New income recognition requirements for not-for-profit entities have been issued by the AASB and are now available for comment.
The AASB reports that the new requirements represent a major step towards financial reporting that better meets the needs of not-for-profit entities and the users of their reports.
The reporting of income will more closely reflect the economic reality by providing more opportunity for deferral. Income recognition will depend on whether there is any liability or other performance obligation (a promise to transfer a good or service) related to the cash or grant received.
The other major change is to the measurement requirements for assets. Currently, only assets acquired by not-for-profits at nil or nominal consideration must be fair valued. The new Standard broadens this to require fair value measurement of assets for which consideration is significantly below that asset’s fair value (including peppercorn leases). However, this only applies to transactions where the difference between fair value and the consideration is principally to enable a not-for-profit entity to further its objectives.
For more information visit the AASB website here
