IPSAS 23

Revenue from non exchange transactions

This material is the property of Department of Accounting and Finance, CoBE,

AAU. Permission must be obtained from the Department prior to reproduction
1
 Learning Objectives
After completion of this session, you will be able
to:
 Understand the scope and applications of IPSAS 23

Identify the key sources of non-exchange revenue

 Comprehend the recognition, measurement,

presentation, disclosure, and reporting

requirements of Revenue from non-exchange
transactions.

2
 Objective

 To prescribe requirements for the financial

reporting of revenue arising from non-
exchange transactions.
 Scope
 An entity that prepares and presents financial statements under
the accrual basis of accounting shall apply this Standard in
accounting for revenue arising from non-exchange transactions
and includes:
 Taxes; and
 Transfers (cash or non-cash),

 including
 grants,
 debt forgiveness,
 fines,
 bequests,
 gifts,
 donations,
 goods and services in-kind, and
 the off-market portion of concessionary loans received.
 Definition
 Revenue
 gross inflows of economic benefits or service potential received and
receivable
 increase in net assets/equity, other than contributions from owners.
 Exchange transactions
 an exchange of approximately equal value.

 Non-exchange transactions

 receives or gives value from/to another entity

 without directly giving or receiving approximately equal

value in exchange
 Transfers

 inflows of future economic benefits or service potential

 From non-exchange transactions,
 other than taxes
 Substance over Form
 Definitions ……cont’d
 Stipulations on transferred assets
 terms in laws or regulation, or a binding arrangement,
 imposed upon the use of a transferred asset
 by entities external to the reporting entity.
 Conditions on transferred assets
 stipulations that specify that the future economic benefits or service
potential embodied in the asset is required to be consumed by the
recipient as specified or
 future economic benefits or service potential must be returned to the
transferor.
 Restrictions on transferred assets
 stipulations that limit or direct the purposes for which a transferred
asset may be used,
 do not specify that future economic benefits or service potential is
required to be returned to the transferor if not deployed as specified.
 Recognition of Assets
 Assets are recognizes when it fulfill the definition of assets and
recognition criteria
 Assets are defined in IPSAS 1

 Control of an asset

 The ability to exclude or regulate the access of others to the

benefits of an asset
 Past event
 Probable of inflow of resources

 Recognition criteria

 (a) It is probable that the future economic benefits will flow

to the entity;
 (b) The fair value of the asset can be measured reliably.

 However, an entity may, but is not required to, recognize services

in-kind as revenue and as an asset.

7
 Recognition of Revenue
 An inflow of resources from a non-exchange transaction
recognized as an asset shall be recognized as revenue,
except to the extent that a liability is also recognized in
respect of the same inflow.
 As an entity satisfies a present obligation recognized as
a liability in respect of an inflow of resources from a
non-exchange transaction recognized as an asset,
 it shall reduce the carrying amount of the liability
recognized and recognize an amount of revenue equal
to that reduction, eg. debt forgiveness,
 The timing of revenue recognition is determined by the
nature of the conditions and their settlement.

8
 Recognition of Liabilities
 Liabilities are recognizes when it fulfill the definition of
liability and recognition criteria
 A present obligation
 a duty to act or perform in a certain way eg stipulation or

conditions on transferred assets; operating environments etc

 arising from a non-exchange transaction
 meets the definition of a liability
 Recognition criteria
 It is probable that an out flow of resources embodying future

economic benefits or service potential will be required to

settle the obligation; and
 A reliable estimate can be made of the amount of the

obligation.

9
 Measurement

 Measurement of Assets on Initial Recognition

 at its fair value at the date of acquisition.
 Measurement of Revenue from Non-Exchange
Transactions
 at the amount of that increase in net assets.
 Measurement of Liabilities on Initial Recognition
 the best estimate of the amount required to settle the
present obligation at the reporting date.
 Takes account of risk and uncertainty

 If time value of money is material use PV

10
 Disclosures
 An entity shall disclose:
 The amount of revenue from non-exchange transactions by major classes
 The amount of receivables recognized in respect of non-exchange revenue.
 The amount of liabilities recognized in respect of transferred assets subject
to conditions.
 The amount of assets recognized that are subject to restrictions and the
nature of those restrictions.
 The existence and amounts of any advance receipts in respect of non-
exchange transactions.
 The amount of any liabilities forgiven.
 The accounting policies adopted
 the basis on which the fair value of inflowing resources was measured.
 occurs, information about the nature of the tax.
 The nature and type of major classes of revenue
 showing separately major classes of goods in-kind received