KU Annual Report KU Annual Report 2017 | Page 38

FINANCIALS 2. Application of new and revised Accounting Standards (continued) The issuance of AASB 1058 also results in consequential amendments to other Standards and Interpretations, as set out below: The core principle of AASB 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: • AASB 15 Revenue from Contracts with Customers • AASB 16 Leases • AASB 101 Presentation of Financial Statements • AASB 116 Property, Plant and Equipment • AASB 117 Leases • AASB 138 Intangible Assets • AASB 1004 Contributions • AASB 1057 Application of Australian Accounting Standards Among the amendments listed above, the key amendments to note are the: KU 20 17 •  Step 1: Identify the contract(s) with a customer •  Step 2: Identify the performance obligations in the contract •  Step 3: Determine the transaction price •  Step 4: Allocate the transaction price to the performance obligations in the contract •  Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. • new lessee accounting requirements for leases at significantly below-market terms and conditions (commonly known as ‘peppercorn leases’) principally to enable the lessee to further its objectives (as amended in AASB 16 and AASB 117). This requires the lessee to recognise the leased asset / right-of-use asset at fair value per AASB 13, the lease liability per AASB 117 / AASB 16 and the residual as income at the inception of the lease; • requirement to measure inventories (e.g. donated inventories) at current replacement cost where the consideration for those inventories is significantly less than fair value principally to enable the entity to further its objectives (as amended in AASB 102); • requirement to measure the cost of the asset (e.g. property, plant and equipment, intangible asset or investment property) at fair value per AASB 13 where the consideration for the asset is significantly less than fair value principally to enable the entity to further its objectives (as amended in AASB 116, AASB 138 and AASB 140); and • removal of all income recognition requirements for private sector NFP entities and majority of income recognition requirements for public sector NFP entities in AASB 1004. d) AASB 15 ‘Renumeration Contracts with Customers’ effective for annual periods beginning on or after 1 January 2019. Expected to be initially adopted for the financial period ending 31 December 2019. In May 2016, the AASB issued AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. In December 2016, the AASB issued the following amending Standards that applies to not-for-profit entities: • AASB 2016-7 Amendments to Australian Accounting Standards – Deferral of AASB 15 for Not-for-Profit Entities which deferred the application date for not-for-profit entities to 1 January 2019 • AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities which introduced not-for-profit-specific implementation guidance on ‘enforceability’ of a contract (Step 1), ‘sufficiently specific’ performance obligations (Step 2) and separate recognition of ‘donation’ element (Step 4). 14