- AASB 1058 was intended to help resolve some inconsistencies in income recognition for NFPs
- In practice, some inconsistencies remain
- The standard will be subject to a PIR in 2022
When the AASB issued AASB 1058 Income for Not-for-Profit Entities (“AASB 1058”), to be applied alongside AASB 15 Revenue from Contracts with Customers (“AASB 15”), relief spread through the NFP sector. The previous standard, AASB 1004 Contributions, required significant judgment be applied to determine the appropriate recognition of income. Often, separate NFPs receiving multi-year grants with similar terms and conditions would account for them differently: one of them treating the agreement as ‘reciprocal’, recognising revenue over the period of the grant, and the other treating it as non-reciprocal, recognising income when the funds were received. The result was inconsistent financial reporting in the not-for-profit sector.
Both users and preparers hoped that the new standards would resolve these inconsistences; but in practice, there have been significant difficulties in applying these standards, maintaining the diversity in financial reporting practice.
In this article Ralph Martin and Ana-Espinal Rae from RSM Australia explore some of the challenges and the way forward, ahead of a post implementation review of the standard by the AASB.