- 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.