Where an entity that reports under PBE Standard or PBE Standards RDR receives revenue, it must determine whether that revenue arises from an exchange or a non-exchange transaction.
PBE IPSAS 9 Revenue from Exchange Transactions (“PBE IPSAS 9”) defines:
- Exchange transactions as “transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange”
- Non-exchange transactions as “transactions that are not exchange transactions” (further to this it notes that, in a non-exchange transaction, “an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange”).
Revenue that arises from exchange transactions is accounted for under the requirements of PBE IPSAS 9, while revenue that arises from non-exchange transactions is accounted for under the requirements of PBE IPSAS 23 Revenue from Non-Exchange Transactions (“PBE IPSAS 23”).
The New Zealand Government wage subsidy meets the definition of a non-exchange transaction and is consequently accounted for under the requirements of PBE IPSAS 23.
Under PBE IPSAS 23, revenue received or receivable from a non-exchange transaction is recognised:
- As revenue if it does not have an associated condition (a condition is a requirement that the asset received must be consumed by the recipient as specified, or returned to the transferor)
- As a liability if it does have an associated condition (with the liability being extinguished and revenue recognised as the condition is met).
The New Zealand Government wage subsidy has an associated condition, as an entity can be required to repay part or all of it under specified circumstances. This means that, when the wage subsidy is received, it must be initially recognised as a liability and then recognised as non-exchange revenue (with the liability being extinguished) as wages/salaries are paid.