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 http://www.treasury.qld.gov.au/office/services/reporting/requirement s/index.shtml • Financial Reporting Requirements http://www.treasury.qld.gov.au/office/knowledge/docs/fin-reporting- req/index.shtml • Non-Current Asset Policies http://www.treasury.qld.gov.au/office/knowledge/docs/non-current- asset-policies/index.shtml • FMB Helpdesk (email) fmhelpdesk@treasury.qld.gov.au This is trial version www.adultpdf.com For Further Information (cont’d) Government Owned Corporations: • “Minimum Remuneration Disclosure Requirements” http://www.ogoc.qld.gov.au/goc-policies/index.shtml Local Governments: • “A guide to asset accounting in Local Governments” http://www.dip.qld.gov.au/guide-to-the-local-government- act/index.php This is trial version www.adultpdf.com . Preparation and Presentation of Financial Statements • AASB 101 Presentation of Financial Statements • AASB 9 Financial Instruments • AASB 139 Financial Instruments: Recognition and Measurement This. during 2 010/ 11 – DET recognises the full $2M as grant income for 2 010/ 11 This is trial version www.adultpdf.com Case study: “Better XYZ Facilities” Funding Deed Accounting Treatment (for 2 010 -2011) . 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