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Grant Thornton Australia | Audit, Tax and Advisory
Client alerts
2016
Income recognition changes – Not for Profits

Income recognition changes – Not for Profits

30 Jun 2016

Income recognition changes – Not for Profits

With the issue of Exposure Draft 260, Income of Not for Profit Entities (ED 260), the Australian Accounting Standards Board (AASB) aims to improve the match between revenues and expenditures.

Replacing the income recognition requirements of AASB 1004, ED 260 applies to grants, donations, taxes and other receipts that are outside the scope of other Accounting Standards and includes guidance assisting NFP entities to apply AASB 15. Exposure Draft 260 is proposed to be effective at January 1 2017, with early adoption permitted.

	AASB 1004 Contributions	ED 260 Income of Not for Profit entities
Scope	Applies when a Not for Profit entity receives a contribution; otherwise known as a ‘non-reciprocal transfer’.	Applies when the agreement with the customer does not contain ‘performance obligations’ and/or is not ‘enforceable’.
Recognition criteria – donations and grants	When the ultimate beneficiary is not the grantor there is immediate income recognition as long as the contributions are received or receivable when an entity obtains control or a right over the contribution which has probable economic benefits that will flow to the entity, and the amount can be measured reliably.	Regardless of whether the ultimate beneficiary is the grantor or not, the ultimate beneficiary is able to defer income from donations and grants (as per AASB 15) and only recognise this income as and when performance obligations are satisfied, provided the conditions attached regarding delivery of goods or services are enforceable performance conditions and sufficiently specific. Note, transfers where there is discretion about how the grant or donation is to be used will still be recognised immediately.
Recognition criteria – other	Contributions of assets same as above.	Contributions of assets: Criteria are the same as AASB 1004 except for obtaining volunteer services.
Measurement	Requires income to be measured at the fair value of the contributions received or receivable.	Assets are measured under AASB 139/9 (financial instruments standard) or at fair value under AASB 13 Other: Volunteer services and transactions with a donation element (e.g. peppercorn $1 leases) recognised as income at fair value.

For more information, contact:

Simon Hancox

Office Chair - Brisbane Brisbane

Email address https://au.linkedin.com/pub/simon-hancox/9/aa6/458 Simon Hancox VCard

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