15RU-005 Proposals for income recognition for Not-For-Profit Entities

15RU-005 Proposals for income recognition for NFPs

Existing Not-For-Profit (NFP) income guidance under AASB 1004 Contributions does not comprehensively address the recognition and measurement issues associated with NFP income transactions resulting in divergence in practice.

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Exposure Draft Income of Not-for-Profit Entities (ED 260) was issued to address the divergent practice and will apply to both private and public sector NFP entities.

ED 260 has removed the concept of reciprocal or non-reciprocal income transactions, instead NFP entities will account for income arrangements either under AASB 15 Revenue from Contracts with Customers or a new standard AASB 10XX Income of Not-for-profit Entities. Which standard applies will be dependent on the individual agreement’s terms and conditions and whether the agreement is both “enforceable” and contains “performance obligations”.

ED 260 will not apply to for-profit entities, these entities will continue to apply AASB 120 Accounting for Government Grants and Disclosure for Government Assistance where appropriate.

Submissions to the AASB for comment letters on the ED 260 proposals are due 14 August 2015.

Key points

  • ED 260 proposes new income recognition requirements for NFP entities.
  • Proposal for income to be accounted for under either AASB 15 Revenue from contracts with customers or a new NFP specific standard.
  • Accounting guidance applied depends on whether agreement is enforceable and contains performance obligations.
  • Income recognition may be accelerated or deferred compared to current treatment.
  • Submissions for comment letters due 14 August 2015.

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