A decision was taken by the Australian Accounting Standards Board (AASB) on 21 November 2019 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 (NFP) entities in accounting for research grants by six months. The deferral means these two new accounting standards (as they relate to research grants received by NFPs) now apply to annual reporting periods beginning on or after 1 July 2019 as opposed to 1 January 2019. Earlier application is, however, permitted.
The decision follows the continuing debate and differing views regarding the revenue recognition for research grants. The AASB plans to amend the existing illustrative examples and add another example to assist NFPs in implementing AASB 15, as well as advance education efforts through a webinar and revised staff FAQs.
NFP entities with upcoming 31 December 2019 year ends should be aware of the following:
- Such entities can elect not to apply AASB 15 and AASB 1058 to research grants and instead continue to apply the provisions of AASB 1004 Contributions and/or AASB 118 Revenue.
- Where deferral is elected, research grant contracts would have to be separately identified. This could be a challenge where a research grant is one component within a larger agreement. It is, at this stage, unclear what exactly constitutes a ‘research grant’.
NFP entities should remain alert for educational materials that the AASB intends to roll out in relation to research grants. HLB will keep readers up to date as new developments transpire.