أمثلة توضيحية

These examples accompany، but are not part of، IPSAS 47.

Identify the Revenue Transaction

Example 1 – Transaction Arose from an Arrangement that is Not Binding

IE3. A social development entity (the Entity) receives funding of CU511 million from a government body (the Government) to fund its employment programs. The agreement requires funding to be spent on programs with the goal of improving employment in the region. If the Entity incurs expenditures to improve employment in the region، it is able to enforce its right to receive funding from the Government. The agreement does not specify the time period in which the funds are to be spent، any requirement to fund specific employment programs، nor how the Government will receive or verify information on how the funds were spent.

11       In these examples، monetary amounts are denominated in 'currency units' (CU).

Case B – Specified Time Period to Spend Funds

Case C – Specified Time Period to Spend Funds and Specific Reporting to the Government is Required

Example 2 – Research Grant Arising from a Binding Arrangement

IE8. Based on these terms، the Lab has concluded that the agreement is a binding arrangement in accordance with paragraph 4 of IPSAS 47، as it has an enforceable obligation to conduct the research project in accordance with the specified milestones in order to retain the funds، and an enforceable right to consideration for conducting this research project. The Lab shall apply the accounting principles in paragraphs 56–147 to account for this revenue from a transaction with a binding arrangement.

IE9. Examples 3–7 illustrate the requirements in paragraphs AG14–AG25 of IPSAS 47 on enforceability، which complement the requirements in paragraphs 11–14.

IE10. Pursuant to a ministerial directive، a state government (the Government) signed a memorandum of understanding with the Department of Public Works (Public Works)، for Public Works to receive funds to build a government office building. The memorandum is not binding in the court of law، does not impose a refund obligation for Public Works in the event that it fails to perform under the terms of the memorandum، nor does it refer to any other enforcement mechanisms. Although the memorandum is not legally binding، the Government and Public Works relied upon it during their contract negotiations. Public Works commenced providing construction services in accordance with the terms of the memorandum of understanding. In addition، Public Works has reported to the Government on its first month of work، and the Government has accepted the work performed to date.

IE12. Thus، the memorandum is enforceable by law in the parties' jurisdiction based on the concept of promissory estoppel. That is، the Government has the right to use its court of law to ensure that Public Works satisfies the promises in the memorandum or seek redress should they not be satisfied. Similarly، Public Works has the right to use the court of law to enforce the receipt of funds from the Government for work performed to date. As a result، the memorandum is considered enforceable through legal means in accordance with paragraphs AG14–AG18 of IPSAS 47.

IE13. The national government (the Government) transfers 200 hectares of land in a major city to a university (the University) to establish a university campus. The arrangement specifies that the land is to be used for a campus، but does not specify that the land is to be returned if not used for a campus or incur another form of compensation.

Example 5 – Enforceable Right to Revenue of Aid Agency

IE15. Green-Aid Agency (Agency) is an intergovernmental organization which relies on annual funding from a group of governments to deliver on its initiatives. The Agency has a signed agreement with the government of a sovereign state (State) which specifies the percentage of the Agency's approved budget that the State will fund in 20X2. The agreement indicates that the funds received from the State can only be used to incur eligible expenditures، per the approved 20X2 budget. If funds are not used to incur eligible expenses (e.g.، misused or unused)، such funds must be repaid to the State at the end of its financial year on December 31، 20X2. The Agency's budget is approved in the preceding October.

IE17. Based on past experience، the State is very unlikely to pay what it owes، either during the financial year or at any future time، and the Agency is not able to force the State to pay any amounts owed. Therefore، the Agency does not have an enforceable right to receive an inflow of resources from the State and the arrangement is not binding. The Agency will only recognize an asset when it receives and controls the inflow of resources from the State.

IE18. The same facts as Case A apply to Case B، except the Agency is able to prevent the State from participating in the Agency's voting processes if it does not transfer resources in accordance with the signed arrangement after the budget is approved. In this scenario، the Agency has the ability to enforce its right to receive resources (i.e.، an enforceable right). As a result، each party in the arrangement has both an enforceable right and an enforceable obligation، and the arrangement is thus a binding arrangement.

IE19.   National Park Department of Country A (the Department) enters into an arrangement and receives a transfer of CU500،000 from the Bilateral Aid Agency of Country B (the Agency). The arrangement specifies that the transferred resources are required to be used to rehabilitate deforested areas of Country A's existing wilderness reserves، and returned to the Agency if the money is not used for the stated purpose. The terms of the agreement are enforceable in the courts of Country A، and in international courts of justice. This is the thirteenth year that the Department has received a transfer of this type from this Agency. In prior years، the transferred resources have not been used as specified; rather، they have been used to acquire additional land adjacent to national parks for expansion purposes. The Department has not conducted any rehabilitation of deforested areas in the past thirteen years. The Agency is aware of the previous breaches of the agreement terms.

Example 7 – Revenue Subject to Completion of the Appropriations Process

IE22. Parliament completes the appropriation process for CU10 million on March 31، 20X2، and transfers the resources on April 15، 20X2. The appropriation for CU5 million is not completed in March 20X2 but is considered at a later date as part of the appropriation process for 20X3. Once resources are transferred، Government L is required to use the resources to reduce air pollution or be required by law to repay، which constitutes an enforceable obligation.

IE23. The reduction in air pollution is a local government responsibility، and there is no authorizing legislation that requires Government N to fund such initiatives. The arrangement is clear that the funding is subject to the completion of the appropriation process، which is not certain، and that the amount may be reduced. Government L applies paragraphs AG14–AG25 of IPSAS 47 to determine whether its right is enforceable، given the term in the arrangement that the funding is subject to the completion of the appropriation process.

IE25. On April 15، 20X2، Government L recognizes an asset of CU10 million، and an equivalent liability، when it receives the resources. It does not recognize an asset for the CU5 million، as the appropriation process for the 20X3 amount has not been completed. Government L considers whether to disclose the CU5 million as a contingent asset in accordance with paragraph 24 in the 20X2 notes to its general purpose financial statements. Government L will assess the accounting implications of the authorization process in 20X3 for the remaining CU5 million.

IE26. Authorizing legislation requires Government N to invest in measures to reduce air pollution، and the arrangement is a firm commitment by Government N to meet its legislative obligations by investing in specific measures، set out in the arrangement، to be undertaken by Government L. Government L applies paragraphs AG14–AG25 of IPSAS 47 to determine whether its right is enforceable، given the term in the arrangement that the funding is subject to the completion of the appropriation process.

IE28.   On April 15، 20X2، Government L recognizes an asset of CU10 million، and an equivalent liability. It does not recognize an asset for the CU5 million. Government L will assess the accounting implications of the authorization process in 20X3 for the remaining CU5 million.

Example 8 – Advance Receipts of Income Tax

IE30. The resources received from self-employed taxpayers by December 24 are advance receipts against taxes due for the following year because the taxable event is the earning of income during the taxation period، which has not commenced. The Government recognizes an increase in an asset (cash in bank) and an increase in a liability (advance receipts) in accordance with paragraph 44 of IPSAS 47.

Criteria to Apply the Binding Arrangement Model

Example 9 – Collectability of the Consideration

IE33. As part of this rent-to-own program، the Government enters into a binding arrangement with a Resident for the sale of a residential unit with a market price of CU400،000. Up to the time of the purchase، the Resident had cumulatively paid CU150،000 in rent to the Government، so the purchase price for the unit was CU250،000. The Resident pays the non-refundable deposit of CU5،000 at the inception of the binding arrangement and enters into a long-term financing agreement with the Government for the remaining CU245،000 of the promised consideration. However، the Resident is only expected to pay CU180،000 (including the CU5،000 deposit) until they begin to collect their superannuation، and at that time، their expected level of income will result in payments ceasing. The Resident obtains control of the unit at the inception of the binding arrangement and payment of the CU5،000 deposit.

IE35. Because the criteria in paragraph 56 of IPSAS 47 are not all met، the Government applies paragraphs 58 and 81–86 of IPSAS 47 to determine the accounting for the non-refundable deposit of CU5،000. The Government observes that the events described in paragraph 58(a) have occurred—that is، the Government has transferred control of the building to the Resident، and the Government has no obligation to transfer additional goods or services for the CU5،000 payment received، and the payment is non-refundable. Consequently، in accordance with paragraph 58، the Government recognizes the non-refundable CU5،000 payment as revenue upon receipt.

IE36. A government pharmaceutical agency (the Agency) provides 1،000 units of a prescription drug to a hospital for promised consideration of CU1 million. The price of the drugs is regulated، so the Agency has no discretion on pricing. The Agency expects that it will not be able to collect from the hospital the full amount of the promised consideration due to a medical crisis occurring in the region which is diverting the hospital's resources.

IE38. The Agency considers the hospital's ability and intention to pay the consideration and concludes that even though the region is experiencing economic difficulty، it is probable that it will collect CU400،000 from the hospital. Consequently، the Agency concludes that the criterion in paragraph 56(e) of IPSAS 47 is met based on an estimate of variable consideration of CU400،000. In addition، on the basis of an evaluation of the binding arrangement terms and other facts and circumstances، the Agency concludes that the other criteria in paragraph 56 of IPSAS 47 are also met. Consequently، the Agency accounts for the binding arrangement with the hospital، with a transaction consideration of CU400،000، in accordance with paragraphs 56–147 in IPSAS 47.

IE39. A government hospital (the Hospital) provides medical services to an uninsured patient in the emergency room. The Hospital is required by law to provide medical services to all emergency room patients، and patients are required to pay، and the arrival of a patient in the emergency room constitutes the initiation of a binding arrangement. Because of the patient's condition upon arrival at the Hospital، the Hospital was compelled under legislation to provide the services immediately and، therefore، before the Hospital can determine whether the patient is committed to satisfying its obligation to pay for services received in exchange for the medical services provided. Consequently، the binding arrangement does not meet all of the criteria in paragraph 56 of IPSAS 47 and، in accordance with paragraph 58 of IPSAS 47، the Hospital will continue to assess its conclusion based on updated facts and circumstances.

IE41. The Hospital considers paragraphs 109 and 115(b) of IPSAS 47. Although the standard rate for the services is CU10،000 (which may be the amount invoiced to the patient)، the Hospital expects to accept a lower amount of consideration in exchange for the services. Accordingly، the Hospital concludes that the transaction consideration is not CU10،000 and، therefore، the promised consideration is variable. The Hospital reviews its historical cash collections from this purchaser class and other relevant information about the patient. The Hospital estimates the variable consideration and determines that it expects to collect CU1،000.

Example 12 – Reassessing the Criteria to Apply the Binding Arrangement Model

IE44. Throughout the first year of the binding arrangement، the Company provides quarterly extraction reports and pays within the agreed-upon period.

IE46. During the third year of the binding arrangement، the Company continues to use the permit issued by the Department. However، the Department learns that the Company has lost access to credit and its major customers، and thus the Company's ability to pay significantly deteriorates. The Department therefore concludes that it is unlikely that the Company will be able to make any further royalty payments for ongoing usage of the mining permit. As a result of this significant change in facts and circumstances، in accordance with paragraph 57 of IPSAS 47، the Department reassesses the criteria in paragraph 56 of IPSAS 47 and determines that they are not met because it is no longer probable that the Department will collect the consideration to which it will be entitled. Accordingly، the Department does not recognize any further revenue associated with the Company's future usage of its permit. The Department accounts for any impairment of the existing receivable in accordance with IPSAS 41.

IE47. Examples 13–15 illustrate the requirements in paragraphs 63–66 of IPSAS 47 on binding arrangement modifications. In addition، the following requirements are illustrated in these examples:

(a)     Paragraphs 68–77 of IPSAS 47 on identifying compliance obligations (Example 15);

(b)     Paragraphs 119–121 of IPSAS 47 on constraining estimates of variable consideration (Examples 14 and 15); and

(c)     Paragraphs 144–147 of IPSAS 47 on changes in the transaction consideration (Example 14).

IE48. An intergovernmental organization (the Organization) promises to provide 1.2 million textbooks to a national government (the Government) for CU12 million (CU10 per textbook). The textbooks are transferred to the Government over a six-month period. The CU12 million is funded by the Organization's donors. The Organization transfers control of each textbook at a point in time. After the Organization has transferred control of 600،000 textbooks to the Government، the binding arrangement is modified to require the delivery of an additional 300،000 textbooks (a total of 1.5 million identical textbooks) to the Government. The additional 300،000 textbooks were not included in the initial binding arrangement.

IE49. When the binding arrangement is modified، the price of the modification to a binding arrangement for the additional 300،000 textbooks is an additional CU2.85 million or CU9.5 per textbook. The pricing for the additional textbooks reflects the stand-alone value of the textbooks at the time of the modification to the binding arrangement and the additional textbooks are distinct (in accordance with paragraph 73 of IPSAS 47) from the original textbooks.

Case B—Additional Products for a Price that Does not Reflect the Stand-Alone Value

IE52. At the time of modification، the Organization recognizes the CU900،000 as a reduction of the transaction consideration and، therefore، as a reduction of revenue for the initial 600،000 textbooks transferred. In accounting for the sale of the additional 300،000 textbooks، the Organization determines that the negotiated price of CU8.0 per product does not reflect the stand-alone value of the additional textbooks. Consequently، the modification to a binding arrangement does not meet the conditions in paragraph 65 of IPSAS 47 to be accounted for as a separate binding arrangement. Because the remaining textbooks to be delivered are distinct from those already transferred، the Organization applies the requirements in paragraph 66(a) of IPSAS 47 and accounts for the modification as a termination of the original binding arrangement and the creation of a new binding arrangement.

Example 14 – Change in the Transaction Consideration after a Modification of a Binding Arrangement

IE55. The transaction consideration of CU1.2 million is allocated equally to the compliance obligation for the light-armored vehicle and the compliance obligation for spare parts. This is because both products have the same stand-alone values and the variable consideration does not meet the criteria in paragraph 142 that requires allocation of the variable consideration to one but not both of the compliance obligations.

IE57. On November 30، 20X0، the scope of the binding arrangement is modified to include the promise to transfer ammunition (in addition to the undelivered spare parts) to Government F on June 30، 20X1 and the price of the binding arrangement is increased by CU300،000 (fixed consideration)، which does not represent the stand-alone value of ammunition. The stand-alone value of ammunition is the same as the stand-alone values of the light-armored vehicle and spare parts.

IE59. After the modification but before the delivery of spare parts and ammunition، the Department revises its estimate of the amount of variable consideration to which it expects to be entitled to CU240،000 (rather than the previous estimate of CU200،000). The Department concludes that the change in estimate of the variable consideration can be included in the transaction consideration، because it is highly probable that a significant reversal in cumulative revenue recognized will not occur when the uncertainty is resolved. Even though the modification was accounted for as if it were the termination of the existing binding arrangement and the creation of a new binding arrangement in accordance with paragraph 66(a) of IPSAS 47، the increase in the transaction consideration of CU40،000 is attributable to variable consideration promised before the modification. Therefore، in accordance with paragraph 147 of IPSAS 47، the change in the transaction consideration is allocated to the compliance obligations for the light-armored vehicle and spare parts on the same basis as at the inception of the binding arrangement. Consequently، the Department recognizes revenue of CU20،000 for the light-armored vehicle in the period in which the change in the transaction consideration occurs. Because the spare parts had not transferred to Government F before the modification to a binding arrangement، the change in the transaction consideration that is attributable to spare parts is allocated to the remaining compliance obligations at the time of the modification to a binding arrangement. This is consistent with the accounting that would have been required by paragraph 66(a) of IPSAS 47 if that amount of variable consideration had been estimated and included in the transaction consideration at the time of the modification of a binding arrangement.

IE61. On March 31، 20X1، the spare parts are transferred to Government F and the Department recognizes revenue of CU460،000. On June 30، 20X1، the ammunition is transferred to the foreign government and the Department recognizes revenue of CU460،000.

IE62. The Department of Public Works (Public Works) enters into a binding arrangement to construct a residential building for the Department of Housing (Housing) on land owned by Housing for promised consideration of CU10 million and a bonus of CU2 million if the building is completed within 24 months. Public Works accounts for the promised bundle of goods and services as a single compliance obligation satisfied over time in accordance with paragraph AG72(b) of IPSAS 47 because Housing controls the building during construction. At   the   inception   of   the binding arrangement، Public Works expects the following:

IE64. Public Works determines that the input measure، on the basis of costs incurred، provides an appropriate measure of progress towards complete satisfaction of the compliance obligation. By the end of the first year، Public Works has satisfied 60 percent of its compliance obligation on the basis of costs incurred to date (CU5.4 million) relative to total expected costs (CU9 million). Public Works reassesses the variable consideration and concludes that the amount is still constrained in accordance with paragraphs 119–121 of IPSAS 47. Consequently، the cumulative revenue and costs recognized for the first year are as follows:

IE66. Consequently، Public Works accounts for the modification to a binding arrangement as if it were part of the original binding arrangement (in accordance with paragraph 66(b) of IPSAS 47). Public Works updates its measure of progress and estimates that it has satisfied 52.9 percent of its compliance obligation (CU5.4 million actual costs incurred ÷ CU10.2 million total expected costs). Public Works recognizes additional revenue of CU1.14 million [(52.9 percent complete × CU13.5 million modified transaction consideration) – CU6 million revenue recognized to date] at the date of the modification as a cumulative catch-up adjustment in the statement of financial performance.

IE67. Examples 16–19 illustrate the requirements in paragraphs 68–77 of IPSAS 47 on identifying compliance obligations.

Case A – Distinct Goods or Services

IE69. The Agency assesses the goods and services promised to the State Government to determine which goods and services are distinct in accordance with paragraph 73 of IPSAS 47. The Agency observes that the software is delivered before the other goods and services، and remains functional without the updates and the technical support. The State Government can generate economic benefits or service potential from the updates together with the software license transferred at the start of the binding arrangement. Thus، the Agency concludes that the State Government can generate economic benefits or service potential from each of the goods and services either on their own or together with the other goods and services that are readily available and the criterion in paragraph 73(a) of IPSAS 47 is met.

IE71. On the basis of this assessment، the Agency identifies four compliance obligations in the binding arrangement to transfer the following goods or services to another party:

(a)     The software license;

(b)     An installation service;

(c)     Software updates; and

(d)     Technical support.

Case B – Significant Customization

IE74. The Agency assesses the goods and services promised to the State Government to determine which goods and services are distinct in accordance with paragraph 73 of IPSAS 47. The Agency first assesses whether the criterion in paragraph 73(a) has been met. For the same reasons as in Case A، the Agency determines that the software license، installation، software updates and technical support each meet that criterion. The Agency next assesses whether the criterion in paragraph 73(b) has been met by evaluating the principle and the factors in paragraph 76 of IPSAS 47. The Agency observes that the terms of the binding arrangement result in a promise to provide a significant service of integrating the licensed software into the existing software system by performing a customized installation service as specified in the binding arrangement. In other words، the Agency is using the license and the customized installation service as inputs to produce the combined output (i.e.، a functional and integrated software system) specified in the binding arrangement (see paragraph 76(a) of IPSAS 47). The software is significantly modified and customized by the service (see paragraph 76(b) of IPSAS 47). Consequently، the Agency determines that the promise to transfer the license is not separately identifiable from the customized installation service and، therefore، the criterion in paragraph 73(b) of IPSAS 47 is not met. Thus، the software license and the customized installation service are not distinct.

IE76. On the basis of this assessment، the Agency identifies three compliance obligations in the binding arrangement to transfer the following goods or services to another party:

(a)     Software customization (which comprises the license for the software and the customized installation service);

(b)     Software updates; and

(c)     Technical support.

Case C – Promises are Separately Identifiable (Installation)

IE79. The Agency identifies two promised goods and services in the binding arrangement: (a) equipment and (b) installation. The Agency assesses the criteria in paragraph 73 of IPSAS 47 to determine whether each promised good or service is distinct. The Agency determines that the equipment and the installation each meet the criterion in paragraph 73(a) of IPSAS 47. The State Government can generate economic benefits or service potential from the equipment on its own، by using it or reselling it، or together with other readily available resources (for example، installation services available from alternative providers). The State Government also can generate economic benefits or service potential from the installation services together with other resources that the State Government will already have obtained from the Agency (i.e.، the equipment).

IE81. On the basis of this assessment، the Agency identifies two compliance obligations in the binding arrangement to transfer the following goods or services to another party:

(a)     The equipment; and

(b)     Installation services.

Case D – Promises are Separately Identifiable (Restrictions to a Binding Arrangement)

IE84.   The binding arrangement requirement to use the Agency's installation services does not change the evaluation of whether the promised goods and services are distinct in this case. This is because the binding arrangement requirement to use the Agency's installation services does not change the characteristics of the goods or services themselves، nor does it change the Agency's promises to the State Government. Although the State Government is required to use the Agency's installation services، the equipment and the installation services are capable of being distinct (i.e.، they each meet the criterion in paragraph 73(a) of IPSAS 47) and the Agency's promises to provide the equipment and to provide the installation services are each separately identifiable (i.e.، they each meet the criterion in paragraph 73(b) of IPSAS 47). The Agency's analysis in this regard is consistent with that in Case C.

IE85. A shared IT services agency (the Agency) enters into a binding arrangement with a state government office (State Government) to provide a piece of off-the-shelf equipment (i.e.، the equipment is operational without any significant customization or modification) and to provide specialized consumables for use in the equipment at predetermined intervals over the next three years. The consumables are produced only by the Agency but are provided separately by the Agency.

IE87. The Agency determines that its promises to transfer the equipment and to provide consumables over a three-year period are each separately identifiable in accordance with paragraph 73(b) of IPSAS 47. In determining that the equipment and the consumables are not inputs to a combined item in this binding arrangement، the Agency considers that it is not providing a significant integration service that transforms the equipment and consumables into a combined output. In addition، neither the equipment nor the consumables are significantly customized or modified by the other. Lastly، the Agency concludes that the equipment and the consumables are not highly interdependent or highly interrelated because they do not significantly affect each other. Although the State Government can generate economic benefits or service potential from the consumables in this binding arrangement only after it has obtained control of the equipment (i.e.، the consumables would have no use without the equipment) and the consumables are required for the equipment to function، the equipment and the consumables do not each significantly affect the other. This is because the Agency would be able to satisfy each of its promises in the binding arrangement independently of the other. That is، the Agency would be able to satisfy its promise to transfer the equipment، even if the State Government did not purchase any consumables، and would be able to satisfy its promise to provide the consumables، even if the State Government acquired the equipment separately.

IE89. The Agency applies paragraphs 87–97 of IPSAS 47 to determine whether each compliance obligation is satisfied at a point in time or over time.

Case A – Significant Integration Service: Hospital Construction

IE91. The promised goods and services are capable of being distinct in accordance with paragraph 73(a) of IPSAS 47. That is، the Department of Health can generate economic benefits or service potential from the goods and services either on their own or together with other readily available resources. This is evidenced by the fact that Public Works regularly provides many of these goods and services separately to other purchasers، as do comparable construction entities. In addition، the Department of Health could generate economic benefits or service potential from the individual goods and services by using، consuming، selling or holding those goods or services.

IE93. Because the criterion in paragraph 73(b) of IPSAS 47 is not met، the goods and services are not distinct. Public Works accounts for all of the goods and services promised in the binding arrangement as a single compliance obligation.

IE94. The Department of Research Sciences (the Department) enters into a binding arrangement with a local government (the Government) that will result in the delivery of multiple highly complex، specialized road trains. The terms of the binding arrangement require the Department to establish a manufacturing process in order to produce the road trains. The specifications are unique to the Government، based on a custom design that is owned by the Government and that were developed under the terms of a separate binding arrangement that is not part of the current negotiated exchange. The Department is responsible for the overall management of the binding arrangement، which requires the performance and integration of various activities including procurement of materials، identifying and managing subcontractors، and performing manufacturing، assembly and testing.

IE96. The Department observes that the nature of its promise is to establish and provide a service of producing the full complement of road trains for which the Government has entered into a binding arrangement in accordance with the Government's specifications. The Department considers that it is responsible for the overall management of the binding arrangement and for providing a significant service of integrating various goods and services (the inputs) into its overall service and the resulting road trains (the combined output). Therefore، the road trains and the various promised goods and services inherent in producing those road trains are not separately identifiable in accordance with paragraph 73(b) and paragraph 76 of IPSAS 47. In this case، the manufacturing process provided by the Department is specific to its binding arrangement with the Government. In addition، the nature of the Department's performance and، in particular، the significant integration service of the various activities means that a change in one of the Department's activities to produce the road trains has a significant effect on the other activities required to produce the highly complex، specialized road trains such that the Department's activities are highly interdependent and highly interrelated.

Case C – Significant Integration Service: Emergency Response

IE99. The promised goods and services are capable of being distinct in accordance with paragraph 73(a) of IPSAS 47 because the citizens in the affected region are able to generate economic benefits or service potential from the supplies and cleanup services either on their own or together with other resources readily available.

IE101. Because the criterion in paragraph 73(b) of IPSAS 47 is not met، the goods and services are not distinct. Rather، the combined bundle of goods and services in the binding arrangement is distinct. The Agency accounts for all of the goods and services promised in the binding arrangement as a single compliance obligation.

IE102. The national government (Government N) provides CU10 million to a provincial government (Government P) to be used to improve and maintain mass transit systems. Specifically، the money is required to be used as follows: 40 percent for existing railroad and tramway system modernization، 40 percent for a new railroad or tramway system، and 20 percent for the purchase of rolling stock. Under the terms of the binding arrangement، the money can only be used as specified and any misused or unused amounts must be repaid to Government N. Furthermore، Government P is required to include a note in its audited general purpose financial statements detailing how the transferred resources were spent. The binding arrangement requires the resources to be spent as specified in the current year or be returned to Government N.

IE104. Government P notes that various goods and services not explicitly stated in the binding arrangement are required to satisfy the binding arrangement. For example، certain goods and services would be required to modernize the existing railroad and tramway system، while other goods and services would be required to build a new railroad or tramway system. Thus، Government P conducts a thorough assessment to identify all goods and services inherently promised in the binding arrangement. It then determines that the promised goods and services are capable of being distinct in accordance with paragraph 73(a) of IPSAS 47 because Government N can generate economic benefits or service potential from each good and service on its own or together with other readily available resources.

IE106. Because both criteria in paragraph 73 of IPSAS 47 are met، the binding arrangement contains three separate compliance obligations;

a)     The compliance obligation to use CU4 million for modernizing the existing railroad and tramway system;

b)     The compliance obligation to use CU4 million for a new railroad or tramway system; and

c)     The compliance obligation to use CU2 million for purchasing rolling stock.

Example 19 – Explicit and Implicit Promises in a Binding Arrangement

Case A—Explicit Promise of Service

IE110. The binding arrangement with the Telecom includes two promised goods or services: (a) the modem and (b) the maintenance services. The promise of maintenance services is a promise to transfer goods or services in the future and is part of the negotiated exchange between the Government and the Telecom. The Government assesses whether each good or service is distinct in accordance with paragraph 73 of IPSAS 47. The Government determines that both the product and the maintenance services meet the criterion in paragraph 73(a) of IPSAS 47. The Government provides the modem on a stand-alone basis، which indicates that the Telecom can generate economic benefits or service potential from the modem on its own. The Telecom can generate economic benefits or service potential from the maintenance services together with a resource the Telecom already has obtained from the Government (i.e.، the modem).

Case B—Implicit Promise of Service

IE113. However، on the basis of its customary practice، the Government determines at the inception of the new binding arrangement that it has made an implicit promise to provide maintenance services as part of the negotiated exchange with the Telecom. That is، the Government's past practices of providing these services in rural areas create valid expectations of the Government's purchasers (i.e.، the Telecom) in accordance with paragraph 71 of IPSAS 47. Consequently، the Government assesses whether the promise of maintenance services is a compliance obligation. For the same reasons as in Case A، the Government determines that the product and maintenance services are separate compliance obligations.

IE114. As a further variation from Cases A and B، in the binding arrangement with the Telecom، the Government does not promise to provide any maintenance services. In addition، the Government typically does not provide maintenance services and، therefore، the Government's customary practices، published policies and specific statements at the time of entering into the binding arrangement have not created an implicit promise to provide goods or services to its purchasers. The Government transfers control of the modem to the Telecom and، therefore، the binding arrangement is completed. However، before the sale to the Telecom's end customers، the Government makes an offer to provide maintenance services to any party that purchases a modem from the Telecom for no additional promised consideration.

IE116. Although the maintenance services are not a promised service in the current binding arrangement، in future binding arrangements with the Telecom or other telecommunications companies، the Government would assess whether it has created a business practice resulting in an implied promise to provide maintenance services.

Satisfied Over Time or at a Point in Time

Example 20 – Resource Provider Simultaneously Receives and Consumes the Economic Benefits or Service Potential

IE118. A regional government (the Government) enters into a binding arrangement to provide CU1.2 million to the regional hospital network (the Hospital). The Government requires the Hospital to use the CU1.2 million in the operation of its medical imaging department.

Case B – Satisfaction of Compliance Obligation to Transfer Goods or Services to Another Party

IE121. The promised payroll processing services are accounted for as a single compliance obligation in accordance with paragraph 68(b) of IPSAS 47. The compliance obligation is satisfied over time in accordance with paragraph 95(a) of IPSAS 47 because the Department simultaneously receives and consumes the economic benefits or service potential of the Payroll Center's performance in processing each payroll transaction as and when each transaction is processed. The fact that another entity would not need to re-perform payroll processing services for the service that the Payroll Center has provided to date also demonstrates that the Department simultaneously receives and consumes the economic benefits or service potential of the Payroll Center's performance as the Payroll Center performs. The Payroll Center disregards any practical limitations on transferring the remaining compliance obligation، including setup activities that would need to be undertaken by another entity. The Payroll Center recognizes revenue over time by measuring its progress towards complete satisfaction of that compliance obligation in accordance with paragraphs 98–104 of IPSAS 47.

IE122. The Office of the Auditor General (the Auditor) enters into a binding arrangement with a government agency (the Agency) to provide financial statement audit services that result in the Auditor providing an audit opinion to the Agency. The audit opinion relates to the accounting records and other facts and circumstances that are specific to the Agency. If the Agency were to terminate the audit for reasons other than the Auditor's failure to perform as promised، the binding arrangement requires the Agency to compensate the Auditor for its costs incurred.

IE124. However، the Auditor's compliance obligation meets the criterion in paragraph 95(c) of IPSAS 47 because the audit work completed to date would not have any alternative use، as it would be specific to the audit of the Agency. Thus، the Auditor has a compliance obligation satisfied over time because of both of the following factors:

a)     In accordance with paragraphs 96 of IPSAS 47، the development of the audit opinion does not create an asset with an alternative use to the Auditor because the audit relates to facts and circumstances that are specific to the Agency. Therefore، the Auditor cannot use the audit opinion for any other purpose.

b)     In accordance with paragraphs 97 of IPSAS 47، the Auditor has an enforceable right to receive consideration for its performance completed to date for its costs.

Example 22 – Assessing Whether a Compliance Obligation is Satisfied at a Point in Time or Over Time

Case A – Entity does not have an Enforceable Right to Consideration for Performance Completed to Date

IE128. At the inception of the binding arrangement، Public Works applies paragraph 95(c) of IPSAS 47 to determine whether its promise to construct and transfer the units to Housing is a compliance obligation satisfied over time. Public Works determines that it does not have an enforceable right to consideration for performance completed to date because، until construction of the units is complete، it only has a right to the deposit paid by Housing. Because Public Works does not have a right to consideration for work completed to date، its compliance obligation is not a compliance obligation satisfied over time in accordance with paragraph 95(c) of IPSAS 47. Instead، Public Works accounts for the sale of the units as compliance obligations satisfied at a point in time in accordance with paragraph 97 of IPSAS 47.

IE129. Housing pays a non-refundable deposit upon entering into the binding arrangement and will make progress payments during construction of the units. The binding arrangement has substantive terms that preclude Public Works from being able to direct the units to another purchaser. In addition، Housing does not have the right to terminate the binding arrangement unless Public Works fails to perform as promised. If Housing defaults on its obligations by failing to make the promised progress payments as and when they are due، Public Works would have a right to all of the consideration promised in the binding arrangement if it completes the construction of the units. The courts have previously upheld similar rights that entitle developers to require the purchaser to perform، subject to the entity meeting its compliance obligations under the binding arrangement.

IE131. Public Works also has a right to consideration for performance completed to date in accordance with paragraphs 97(a) of IPSAS 47. This is because if Housing were to default on its obligations، Public Works would have an enforceable right to all of the consideration promised under the binding arrangement if it continues to perform as promised.

IE133. In the construction of a multi-unit residential complex، Public Works may have many binding arrangements with individual purchasers for the construction of individual units within the complex. Public Works would account for each binding arrangement separately. However، depending on the nature of the construction، Public Works' performance in undertaking the initial construction work (i.e.، the foundation and the basic structure)، as well as the construction of common areas، may need to be reflected when measuring its progress towards complete satisfaction of its compliance obligations in each binding arrangement.

IE134. The same facts as in Case B apply to Case C، except that in the event of a default by Housing، either Public Works can require Housing to perform as required under the binding arrangement or Public Works can cancel the binding arrangement in exchange for the asset under construction and an entitlement to a penalty of a proportion of the agreed price in the binding arrangement.

Measuring Progress Towards Complete Satisfaction of a Compliance Obligation

Example 23 – Measuring Progress when Making Goods or Services Available

IE138. The Government determines that its promise to the member of the public is to provide a service of making the pools available for the member of the public to use as and when the member of the public wishes. This is because the extent to which the member of the public uses the pools does not affect the amount of the remaining goods and services to which the member of the public is entitled. The Government concludes that the member of the public simultaneously receives and consumes the economic benefits or service potential of the local government's performance as it performs by making the pools available. Consequently، the Government's compliance obligation is satisfied over time in accordance with paragraph 92(a) of IPSAS 47.

Example 24 – Measuring Progress for Uninstalled Materials

IE141. A summary of the transaction consideration and expected costs is as follows:

IE143. Public Works concludes that including the costs to procure the elevators in the measure of progress would overstate the extent of its performance. Consequently، in accordance with paragraph AG95 of IPSAS 47، Public Works adjusts its measure of progress to exclude the costs to procure the elevators from the measure of costs incurred and from the transaction consideration. Public Works recognizes revenue for the transfer of the elevators in an amount equal to the costs to procure the elevators (i.e.، at a zero margin).

IE145. Consequently، at December 31، 20X2، Public Works recognizes the following:

Variable Consideration

IE146. The Department of Public Works (Public Works) enters into a binding arrangement with the Department of Transportation (Transportation) to build a bridge. The promise to transfer the bridge is a compliance obligation that is satisfied over time. The promised consideration is CU25 million، but that amount will be reduced or increased depending on the timing of completion of the bridge. Specifically، for each day after March 31، 20X7 that the bridge is incomplete، the promised consideration is reduced by CU100،000. For each day before March 31، 20X7 that the bridge is complete، the promised consideration increases by CU100،000.

IE148. Public Works determines that the consideration promised in the binding arrangement includes a variable amount، and estimates the amount of consideration it is entitled to in accordance with paragraphs 113–117 of IPSAS 47. In determining the transaction consideration، Public Works prepares a separate estimate for each element of variable consideration to which Public Works will be entitled using the estimation methods described in paragraph 116 of IPSAS 47:

(a)       Public Works decides to use the expected value method to estimate the variable consideration associated with the daily penalty or incentive (i.e.، CU25 million، plus or minus CU100،000 per day). This is because it is the method that Public Works expects to better predict the amount of consideration to which it will be entitled.

(b)       Public Works decides to use the most likely amount to estimate the variable consideration associated with the incentive bonus. This is because there are only two possible outcomes (CU1.5 million or CU0) and it is the method that Public Works expects to better predict the amount of consideration to which it will be entitled.

The Existence of a Significant Financing Component in the Binding Arrangement

Example 26 – Significant Financing Component and Right of Return

IE152. The cash price of the trains is CU100 million، which represents the amount that the Operator would pay upon delivery for the same trains provided under otherwise identical terms and conditions as at the inception of the binding arrangement. The Government's cost of the trains is CU80 million.

IE154. The binding arrangement includes a significant financing component، in accordance with paragraphs 123–125 of IPSAS 47. This is evident from the difference between the amount of promised consideration of CU121 million and the cash price of CU100 million at the date that the goods are transferred to the Operator.

IE156. Until the Government receives the cash payment from the Operator، interest revenue would be recognized in accordance with IPSAS 41. In determining the effective interest rate in accordance with IPSAS 41، the Government would consider the remaining terms of the binding arrangement.

IE157. The Department of Public Works (Public Works) enters into a binding arrangement for the construction of a building that includes scheduled milestone payments for the performance by Public Works throughout the binding arrangement term of three years. The compliance obligation will be satisfied over time and the milestone payments are scheduled to coincide with the Public Works' expected performance. The binding arrangement provides that a specified percentage of each milestone payment is to be withheld (i.e.، retained) by the resource provider throughout the binding arrangement and paid to Public Works only when the building is complete.

Example 28 – Determining the Discount Rate

Case A – Discount Rate in the Binding Arrangement Reflects the Rate in a Separate Financing Transaction

IE161. The market terms of the financing mean that the cash price of the equipment is CU100 million. This amount is recognized as revenue and as a loan receivable when control of the equipment transfers to the foreign government. The Department accounts for the receivable in accordance with IPSAS 41.

IE162. In evaluating the discount rate in the binding arrangement that contains a significant financing component، the Department observes that the five percent rate of interest in the binding arrangement is significantly lower than the 12 percent interest rate that would be used in a separate financing transaction between the Department and the foreign government at the inception of the binding arrangement (i.e.، the rate of interest in the binding arrangement of five percent does not reflect the credit characteristics of the foreign government). This suggests that the cash price is less than CU100 million.

Example 29 – Advance Payment and Assessment of Discount Rate

IE165. The national government concludes that the binding arrangement contains a significant financing component because of the length of time between when the state government pays for the vehicle and when the national government transfers the vehicles to the state government، as well as the prevailing interest rates in the market.

IE167. The following journal entries illustrate how the national government would account for the significant financing component:

(a)       Recognize a binding arrangement liability for the CU4 million payment received at inception of the binding arrangement:

(b)       During the two years from inception of the binding arrangement until the transfer of the vehicle، the national government adjusts the promised amount of consideration (in accordance with paragraph 128 of IPSAS 47) and builds up the binding arrangement liability by recognizing interest on CU4 million at six percent for two years:

(c)       Recognize revenue for the transfer of the vehicles:

14   CU494،000 = CU4 million binding arrangement liability × (6 per cent interest per year for two years).

IE168. A private sector telecommunications company (the Telecom) has set up cellular phone towers on government-owned properties. Under the arrangement، access to the towers can only be made by appropriately skilled telecommunications specialists. The Telecom enters into a binding arrangement with a government entity that provides specialist telecommunications services (the Government Entity) to provide maintenance and repair services for three years. The Telecom purchases this support service at the time of setting up the cellular phone towers. Consideration for the service is CU300،000، and the Telecom must pay for it upfront (i.e.، a monthly payment option is not available).

IE169. In assessing the requirements in paragraph 125(c) of IPSAS 47, the Government Entity determines that the payment terms were structured primarily for reasons other than the provision of finance to the Government Entity. The Government Entity charges a single upfront amount for the services because other payment terms (such as a monthly payment plan) would affect the nature of the risks assumed by the Government Entity to provide the service and may make it uneconomical to provide the service. As a result of its analysis, the Government Entity concludes that there is not a significant financing component.

IE171. Example 31 illustrates the requirements in paragraphs 129–132 of IPSAS 47 on non-cash consideration، as well as the requirements in paragraph 68 of IPSAS 47 on identifying compliance obligations.

IE172. A public broadcaster (the Broadcaster) enters into a binding arrangement with a private media company (the Media Company) to provide production services for one year. The binding arrangement is signed on January 1، 20X1 and work begins immediately. The Broadcaster concludes that the production services are a single compliance obligation in accordance with paragraph 68(b) of IPSAS 47. This is because the Broadcaster is providing a series of distinct production services that are substantially the same and have the same pattern of transfer (the production services transfer to the Media Company over time and use the same method to measure progress—that is، a time-based measure of progress).

IE174. The Broadcaster measures its progress towards complete satisfaction of the compliance obligation as each week of production service is complete. To determine the transaction consideration (and the amount of revenue to be recognized)، the Broadcaster first considers the fair value of the right to air the popular sports program. However، as the right to air the program is not typically sold by the Media Company or traded in the market، the Broadcaster concludes that it cannot reasonably estimate the fair value of the non-cash consideration. As a result، the Broadcaster measures the transaction consideration indirectly by reference to the stand-alone value of the production services promised to the Media Company.

IE175. Examples 32–34 illustrate the requirements in paragraphs 133–143 of IPSAS 47 on allocating the transaction consideration to compliance obligations. In addition، the following requirements are illustrated in these examples:

(a)       Paragraph 116 of IPSAS 47 on variable consideration (Example 34);

(b)       Paragraphs AG107–AG109 of IPSAS 47 on the allocation of a discount (Examples 32-33); and

(c)       Paragraph AG182 of IPSAS 47 on consideration in the form of sales-based or usage-based royalties on licenses of intellectual property (Example 34).

IE176. A Department of Defense (the Department) enters into a binding arrangement with another country to provide a fighter jet، specialized spare parts، and a specialized engine in exchange for CU100 million. The Department will satisfy the compliance obligations for the jet، spare parts، and engine at different points in time. The Department can provide fighter jets separately and therefore the stand-alone value is directly observable. The stand-alone values of the specialized spare parts and specialized engine are not directly observable.

IE178. The other country receives a discount for purchasing the bundle of goods because the sum of the stand-alone values (CU120 million) exceeds the promised consideration (CU100 million). The Department considers whether it has observable evidence about the compliance obligation to which the entire discount belongs (in accordance with paragraph AG108 of IPSAS 47) and concludes that it does not. Consequently، in accordance with paragraphs 136 and AG107 of IPSAS 47، the discount is allocated proportionately across the fighter jet، spare parts and the specialized engine. The discount، and therefore the transaction consideration، is allocated as follows:

IE179. A government procurement agency (the Agency) regularly provides common-use supplies، including Supplies A، B and C individually، to government entities. The Agency establishes the following stand-alone values:

Case A – Allocating a Discount to One or More Compliance Obligations

IE182. The binding arrangement includes a discount of CU40 on the overall transaction، which would be allocated proportionately to all three compliance obligations when allocating the transaction consideration using the relative stand-alone value method (in accordance with paragraph AG107 of IPSAS 47). However، because the Agency regularly provides Supplies B and C together for CU60 and Supply A for CU40، it has evidence that the entire discount should be allocated to the promises to transfer Supplies B and C in accordance with paragraph AG108 of IPSAS 47.

IE184. If the binding arrangement requires the Agency to transfer control of Supplies B and C at different points in time، then the allocated amount of CU60 is individually allocated to the promises to transfer Supply B (stand-alone value of CU55) and Supply C (stand-alone value of CU45) as follows:

IE185. The Agency enters into a binding arrangement with a government entity to provide Supplies A، B and C as described in Case A. The binding arrangement also includes a promise to transfer Supply D. Total consideration in the binding arrangement is CU130. The stand-alone value for Supply D is highly variable (see paragraph 139(c) of IPSAS 47) because the Agency provides Supply D to different purchasers for a broad range of amounts (CU15 – CU45). Consequently، the Agency decides to estimate the stand-alone value of Supply D using the residual approach.

IE187. As in Case A، because the Agency regularly provides Supplies B and C together for CU60 and Supply A for CU40، it has observable evidence that CU100 should be allocated to those three supplies and a CU40 discount should be allocated to the promises to transfer Supplies B and C in accordance with paragraph AG108 of IPSAS 47. Using the residual approach، the Agency estimates the stand-alone value of Supply D to be CU30 as follows:

Case C – Residual Approach is Inappropriate

Example 34 – Allocation of Variable Consideration

Case A – Variable Consideration Allocated Entirely to One Compliance Obligation

IE192. To allocate the transaction consideration، the University considers the criteria in paragraph 142 of IPSAS 47 and concludes that the variable consideration (i.e.، the sales-based royalties) should be allocated entirely to Formulation Y. The University concludes that the criteria in paragraph 142 of IPSAS 47 are met for the following reasons:

(a)    The variable payment relates specifically to an outcome from the compliance obligation to transfer Formulation Y (i.e.، the Company's subsequent sales of medication developed from Formulation Y).

(b)    Allocating the expected royalty amount of CU1،000،000 entirely to Formulation Y is consistent with the allocation objective in paragraph 133 of IPSAS 47. This is because the University's estimate of the amount of sales-based royalties (CU1،000،000) approximates the stand- alone value of Formulation Y and the fixed amount of CU800،000 approximates the stand- alone value of Formulation X. The University allocates CU800،000 to Formulation X in accordance with paragraph 143 of IPSAS 47. This is because، based on an assessment of the facts and circumstances relating to both licenses، allocating to Formulation Y some of the fixed consideration in addition to all of the variable consideration would not meet the allocation objective in paragraph 133 of IPSAS 47.

IE194. When Formulation X is transferred، the University recognizes as revenue the CU800،000 allocated to Formulation X.

IE195. The price stated in the binding arrangement for Formulation X is a fixed amount of CU300،000 and for Formulation Y the consideration is five percent of the Company's future sales of medication developed from Formulation Y. The University's estimate of the sales-based royalties (i.e.، the variable consideration) is CU1،500،000 in accordance with paragraph 116 of IPSAS 47.

IE197. The University allocates the transaction consideration of CU300،000 to Formulations X and Y on the basis of relative stand-alone values of CU800،000 and CU1،000،000، respectively. The University also allocates the consideration related to the sales-based royalty on a relative stand- alone value basis. However، in accordance with paragraph AG180 of IPSAS 47، when an entity licenses intellectual property in which the consideration is in the form of a sales-based royalty، the entity cannot recognize revenue until the later of the following events: the subsequent sales occur or the compliance obligation is satisfied (or partially satisfied).

IE199. In the first month، the royalty due from the Company's first month of sales is CU200،000. Consequently، in accordance with paragraph AG180 of IPSAS 47، the University recognizes as revenue the CU111،000 (CU1،000،000 ÷ CU1،800،000 × CU200،000) allocated to Formulation Y (which has been transferred to the purchaser and is therefore a satisfied compliance obligation). The University recognizes a binding arrangement liability for the CU89،000 (CU800،000 ÷ CU1،800،000 × CU200،000) allocated to Formulation X. This is because، although the subsequent sale by the Company has occurred، the compliance obligation to which the royalty has been allocated is not satisfied until Formulation X is transferred three months later.

IE200. Example 35 illustrates the application of paragraph AG29 of IPSAS 47 on assessing binding arrangements which include the provision of goods or services to third-party beneficiaries and paragraph AG110 of IPSAS 47 on the determination of the stand-alone value of these goods or services.

Case A – Binding Arrangement Includes a Compliance Obligation to Transfer Goods or Services to Another Party

IE202. The Clinic concludes that this binding arrangement includes two compliance obligations to transfer two distinct goods to another party، specifically 150 doses of vaccine A and 350 doses of vaccine B. This is because the government، which is acting as the purchaser، is paying the Clinic to provide vaccination services to local individuals، who are third-party beneficiaries. This is consistent with the requirements in paragraph AG29 of IPSAS 47.

IE204. Using the stand-alone value of CU500 per dose for vaccine A and CU100 per dose for vaccine B will result in the following allocation of the transaction consideration to the two vaccines:

Total Stand-Alone Value of All Compliance Obligations:

Vaccine A: CU500 stand-alone value × 150 doses = CU75،000

Vaccine B: CU100 stand-alone value (based on replacement cost + labor) × 350 doses = CU35،000

Total Stand-Alone Value: CU75،000 + CU35،000 = CU110،000

Allocation of Transaction Consideration of CU100،000 to the Two Vaccines:

Vaccine A: CU100،000 × CU75،000 ÷ CU110،000 = CU68،182 or CU454.55 per dose

Vaccine B: CU100،000 × CU35،000 ÷ CU110،000 = CU31،818 or CU90.91 per dose

Case B – Binding Arrangement Includes a Compliance Obligation to Use Resources for Goods or Services Internally

IE207. The Clinic considers the terms and conditions of the binding arrangement and concludes that while the arrangement includes third-party beneficiaries in accordance with AG29 of IPSAS 47، its compliance obligation is to use resources internally for goods or services to run its vaccination program. This is because the binding arrangement does not specify that the CU100،000 is restricted to fund the provision of vaccines to local individuals (i.e.، third-party beneficiaries). Based on its assessment، the Clinic concludes that the compliance obligation is satisfied over time as eligible expenditures are incurred because this measure of progress best depicts the entity's performance to satisfy this compliance obligation. The Clinic recognizes revenue as eligible expenditures are incurred.

IE208. Examples 36–38 illustrate the requirements in paragraphs AG117–AG125 of IPSAS 47 on principal versus agent considerations.

IE209. A shared maintenance services agency (the Agency) enters into a binding arrangement with the Department of Social Welfare (the Department) to provide office maintenance services on the Department's properties. The Agency and the Department define and agree on the scope of the maintenance services and negotiate the price. The Agency is responsible for ensuring that the services are performed in accordance with the terms and conditions in the binding arrangement. The Agency invoices the Department for the agreed-upon price on a monthly basis with 10-day payment terms.

IE211. To determine whether the Agency is a principal or an agent، the Agency identifies the specified good or service to be provided to the Department and assesses whether it controls that good or service before the good or service is transferred to the Department.

IE213. The Agency concludes that it controls the specified services before they are provided to the Department. The Agency obtains control of a right to office maintenance services after entering into the binding arrangement with the Department but before those services are provided to the Department. The terms of the Agency's binding arrangement with the service provider give the Agency the ability to direct the service provider to provide the specified services on the Agency's behalf (see paragraph AG120(b)). In addition، the Agency concludes that the following indicators in paragraph AG123 of IPSAS 47 provide further evidence that the Agency controls the office maintenance services before they are provided to the Department:

(a)    The Agency is primarily responsible for satisfying the promise to provide office maintenance services. Although the Agency has hired a service provider to perform the services promised to the Department، it is the Agency itself that is responsible for ensuring that the services are performed and are acceptable to the Department (i.e.، the Agency is responsible for satisfying the promise in the binding arrangement، regardless of whether the Agency performs the services itself or engages a third-party service provider to perform the services).

(b)    The Agency has discretion in setting the price for the services to the Department.

IE215. Thus، the Agency is a principal in the transaction and recognizes revenue in the amount of consideration to which it is entitled from the Department in exchange for the office maintenance services.

IE216. A local government negotiates with hospitals to purchase vaccines for individual citizens in the jurisdiction at reduced rates compared with the price of vaccines provided directly by the hospitals to the individual citizens. The local government agrees to buy a specific number of vaccines and must pay for those vaccines regardless of whether it is able to use them. The reduced rate paid by the local government for each vaccine purchased is negotiated and agreed in advance.

IE218. The local government also assists the individual citizens in resolving complaints with the service provided by the hospitals. However، each hospital is responsible for satisfying obligations associated with the vaccines، including remedies to a citizen for dissatisfaction with the service.

IE220. The local government concludes that، with each vaccine that it commits itself to purchase from the hospitals، it obtains control of a right to the vaccine that the local government then transfers to an individual citizen، who in turn is one of the local government's purchasers (see paragraph AG120(a)). Consequently، the local government determines that the specified good or service to be provided to the individual citizen is that right to a unit of the vaccine that the local government controls. The local government observes that no other goods or services are promised in this arrangement to the individual citizens.

IE222. The indicators in paragraphs AG123(b)–AG123(c) of IPSAS 47 also provide relevant evidence that the local government controls each specified right (to the vaccine) before it is transferred to the citizen. The local government has inventory risk with respect to the vaccine because the local government committed itself to obtaining the vaccine from the hospital before entering into a binding arrangement with a citizen to purchase the vaccine. This is because the local government is obligated to pay the hospital for that right regardless of whether it is able to obtain a purchaser to redirect the vaccine to or whether it can obtain a favorable price for the vaccine. The local government also establishes the price that the individual citizen will pay for the specified vaccine.

Example 38 – Arranging for the Provision of Goods or Services (Entity is an Agent)

IE225. The Department and the clinics jointly determine the prices at which the vouchers will be provided to patients. Under the terms of its binding arrangements with the clinics، the Department is entitled to 30 percent of the voucher price when it provides the voucher.

IE227. To determine whether the Department is a principal or an agent، the Department identifies the specified good or service to be provided to the patient and assesses whether it controls the specified good or service before that good or service is transferred to the patient.

IE229. The Department concludes that it does not control the voucher (right to a vaccination) at any time. In reaching this conclusion، the Department principally considers the following:

(a)    The vouchers are created only at the time that they are transferred to the patients and، thus، do not exist before that transfer. Therefore، the Department does not at any time have the ability to direct the use of the vouchers، or obtain substantially all of the remaining economic benefits or service potential from the vouchers، before they are transferred to patients.

(b)    The Department neither purchases، nor commits itself to purchase، vouchers before they are provided to patients. The Department also has no responsibility to accept any returned vouchers. Therefore، the Department does not have inventory risk with respect to the vouchers as described in the indicator in paragraph AG123(b) of IPSAS 47.

Non-Refundable Upfront Fees (and some Related Costs) for a Transfer of Goods or Services to Another Party

Example 39 – Non-refundable Upfront Fee

IE233. The Pool's setup activities do not transfer a good or service to the individual and، therefore، do not give rise to a separate compliance obligation.

Other Assets from Revenue Transactions with Binding Arrangement Costs

Example 40 – Costs that Give Rise to an Asset

IE237. The initial costs incurred to set up the technology platform are as follows:

IE239. In addition to the initial costs to set up the technology platform، the Agency also assigns two employees who are primarily responsible for providing the service to the local government. Although the costs for these two employees are incurred as part of providing the service to the local government، the Agency concludes that the costs do not generate or enhance resources of the Agency (see paragraph 152(b) of IPSAS 47). Therefore، the costs do not meet the criteria in paragraph 152 of IPSAS 47 and cannot be recognized as an asset using IPSAS 47. In accordance with paragraph 155، the Agency recognizes the payroll expense for these two employees when incurred.

Display

Example 41 – Binding Arrangement Liability and Receivable

IE241. On January 1، 20X9، a government procurement agency (the Agency) enters into a binding arrangement that is cancellable to transfer a product to another government entity on March 31، 20X9. The binding arrangement requires the government entity to pay consideration of CU1،000 in advance on January 31، 20X9. The government entity pays the consideration on March 1، 20X9. The Agency transfers the product on March 31، 20X9. The following journal entries illustrate how the Agency accounts for the binding arrangement:

(a)       The Agency receives cash of CU1،000 on March 1، 20X9 (cash is received in advance of performance):

(b)       The Agency satisfies the compliance obligation on March 31، 20X9:

IE242. The same facts as in Case A apply to Case B except that the binding arrangement is non- cancellable and the advance transfer on January 31، 20X9 is required regardless of whether the Agency has started to satisfy its compliance obligation. The following journal entries illustrate how the entity accounts for the binding arrangement:

(a)       The amount of consideration is due on January 31، 20X9 (which is when the Agency recognizes a receivable because it has an unconditional and enforceable right to consideration):

(a)       The Agency receives the cash on March 1، 20X9:

(b)       The Agency satisfies the compliance obligation on March 31، 20X9:

Example 42 – Binding Arrangement Asset Recognized for the Entity's Performance

IE245. The Agency identifies the promises to transfer the software and complete the configuration as separate compliance obligations and allocates CU400،000 to the compliance obligation to transfer the software and CU600،000 to the compliance obligation to complete the configuration on the basis of their relative stand-alone values. The Agency recognizes revenue for each respective compliance obligation when control of the product transfers to the Department.

IE247. The Agency satisfies the compliance obligation to configure the software and to recognize the unconditional right to consideration:

IE248. A government hospital (the Hospital) enters into a binding arrangement with the Department of Correctional Services (Correctional Services) on January 1، 20X9 to perform medical examinations for inmates for CU150 per examination. If Correctional Services   requires   more   than 10،000 examinations to be performed in a calendar year، the binding arrangement indicates that the price per examination is retrospectively reduced to CU125 per product.

IE250. In determining the transaction consideration، the Hospital concludes at the inception of the binding arrangement that Correctional Services will meet the 10،000-examination threshold and therefore estimates that the transaction consideration is CU125 per product. Consequently، upon the completion of the first 100 examinations for Correctional Services، the Hospital recognizes the following:

15 CU150 per examinations × 100 examinations

16 CU125 transaction consideration per examinations × 100 examinations

Disclosure

Example 44 – Disclosure of Services In-kind not Recognized

IE254. The hospital analyzes the agreements it has with the volunteers and concludes that، at least for a new volunteer's first six months، it has sufficient control over the services to be provided by the volunteer and that it receives service potential from the volunteers، satisfying the definition of an asset. However، it concludes that it cannot reliably measure the fair value of the services provided by the volunteers، because there are no equivalent paid positions either in the hospital or in other health or community care facilities in the region. The hospital does not recognize the services in- kind provided by the volunteers. In accordance with paragraphs 175–176 of IPSAS 47، the hospital discloses the number of hours of service provided by volunteers during the reporting period and a description of the services provided.

IE255. For the year ended December 31، 20X2، Government A prepares and presents financial statements prepared in accordance with IPSAS for the first time. It makes the following disclosures in its financial statements: