Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p84
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 84/91)
Character Range: 237641–240473

to recognise right-of-use assets arising from operating leases at fair value when applying AASB 1058 before adopting AASB 16, noting this approach would be consistent with the objective of this Standard.  However, the Board was conscious that it were to do so, it would place an additional burden on not-for-profit lessees, and would not be in keeping with its policy on transaction neutrality.  Consequently, and having regard to the short lead time before AASB 16 becomes effective, the Board decided to require entities to continue applying the requirements of AASB 117 in respect of operating leases until transition to AASB 16.

BC156        With respect to finance leases within the scope of AASB 117, the Board noted that a lessee may not have previously measured a finance lease asset, in a lease made on significantly below-market terms and conditions at inception principally to enable an entity to further its objectives, at fair value on initial recognition.  The Board considered the costs to a lessee of having to fully retrospectively apply AASB 1058 to such leases were likely to outweigh the benefits to users of doing so.  Consequently, the Board decided to require a lessee to measure the fair value of a finance leased asset at the date of initial application of AASB 1058 (if paragraph C3(b) applies) or at the beginning of the earliest period presented (if paragraph C3(a) applies).  The Board decided it was not necessary to require the entity to remeasure the leased asset to fair value again on adoption of AASB 16.

First-time adoption of Australian Accounting Standards

BC157        The Board considered whether any amendment is necessary to AASB 1 First-time Adoption of Australian Accounting Standards to assist not-for-profit entities on first-time adoption of Australian Accounting Standards.  In making its decision, the Board had regard to the extent of amendment to AASB 1 as a consequence of the issue of AASB 15 and AASB 16.

BC158        The Board noted that a not-for-profit entity applying AASB 1 would be able to access the relief specified in AASB 15 in respect of contracts for which the entity has previously fully recognised income in accordance with AASB 1004 (refer paragraphs D34-D35 of AASB 1).  Consequently, the Board decided no further amendment was required in this regard.

BC159        The Board observed that AASB 1 specifies the accounting on first-time adoption of Australian Accounting Standards for lease assets and lease liabilities, including practical expedients that may be adopted.  The Board noted, in the absence of developing Australian specific amendments to AASB 1, it is unclear how a lease within the scope of AASB 1058 should be treated in the financial statements of a first-time adopter of Australian Accounting Standards.

BC160        The Board considered