Proposed changes to accounting for peppercorn leases

AASB Release Update

This article follows the AASB release of an exposure draft on changes to peppercorn leases.

The AASB have released an exposure draft which proposes changes to peppercorn (and other significantly below market value leases).

The proposals would allow NFP entities to choose an accounting policy in relation to the right of use assets relating to peppercorn leases of either cost or fair value. This accounting policy choice would be temporary until the ACNC threshold for private sector NFP’s have been set and the AASB Fair Value Advisory Panel has provided guidance on valuing assets with restrictions.

The exposure draft asks for comments on whether:

• Temporary relief for all not for profit entities in relation to peppercorns should be granted until the ACNC thresholds have been set and guidance is issued by the Fair Value panel in relation to valuation of right of use assets and
• There should be permanent relief for peppercorn leases in place on transition to AASB 1058 for NFP entities in the private, public or both sectors.

The exposure draft comment period ends on 7 December 2018 with a final standard expected before Christmas.

In the meantime, NFPs should not engage any valuers nor perform any further detailed analysis on peppercorn leases in place today until the outcomes of the standard is released.

For further information, please contact your Bentleys Advisor.