Not-For-Profits Time To Shine

By Hayley Keagan

28 February 2020

The next round of accounting standard changes is looming over the Not-For-Profit (NFP) sector but is everyone ready?

History tells us that in practice, changes are implemented at the very last minute. In fact, the release of AASB 15: Revenue from Contracts with Customers as well as recent changes to AASB 9: Financial Instruments for the For-Profit sector was exactly that. Last minute chaos! Whilst this was occurring, the NFPs received a 12-month deferral on revenue meaning that they could watch and learn when transitioning to their new standards for periods beginning on or after 1 January 2019. NFPs should be looking to use this additional breathing room to their advantage.

Standards that NFPs should be ready for:



AASB 15: Revenue from Contracts with Customers

Changes core principle for revenue recognition to be based upon the delivery of goods or services to a customer. Applies to funding arrangements which are “enforceable” and where there are “sufficient specific” performance obligations.

AASB 1058: Income for Not-for-Profit Entities

Explains how to record income when acquiring an asset where consideration is significantly less than the fair value. Will relate to assets received in-kind, grant arrangements which don’t fall under AASB 15 and volunteer services.

AASB 16: Leases

Recognising operating leases onto the balance sheet of lessees. Will result in an increase in assets and liabilities on the balance sheet, while rent expense will be replaced by interest and depreciation for the P&L.


How to get ready

Preparation is key, and the earlier the better. A good approach for revenue and other income would be:

  1. Identify where revenue comes from – categorise by contract.
  2. For each contract determine if revenue falls under AASB 15 or AASB 1058. A flow chart has been provided by the AASB to assist you with the process.
  3. Determine when you can recognise revenue by either referring to the 5-step approach under AASB 15 or by reference to receipt of consideration under AASB 1058.
  4. Compare assessment from Point 3 with current revenue policies and identify changes.
  5. Substantiate and record impact of change at both start of reporting period as well as at end.
  6. Make changes to systems and processes to ensure compliance maintained going forward.

It is best not to perform annual assessments to align your revenue with the required policies. Instead, change your processes to reflect the changes. Performing adjustments when needed for reporting can create an unnecessary burden, as essentially you are maintaining two separate sets of accounting records.

When tackling the changes to leases please consider our ‘AASB 16 Leases’ article from the 2019 Autumn edition of Clarity.

Our team at PKF have developed a calculation tool designed to help you with your updated lease calculations. Reach out to your local PKF Audit & Assurance representative to obtain the tool or to talk about the impact the above standards will have on your organisation.