Changes To Revenue Recognition

By Mark Harrison - March 21, 2016

For health and care not-for-profit entities, in April 2015, the Australian Accounting Standards Board (AASB) issued an exposure draft ED 260 Income of Not-for-Profit Entities

The new revenue recognition standard AASB 15 “Revenue from Contracts with Customers” will impact both for-profit and not-for profit entities.  The standard will present a challenge for adoption across the health and care sectors, particularly in instances of long term service contracts and public body reciprocal funding arrangements.

The core principle of AASB 15 is to recognise revenue received under a contract when the goods or services have been actually delivered to customers.  As the title of AASB 15 suggests, an entity shall only apply AASB 15 to a contract if the counterparty to the contract is a customer. A customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. 

We have summarised below a 5-Step Model to Apply the Core Principles of the standard.

An entity recognizes revenue in accordance with the core principle by applying the following steps:

Currently, AASB 15 applies to annual reporting periods beginning on or after 1 January 2018. 

For health and care not-for-profit entities, in April 2015, the Australian Accounting Standards Board (AASB) issued an exposure draft ED 260 Income of Not-for-Profit Entities which proposes:
•    guidance to assist not-for-profit entities to apply the principles of AASB 15 Revenue from Contracts with Customers, and 
•    a replacement of the income recognition requirements in AASB 1004 Contributions.

This new standard essentially means revenue is recognised when a product or service is delivered, rather than when it has been contracted.  If a not-for-profit entity’s transaction is outside the scope of AASB 15, such an inflow would be accounted for in accordance with the proposed Income of Not-for-Profit Entities either as other income, a liability (for example, a refund liability) or a contribution by owners. 

Other income would arise when the not-for-profit entity recognises an inflow of an asset initially measured at an amount exceeding the initial carrying amount of any resulting liability to that entity (including a contract liability to a customer), provided that the inflow is not a contribution by owners. Recognition of the inflow would generally occur when the not-for-profit entity obtains control of the promised or transferred asset. This problematic concept (that is, ‘control of an asset’), which is also included in the current AASB 1004, is addressed in ED 260. 

For more information about how the new standard affects you, contact Mark Harrison, Partner, Pitcher Partners

Other articles


Top of Page

 Back to News


Rob Southwell

Rob Southwell's picture


Managing Partner and Partner – Private Business and Family Advisory

> View profile

Nigel Fischer

Nigel Fischer's picture


Managing Partner - Private Business and Family Advisory

> View profile

Michael Minter

Michael Minter's picture


Managing Partner

> View profile

Leon Mok

Leon Mok's picture


Managing Director

> View profile

Brendan Britten

Brendan Britten's picture


Managing Partner and Executive Director/Partner- Business Advisory and Assurance

> View profile

Tom Verco

Tom Verco's picture


Managing Principal - Private Business and Family Advisory

> View profile

Partnership fraud


Paperwork and independent advice saves partnerships from fraud

Discover more

Kia Ora Horse Stud


Pitcher Partners fills a Financial Manager gap to keep the business on track

Discover more

Fuel Injection Company Administration


A fuel injection company began life as an Australian public company before being acquired by a UK publicly listed company while in the research and development stage of a “green...

Discover more

@PitcherPartner EXCELLENCE IN ENGINEERING | Our Newcastle & Hunter firm is proud to have sponsored the 2019 Hunter Business Chamber…