Peppercorn leases: the lowdown on AASB 16 and AASB 1058

In December 2018, the Australian Accounting Standards Board (AASB) issued an amending standard that provides a temporary exemption for not-for-profit (NFP) entities from the requirement to fair-value the right-of-use assets arising from peppercorn lease contracts.

The exemption is optional, allowing entities to measure and recognise right-of-use assets arising from peppercorn leases at fair value if they choose to do so, or at cost (based on actual payments).

At a glance:

  • NFPs are temporarily exempt from having to fair-value right-of-use assets arising from peppercorn lease contracts.
  • Peppercorn lease arrangements are common in private sector NFPs, where philanthropic-minded asset owners provide significantly discounted access to assets to assist NFP entities in furthering their objectives.
  • For NFP entities with June year-ends, the new requirements and temporary exemption will first apply for the year to 30 June 2020.

To view the full In The Black article, click here.

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