Appendix C (AASB9_12-14_COMPdec22_01-23)

AASB 9 Financial Instruments incorporates International Financial Reporting Standard IFRS 9 Financial Instruments, issued by the International Accounting Standards Board. Consequently, the text of AASB 9 is generally expressed from the perspective of for-profit entities in the private sector. The AASB has prepared this appendix to explain the principles in the Standard in relation to non-contractual receivables arising from statutory requirements (‘statutory receivables’) from the perspective of not-for-profit entities in the private and public sectors. The appendix does not apply to for-profit entities or affect their application of AASB 9.

This appendix provides guidance to assist not-for-profit entities to determine whether particular transactions or other events, or components thereof, are within the scope of this Standard. If a transaction is outside the scope of AASB 9, the recognition and measurement of the asset and income arising from the transaction may instead be specified by another Standard, such as AASB 1058 Income of Not-for-Profit Entities.

The scope of AASB 9 depends on the definition of a financial instrument, which is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Therefore, AASB 9 specifically addresses financial assets (and financial liabilities) that arise from contracts.

Financial assets include contractual rights to receive cash or another financial asset from another entity. However, in a not-for-profit context, a receivable may arise from statutory requirements rather than through a contract (for example, rates, taxes and fines). The nature of such a receivable arising from statutory requirements is, in substance, similar to a contractual receivable, as the statutory requirements also provide an entity with a right to receive cash or another financial asset from another entity.

Accordingly, an entity recognises and measures a statutory receivable as if it were a financial asset when statutory requirements establish a right for the entity to receive cash or another financial asset. Such a right arises on the occurrence of a past event.

A past event relating to taxes occurs as specified for each tax levied in the relevant taxation law. Examples of taxable events include:

(a) income tax – the end of the taxation period in respect of which taxable income of a taxpayer is determined;

(b) goods and services tax – the purchase or sale of taxable goods and services during the taxation period;

(c) customs duty – the movement of dutiable goods or services across the customs boundary; and

(d) property tax – the passing of the date on which the tax is levied, or, if the tax is levied on a periodic basis, the period for which the tax is levied.

In some instances, assets arising from taxable events cannot be measured reliably until after the taxing entity’s financial statements are authorised for issue. This may occur, for example, if a tax base is volatile and reliable estimation is not possible. Consequently, in those cases, the assets would be recognised in a period subsequent to the occurrence of the taxable event, which may be several reporting periods after the taxable event.

It is unlikely that taxes or fines will qualify as assets of the government agency or department responsible for their collection. This is because the government agency or department responsible for collecting taxes or fines does not normally control the future economic benefits embodied in tax collections, and the taxes and fines are controlled at a whole of government level.