Financial Audit Update Thursday 3 March 2011 and Thursday 10 March 2011_part4 ppt

AASB 1004 Contributions
(cont’d)
(Accounting for Grants)
• Restrictions and/or conditions
– requirements that may be imposed by the transferor on the use of
the contribution
• Common examples seen in grant agreements/contracts
• requirement to meet defined key performance indicators
• fiduciary responsibility to use effectively and efficiently
• requirement to return monies if a breach on use occurs
• requirement that all unspent money is to be returned
• The inclusion of restriction and/or condition in a grant agreement is
not sufficient in themselves to give rise to a present obligation as per
the definition of a liability
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• Rare situations some or all of contribution may be shown as
liability (AASB 1004.26):
– ONLY in event of an obligation arising to return all or part of the
contribution.
• Need evidence that obligation has arisen (eg. such as invoice
from grantor demanding an amount to be paid back)
• Liability with corresponding expense is recognised
– Obligation needs to meet definition of a liability as per the AASB
Framework
AASB 1004 Contributions
(cont’d)
(Accounting for Grants)
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AASB 1004 Contributions

(cont’d)
(Accounting for Grants)
• Summary
– Contributions are to be recognised as revenue once entity has met
the recognition criteria (AASB 1004 para 20)
– A liability and corresponding expense is only recognised when an
actual obligation to return money exists (AASB 1004 para 26)
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AASB 1004 – Contributions
(Accounting for Contribution of Services)
• Government agencies may receive contribution of goods or
services free of charge or by way of gift or donation
– Eg. volunteers involved in the clean up after the Queensland floods
and Cyclone Yasi
• Some donated services, while useful, may not be central to the
delivery of services
• Case by case basis as to whether agency would purchase the
services if they were not donated
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AASB 1004 – Contributions
(cont’d)
(Accounting for Contribution of Services )
• Recognition of services (AASB 1004.45.46):
– Services only recognised when they would be purchased if not
donated and when their fair value can be measured reliably.
– Recognise services at fair value and as income and expenses (i.e.
bottom line neutral)
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AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance
• Applicable to for-profits entities preparing general purpose
financial statements
• Government grants
– defined in the standard including non-monetary grants and
forgivable loans
– excludes government assistance which cannot be valued and
transactions which form normal trading activities
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AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance (cont’d)
• Timing of Recognition
(AASB 120.7):
– Government grants:
• only when agency will comply with the conditions attached
• when the grant will be a receivable
• Accounting
– same be it cash or reduction of a liability to Govt
– Non-monetary grants:
• grant and asset recognised at fair value OR nominal value
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AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance (cont’d)

• Recognition
(AASB 120.12)
:
– on a systematic basis
– over the periods necessary to match them with the related costs
for which they are intended to compensate.
• Presentation
– Grants related to income
(
AASB 120.29-31)
• Government grant other than those related to assets
– Grants related to assets (AASB 120.24-28)
• Government grant whose primary condition is to purchase,
construct or otherwise acquire long-term assets
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AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance (cont’d)
• Presentation options for Government grants related to income
(AASB 120.29-31):
– as income
OR
– offset against the related expense
• Presentation options for Government grants related to assets
(AASB 120.24-28):
– Set up the grant as deferred income (i.e. asset) AND recognised as
income on a systematic basis over the useful life of the asset
OR
– Deduct the grant from the carrying amount of the related asset

• lower annual depreciation
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AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance (cont’d)
• A government grant that is compensation (AASB120.20):
– Two scenarios
• for expenses or losses already incurred
• for the purpose of giving immediate financial support to the agency with
no future related costs
– Must be recognised as income of the period in which grant
becomes due
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