Peppercorn leases

Deferral of fair value requirements for peppercorn leases approved by AASB

The decision by the Australian Accounting Standards Board (AASB) in November 2018 to defer the requirements for not-for-profit entities to fair value their right-of-use assets subject to peppercorn leases has now been officially approved.

AASB 2018-8 Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities amends AASB 16 Leases, paragraph Aus25.1, to provide a choice to measure right-of-use assets subject to peppercorn leases at either cost or fair value. Because of the complexity involved in determining fair value for these right-of-use assets, we expect most not-for-profit lessees to adopt the ‘cost’ option when applying the new income recognition standard, AASB 1058 Income of Not-for-Profit Entities from 1 January 2019.

More information

For more information on background to these amendments, please refer to our November 2018 and December 2018 Accounting News articles.