Financial Audit Update Thursday 3 March 2011 and Thursday 10 March 2011_part4 ppt

AASB 1004 Contributions conta Accounting for Grants ¢ Restrictions and/or conditions — requirements that may be imposed by the transferor on the use of the contribution ¢ Common exampl

AASB 1004 Contributions (conta)

(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

Queensland

Government

AASB 1004 Contributions (conta)

(Accounting for Grants)

¢ 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

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Government

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)

\ Queensland

Government

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

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Government

AASB 1004 — Contributions (coni'a)

(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)

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Government

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

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Government

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

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Government

AASB 120 Accounting for Government

Grants and Disclosure of Government

Assistance (cont'd)

¢ Recognition (AASB 120.12):

— onasystematic 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

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Government

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):

— Setup 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

\ Queensland

Government

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

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Government