INTHEBLACK July 2021 - Magazine - Page 23
GREY AREAS IN
The recognition of income from research
grants provided to universities and for medical
research institutes provides a unique set of
challenges, says CPA Australia’s reporting
policy adiser, Ram Subramanian.
not always immediately apparent whether an arrangement is to
provide goods or services to a customer, or whether requirements
in an agreement for particular services are ultimately reflective of
broader responsibilities of the recipient.
“The challenges for governments in implementing the
new standards stem not only from analysis of transactions
with non-government parties, but also in considering how to
account for transactions between government entities.
“Monies appropriated from the consolidated funds of the
government are treated as AASB 1058 income by recipient
government entities. Other agreements may be formed
between government entities that result in a contract with a
customer for accounting purposes.”
Harrison says one of the challenges her government
department has faced was determining which government
entity was the party to an enforceable agreement.
“For example, the Commonwealth Government provides
grant funding for infrastructure programs that may then
take a number of years to carry out,” she says. “Like other
governments, the South Australian Government recognised
significant liabilities upon implementing AASB 1058 in
respect of funding already received for such capital projects,
which were yet to be completed.
“It took particular consideration to determine which entity
within the government should report related AASB 1058
“We concluded that, for accounting purposes, it is Treasury
and Finance that represents the State Crown as having the
enforceable agreement with the Commonwealth to develop
“Unfortunately, just ‘doing research’ is not considered
provision of goods and services, because an entity is
spending money on research, but may or may not
come up with a tangible output,” he says. “They may
not publish a paper out of it. The grant provider
appreciates that, sometimes, research goes nowhere.”
Robin Donohue, director of corporate finance with
Deakin University, says that, for 95 per cent of
Deakin’s income, there has been no difficulty in
working out which accounting standards apply.
However, difficulties have arisen when it comes to
the application of different types of research income
based on the type of research being undertaken.
Donohue says the accounting standards are not
easily applicable to their research, and the
consistency of interpretation is still being debated a
number of years following their coming into force.
“Last year, in conjunction with the AASB, the
Victorian Auditor General’s Office and Victorian
universities, there were a number of virtual
workshops where we discussed the differences of
opinion and the application of the wording within
A discussion point was the use of termination for
convenience clauses in contracts where a grantor
may rescind a contract at any time and require any
unspent monies to be returned.
“So, that meant that the practical differences
between AASB 15 and AASB 1058 with terminations
for convenience essentially give you the same
outcome,” Donohue says.
“It then doesn’t matter, in a way, which standard
you assess them under. You might have differences in
disclosures in your financial statements in relation to
them, but it will have the same profit effect.”
Yet, views on the use termination of convenience
clauses are far from uniform, with some technical
experts questioning the validity of their application
for income recognition purposes.
This is a sure sign that the book on the applications
of AASB 15 and AASB 1058 is far from closed.
intheblack.com July 2021 23