6-month deferral of new AASB 1058 & AASB 15 by NFPs in relation to research grants
26 November 2019
On Thursday, 21 November 2019, the Australian Accounting Standards Board decided to defer the application of AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-Profit Entities by not-for-profit entities to research grants from periods beginning on or after 1 January 2019 to periods beginning on or after 1 July 2019, with earlier application permitted, to provide further education to address the continuing divergent views on revenue recognition for research grants.
NFP entities with 31 December 2019 year-ends therefore can elect to NOT apply AASB 1058 and/or AASB 15 to research grants.
In addition to the above, the AASB decided to proceed with the amendments to the illustrative examples (Examples 4A and 4B), and to add Example 4D (previously Scenario 2A in the Staff FAQs) to illustrate additional contract features to help entities in implementing AASB 15.
Practical Implications for our NFP Clients with 31 December 2019 Year-ends
- NFP clients will need to identify all research grants. However, at this stage it is unclear how broadly the AASB interprets ‘research grants’.
- The question also arises: What if some grants contain components of both research and other grants (i.e. training)?
- If NFP entities elect to defer the application of AASB 15 and AASB 1058, the NFP entities will continue to apply AASB 1004 and/or AASB 118 in respect of research grants, depending on the reciprocal nature of those research agreements.
If NFP entities have done significant work to be ready for the implementation of AASB 15 & AASB 1058 (including to research grants), they can still early adopt. However, the risk is that the requirements, illustrative examples and/or FAQs in relation to research grants might change within the next 6 months. It might be better to wait for the educational AASB Webinar and revised AASB staff FAQs.
AASB members will vote out of session on a revised version of the amending Standard. Further education efforts through a webinar and revised Staff FAQs will be provided.