Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p82
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 82/91)
Character Range: 232190–235324

leases made on significantly below-market terms and conditions is set out in paragraphs BC150–BC153 below.

BC147        With respect to assets other than lease assets, the Board decided not to require a not-for-profit entity to revisit the accounting that previously applied on initial recognition of these assets.  The Board made this decision having regard to costs involved in identifying and measuring the various assets held on adoption of this Standard that may have been acquired at an amount that was more than nil or nominal, but significantly less than fair value, and the associated discount to fair value.  The Board considered these costs to outweigh the benefits of retrospective application of the Standard, as these assets are already recognised (generally at cost on initial recognition) in the statement of financial position, and noting that there is unlikely to be any deferred income to recognise in future periods in accordance with this Standard.

BC148        The Board observed that, consequently, the statement of financial position will reflect a mixed measurement position for assets acquired for consideration that is significantly less than fair value but more than nominal.  Those acquired for more than a nominal amount prior to the application of AASB 1058 would continue to be reflected at cost on initial recognition.  Assets acquired under similar circumstances after adoption of AASB 1058 will generally be initially measured at fair value (or current replacement cost, in relation to inventories).

BC149        The Board decided that the transitional relief for other assets need not be aligned with transitional relief for leases.  In making this decision, the Board considered:

(a)                    the quantum of transactions involving a lease.  The Board observed it expects an entity to have undertaken fewer transactions involving leases, and that the terms and conditions of these  transactions to be clearly identifiable, compared to acquisitions of other assets at a discount to fair value; and

(b)                   that a lessee may not necessarily have recognised an amount in its statement of financial position in respect of the right-to-use asset in an operating lease.

Leases with significantly below-market terms and conditions

BC150        The Board decided to consider transitional relief for leases on significantly below-market terms and conditions separately from transitional relief for other assets.  The Board made this decision having regard to:

(a)                    the diversity in accounting for such leases under previous requirements (see paragraph BC6 above);

(b)                   the potential significance of leases made on such terms to the financial position of a not-for-profit entity; and

(c)                    the prevalence of below-market leases in the not-for-profit sector.

BC151        The Board considered whether to:

(a)                    require retrospective application of this Standard, without any relief on initial application;

(b)                   permit a not-for-profit lessee to continue its existing accounting for such