Document ID: chunk:federal_register_of_legislation:F2024C00049:body:0:p54
Version: federal_register_of_legislation:F2024C00049
Segment Type: other
Provision Reference: 
Character Range: 139483–142723

initial recognition at cost, rather than fair value.

Basis for Conclusions on AASB 2019-8

This Basis for Conclusions accompanies, but is not part of, AASB 16.  The Basis for Conclusions was originally published with AASB 2019-8 Amendments to Australian Accounting Standards – Class of Right-of-Use Assets arising under Concessionary Leases.

Introduction
     BC1               This Basis for Conclusions summarises the Australian Accounting Standards Board's considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.

Reasons for issuing this Standard

     BC2               AASB 1058 Income of Not-for-Profit Entities and AASB 16 Leases are effective for annual reporting periods beginning on or after 1 January 2019. These Standards originally required not-for-profit entities to measure right-of-use assets at initial recognition at fair value for leases that have significantly below-market terms and conditions principally to enable the entity to further its objectives.

     BC3               For ease of reference in this Basis for Conclusions, leases that have significantly below-market terms and conditions principally to enable the entity to further its objectives are referred to as 'concessionary leases'.

     BC4               The Board considered comments from stakeholders that some not-for-profit entities are encountering difficulties in applying the principles in AASB 13 Fair Value Measurement in determining the fair value of right-of-use assets arising under concessionary leases. The Board considered the prevalence and magnitude of concessionary leases in the not‑for‑profit sector, and in December 2018 issued AASB 2018-8 Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities to provide a temporary option for not-for-profit lessees to measure a class (or classes) of right‑of‑use assets at initial recognition at cost or at fair value arising under concessionary leases.

     BC5               Subsequently the Board received feedback that public sector entities preparing Whole of Government and General Government Sector financial statements would need to revalue their right-of-use assets arising under concessionary leases (and other leases) at fair value at subsequent measurement to satisfy the requirements of AASB 1049 Whole of Government and General Government Sector Financial Reporting to elect accounting treatments in Accounting Standards that align with the principles in the ABS GFS Manual. The Board considered the issue and decided to provide an option for the Whole of Government and the General Government Sector to measure right-of-use assets arising under concessionary leases at cost or at fair value in subsequent measurements, which is an extension of the existing temporary relief provided in AASB 2018‑8 in relation to initial recognition.

     BC6               Stakeholders also requested clarification of whether right-of-use assets arising under concessionary leases can be treated as a separate