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The Australian Accounting Standards Board (AASB) is currently finalising two as yet un-numbered new accounting standards that deal with Not For Profit entities in relation to donations, grants, contributions and contract revenue. The two new standards are:
- AASB 10XX – Income for Not For Profit Entities; and
- AASB 2016-X – Australian implementation Guidance for Not For Profit Entities Revenue from Contracts with Customers (AASB15)
The standards are quite wide ranging and bring clarity and changes to a number of key issues:
- Generally, a resource controlled by a NFP entity is initially recognised at its fair value.
- Resources include physical, intangible and financial assets – whether acquired, donated or granted.
- A resource also includes the right to use an asset under a lease.
- Donation elements in below-market leases and loans are recognised as income at inception.
- Income recognition will more closely match recognition of related expenses.
- Capital grants are generally recognised as income as and when the asset is constructed or acquired.
The proposed standards have implications for grants received and their recognition as income (this may change for instance some school’s accounting treatments for Capital Grants), but also where you are leasing your site or premises perhaps below market rates from a church or some other “donor” to your NFP.
The proposed standards are currently out for public comment and will be finalised after that.
Resolve will keep an eye on this issue but they are likely to apply to reporting periods for NFPs commencing on or after 1 January 2019, so the changes are awhile away yet!