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20 Dec. 2018

Right-of-use assets of not-for-profit lessees

The Board is voting on an amending Standard that would provide a temporary option for not-for-profit lessees to elect to measure right-of-use assets arising under ‘concessionary leases’ at initial recognition at cost rather than at fair value. If approved in time, the Standard will be published on 24 December.  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 draft Standard is based on AASB Exposure Draft ED 286 Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities (November 2018).  The Board received 20 submissions.  ED 286 also proposed additional disclosures to AASB 16 Leases for not-for-profit entities that elect to measure the right-of-use assets at initial recognition at cost rather than at fair value, to provide further information to users of financial statements about the entity’s concessionary leases and the right-of-use assets in the absence of fair value information.

The draft Standard incorporates the following key changes from ED 286:

  • permitting the temporary option to be applied to the right-of-use 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 right-of-use assets at cost rather than at fair value.

If the Standard is approved by the Board later, the Standard will be published in January, retaining the application date of periods beginning on or after 1 January 2019.

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