AASB 1058 Income of NFP Entities

AASB 1058 Income of Not-For-Profit Entities and AASB 15 Revenue from Contracts with Customers and its NFP appendix specify the income-recognition requirements that apply to NFPs.

Both standards apply to annual reporting periods beginning on or after 1 January 2019.

They supersede income-recognition requirements of private-sector NFPs and most of the counterpart requirements of public-sector NFPs that were in AASB 1004 Contributions.

The timing of income recognition depends on whether such a transaction gives rise to a liability or other performance obligation (a promise to transfer a good or service) or a contribution by owners related to an asset (such as cash or another asset) received by an entity.

AASB 1058 applies when an NFP gets volunteer services or enters into other transactions where the consideration to acquire an asset is significantly less than the fair value of the asset principally to enable the entity to further its objectives. In the latter case, the entity recognises and measures the asset at fair value in accordance with the applicable Australian standard (for instance, AASB 116 Property, Plant and Equipment).

When an asset is recognised, the standard requires the entity to consider whether any other financial statement elements (called ‘related amounts’) should be recognised, such as (a) contributions by owners, (b) revenue, or a contract liability arising from a contract with a customer, (c) a lease liability, (d) a financial instrument, or (e) a provision. Related amounts are accounted for in accordance with the applicable Australian standard.

If the transaction is a transfer of a financial asset to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity (that is, an in-substance acquisition of a non-financial asset), the entity recognises a liability for the excess of the fair value of the transfer over any related amounts recognised.

The entity recognises income as it satisfies its obligations under the transfer similarly to income recognition of performance obligations under AASB 15.

If the transaction does not enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity, then any excess of the initial carrying amount of the recognised asset over the related amounts is recognised as income.

When an entity receives volunteer services and can reliably measure the fair value of those services, the entity may elect to recognise the services as an asset (provided the relevant asset-recognition criteria are met) or an expense.

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