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24 Dec. 2018

New Accounting Standard: Right-of-Use Assets of Not-for-Profit Entities

The AASB has issued AASB 2018-8 Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities to provide a temporary option for not-for-profit lessees to elect to measure a class (or classes) of right-of-use (ROU) assets arising under ‘concessionary leases’ at initial recognition, either:

  • at cost, in accordance with AASB 16 Leases paragraphs 23–25, which incorporates the amount of the initial measurement of the lease liability; or
  • at fair value, in accordance with AASB 16 paragraph Aus25.1 (as amended).

Concessionary leases in this context are leases that have significantly below-market terms and conditions principally to enable the entity to further its objectives.

The Standard incorporates two key changes from ED 286:

  • permitting the temporary option to be applied to the ROU assets on a class-by-class basis; and 
  • amending AASB 1049 Whole of Government and General Government Sector Financial Reporting to allow governments to measure ROU assets at cost rather than at fair value.

AASB 2018-8 is effective for annual periods beginning on or after 1 January 2019, which is the effective date of AASB 16 and AASB 1058 Income of Not-for-Profit Entities.

The Board will consider a permanent option at a later time.