FINANCIALS 2019
Impact of initial adoption of AASB 1058 Income
of Not-for-Profit Entities and AASB 15 Revenue
from Contracts with Customers
In the current year, the Company has applied AASB
1058 Income of Not-for-Profit Entities and AASB
15 Revenue from Contracts with Customers which is
effective for an annual period that begins on or after
1 January 2019.
The Company has applied AASB 1058 and AASB
15 in accordance with the modified retrospective
(cumulative catch-up) method where the comparative
years are not restated. Instead, the Company has
recognised the cumulative effect of initially applying
AASB 1058 and AASB 15 for the first time for the year
ending 31 December 2019 against retained earnings
as at 1 January 2019. The Company has also elected
to apply AASB 1058 and AASB 15 retrospectively only
to contracts and transactions that are not ‘completed
contracts’ as at 1 January 2019.
Overview of AASB 1058 and AASB 15 requirements
AASB 1058 clarifies and simplifies the income
recognition requirements that apply to Not-for-Profit
entities, in conjunction with AASB 15. The new income
recognition requirements shift the focus from a
reciprocal/non-reciprocal basis to a basis of assessment
that considers the enforceability of a contract and the
specificity of performance obligations.
The core principle of the new income recognition
requirements in AASB 1058 is that when a Not-for-
Profit Company enters into transactions where the
consideration to acquire an asset is significantly less
than the fair value of the asset principally to enable
the Company to further its objectives, the excess of
the asset recognised (at fair value) over any ‘related
amounts’ is recognised as income immediately.
An example of a ‘related amount’ is AASB 15 and in
cases where there is an ‘enforceable’ contract with
a customer with ‘sufficiently specific’ performance
obligations, income is recognised when (or as) the
performance obligations are satisfied under AASB 15,
as opposed to any excess above the related amounts
that would be immediate income recognition under
AASB 1058.
Under AASB 15, a Company 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.
AASB 15 introduces a 5-step approach to revenue
recognition, which is more prescriptive than AASB 118.
General impact of application
The Company has applied the new income
requirements to its main revenue/income streams,
as listed below:
• Government grants
• Donations
• Capital grants
• Parent fees
Government grants
AASB 1058 requires that in cases where there is
an ‘enforceable’ contract with a customer with
‘sufficiently specific’ performance obligations, the
transaction should be accounted for under AASB
15 where income is recognised when (or as) the
performance obligations are satisfied, as opposed to
immediate income recognition under AASB 1058.
The Company has conducted an analysis of the
government grant contracts and analysed the
terms of each contract to determine whether the
arrangement meets the enforceability and the
‘sufficiently specific’ criteria under AASB 15. For
those grant contracts that are not enforceable, the
performance obligations are not sufficiently specific,
this will result in immediate income recognition
under AASB 1058. Income will be deferred under
AASB 15 otherwise and recognised when (or as) the
performance obligations are satisfied.
The Company has determined that there is no
material impact of transitioning to AASB 1058 and
AASB 15. Contracts have been determined to be
enforceable and sufficiently specific and as such
income has been deferred under AASB 15 and
recognised over time as performance obligations are
satisfied. Performance obligations are satisfied on a
straight-line basis, in line with enrolments or in line
with costs incurred (Input Method) depending on the
pattern of transfer of benefit in each contract.
KU
20
19
15