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 governmen

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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

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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

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Case study:

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

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Case study:

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

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Case study:

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

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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

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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

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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

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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

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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

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