Financial Audit Update Thursday 3 March 2011 and Thursday 10 March 2011_part5 doc

AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance (cont’d)
• Government loan at below-market rates of interest
(AASB
120.10A):
– Benefit treated as government assistance
– Measured as the difference between the fair value of the loan and
the proceeds received
– Accounted for in accordance with AASB 120
– Loan recognised in accordance with AASB 139 Financial
Instruments: Recognition and Measurement
This is trial version
www.adultpdf.com
Case study:
“Better XYZ Facilities” Funding Deed
Background
• Department of Education and Training (DET) (grantee) receives a
grant from the Commonwealth Department of Education, Employment
& Workplace Relations (DEEWR) (grantor)
• The grant funding for “Better XYZ Facilities” amounts to $2 million
– Contract includes conditions that some or all of the funding must be
repaid if it has not been spent in accordance with the Agreement or
acquitted to their satisfaction.
• During 2010/11 DET has received the full $2M funding in 4 instalments.
This is trial version
www.adultpdf.com
Case study:
“Better XYZ Facilities” Funding Deed
Accounting Treatment (for 2010-2011)
• In accordance with AASB 1004 DET must recognise the $2 million

grant from DEEWR when:
– it obtains control or the right to receive it
– probable
– measured reliably
• As income in the period received:
– DET received $2M grant monies during 2010/11
– DET recognises the full $2M as grant income for 2010/11
This is trial version
www.adultpdf.com
Case study:
“Better XYZ Facilities” Funding Deed
Accounting Treatment (for 2010-2011) (cont’d)
• At 30 June 2011, it is apparent that DET will not fulfil all of its
obligations as per the funding deed
– one project will not be completed by its specified date
– breach of a condition imposed by DEEWR
• The inclusion of a condition and/or restriction does not mean
DET has a present obligation at this stage to sacrifice future
economic benefits to the DEEWR
(para AASB 1004.20)
• At 30 June DEEWR has not issued invoice for return of grant
monies at this stage
– no liability is raised by DET
This is trial version
www.adultpdf.com
Case study:
“Better XYZ Facilities” Funding Deed
Additional information
• On 7 January 2012, DEEWR issues invoice to DET for repayment of
$200k grant monies for failure to complete project by specified time

Accounting Treatment (for 2011-2012)
• DET raises liability and matching expense for $200k in January 2012
(i.e. financial year ended 30 June 2012)
– DET now has present obligation to DEEWR that has arisen as a
result of a past event (para AASB 1004.26).
• Considered a separate event and transaction to the initial receipt of
grant monies during 2010/11
This is trial version
www.adultpdf.com
Accounting for Grants & Contributions Paid
(Grantor/Payer)
• No specific Australian Accounting Standards to provide
guidance on the accounting treatment
– AASB 1004 Contributions considers the situation of a not-for-profit
receiving grants rather than paying them
– Applicable Standards
• Framework for the Preparation and Presentation of Financial
Statements
• AASB 101 Presentation of Financial Statements
• AASB 9 Financial Instruments
• AASB 139 Financial Instruments: Recognition and Measurement
This is trial version
www.adultpdf.com
Accounting for Grants and Contributions
Paid
(cont’d)
• Treasury policy (Financial Reporting Requirements) for
departments and statutory bodies only
:
– Grant payments in arrears

• Where terms of a grant have been satisfied, but full amount not yet
disbursed, must recognise an expense and a liability (payable)
– Advance grant payments (and transaction is conditional),
• Recognise a prepayment (i.e. asset) and amortisation (i.e. expense)
over grant period, as and when performance by the recipient creates an
unavoidable present obligation
This is trial version
www.adultpdf.com
Latest Developments
• AASB ED 180/FRSB ED 118 Income from Non-exchange
Transactions (Taxes and Transfers)
– To replace AASB 1004 Contributions, for all not-for-profit entities
– Different criteria for timing of revenue recognition
– AASB & NZ FRSB re-visiting proposals – focussing on nature of
obligations of recipients
This is trial version
www.adultpdf.com
For Further Information
Departments and Statutory Bodies:
• Accounting Policy Framework web page
/>s/index.shtml
• Financial Reporting Requirements
/>req/index.shtml
• Non-Current Asset Policies
/>asset-policies/index.shtml
• FMB Helpdesk (email)

This is trial version
www.adultpdf.com
For Further Information

(cont’d)
Government Owned Corporations:
• “Minimum Remuneration Disclosure Requirements”
/>Local Governments:
• “A guide to asset accounting in Local Governments”
/>act/index.php
This is trial version
www.adultpdf.com