journal entry for the accounting treatment is: