Objective
1
This Standard establishes principles for not-for-profit entities that apply to:
(a) transactions where the consideration to acquire an asset is significantly less than fair value principally to enable a not-for-profit entity to further its objectives; and
(b) the receipt of volunteer services.
2
If the consideration provided to acquire an asset, including cash, is significantly less than the fair value of that asset, or if no consideration was provided, and the difference is principally to enable the entity to further its objectives, such a transaction is within the scope of this Standard. For example, an entity that receives a cash grant to be used to further its objectives might not have provided any consideration in exchange for that cash. As another example, governments are entitled to non-contractual receivables arising from statutory requirements such as taxes and rates without providing consideration to the other party – those receivables provide income to the government to further its objectives. This Standard addresses the accounting for the income arising from such transactions.
Meeting the objective
3
To meet the objective in paragraph 1(a), an entity shall initially recognise:
(a) an asset in accordance with the applicable Australian Accounting Standard;
(b) any related contributions by owners, contract liabilities, financial liabilities, lease liabilities and other liabilities and revenue, measured in accordance with the applicable Australian Accounting Standard;
(c) any liabilities for obligations arising from transfers to enable the entity to acquire or construct non-financial assets to be controlled by the entity; and
(d) related income, representing the residual amount of resources received.
4
To meet the objective in paragraph 1(b), certain types of public sector entities shall recognise assets or expenses for volunteer services received if the fair value of those services can be measured reliably and the entity would have purchased those services if they had not been donated. Any not-for-profit entity may elect to recognise volunteer services received if their fair value can be measured reliably irrespective of whether that entity would have purchased those services if not donated.
5
AASB 15 Revenue from Contracts with Customers defines income as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions by equity participants (that is, owners). This Standard addresses income arising from the acquisition of assets for consideration that is significantly less than the fair value of the asset when that difference is principally to enable the not-for-profit entity to further its objectives. This Standard applies to those differences that result in increases in equity, other than those relating to contributions by owners or those accounted for under another Standard (eg AASB 15). Other Australian Accounting Standards (eg AASB 1004 Contributions) address income arising from decreases of liabilities and the accounting for contributions by owners.
6
An entity shall apply the requirements of this Standard to each transaction based on the substance of the transaction, rather than its legal form or the description given to it (eg grants or donations), so as to provide a faithful representation of the economic substance of the transaction.