Independent Review – Australian Accounting Standards Board
On 9 December 2016, the Australian Accounting Standards Board (AASB) released AASB Standard 1058 Income of Not-for-Profit Entities.
The new Standard, which will come into effect on 30 June 2020, makes two major changes to improve the accuracy of not-for-profits’ reporting of their financial position.
Currently, not-for-profits report revenue as income when it is received and expenses when they are incurred. But some grants or donations have performance obligations attached to them. AASB 1058 will allow not-for-profits to recognise such grants or donations as income when the performance obligation has been fulfilled, and not when the revenue is received.
The new Standard will also broaden the range of assets reported on an entity’s balance sheet at their fair value. Currently only assets acquired for no or a nominal consideration must be recognised at fair value. AASB 1058 will extend this requirement to assets acquired at considerably below their fair value, including leases with significantly below market terms and conditions. This change is intended to help entities better manage the resources they have been provided with and help others to have a better understanding of entities’ dependence on donated assets.
The AASB certified the process undertaken by the Board to issue Australian Accounting Standard AASB 1058 and it’s Basis for Conclusions as a process and analysis equivalent to a Regulation Impact Statement (RIS) as set out in The Australian Government Guide to Regulation. The AASB is therefore compliant and consistent with best practice. The Office of Best Practice Regulation (OBPR) does not assess analysis from a certified and robust internal RIS-like process.
The AASB estimated the new standard will increase regulatory burden on community organisations by $13.2 million a year. The OBPR has agreed to the AASB’s estimate.