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 This is trial version www.adultpdf.com • 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) This is trial version www.adultpdf.com 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) This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com 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) This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com 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 This is trial version www.adultpdf.com . (AASB 100 4 para 20) – A liability and corresponding expense is only recognised when an actual obligation to return money exists (AASB 100 4 para 26) This is trial version www.adultpdf.com AASB 100 4. 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) This. Government Grants and Disclosure of Government Assistance • Applicable to for-profits entities preparing general purpose financial statements • Government grants – defined in the standard including