In November 2018 Accounting News we highlighted the Australian Accounting Standards Board’s (AASB) announcement that it intended to defer the requirements for not-for-profit lessees to fair value right-of-use assets subject to peppercorn leases.
On 23 November 2018, the AASB commenced the process to implement these changes by issuing Exposure Draft ED 286 Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities. Given that an amendment to AASB 16 Leases Aus25.1 is required to be legislated prior to the commencement date of AASB 16 (i.e. 1 January 2019), ED 286 had a very short comment period, with comments closing 7 December 2018. We therefore expect to see an amending standard issued in the lead up to Christmas.
In drafting the proposed amendments to AASB 16 and other related standards, rather than provide a deferral for a fixed period of time, the AASB has instead proposed to provide a choice of the measurement basis for right-of-use assets subject to peppercorn leases, i.e. cost or fair value. However, we expect that most NFPs will opt for the ‘cost’ option, and choose not to fair value these right-of-use assets.