Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p20
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 20/91)
Character Range: 61445–64385

the scope of AASB 1058; and

                    it controls a financial asset ($2 million) within the scope of AASB 9.

    Example 3A – Financial instrument (cash scholarships, not goods or services)

    Based on the facts and circumstances outlined above, as the income generated from the principal amount (excluding the income required to preserve the real value of the principal) must be applied towards funding cash scholarships at some time in the future (at its discretion), the university considers whether it has incurred a financial liability under AASB 9 as a related amount.  The university also considers whether derecognition of the financial asset is appropriate under Chapter 3 'Recognition and derecognition' of AASB 9, instead of the recognition of a financial liability.

    In this example, no transfer of specific goods or services is required under the terms of the endowment.  The scholarship is paid in cash rather than through the provision of goods or services.  Accordingly, the university determines that it does not have a contract with a customer (the alumnus) that would be accounted for in accordance with AASB 1058.

    Similarly, the endowment does not give rise to the following types of related amounts:

                    a contribution by owners, as the alumnus does not control or have an ownership interest in the university;

                    a lease liability as defined in AASB 16, as the endowment does not provide a right to use a specified asset; and

                    a provision within the scope of AASB 137, as the agreement provides legal obligations and there are no other constructive obligations that are sufficiently specific to consider.

    Accounting treatment

    In accordance with paragraph 9, University A accounts for the endowment under AASB 9.  In accordance with paragraph B13, any difference between the $2 million financial asset recognised and a related financial liability recognised would be accounted for under AASB 9.  Paragraph 10 of AASB 1058 does not apply in this case.

    Example 3B – Income (provision of services, no sufficiently specific performance obligation)

    In this example, the facts of Example 3 apply, except that:

                    University A is required to provide free student accommodation each year for one student for one year, for as long as University A continues to operate as a university and subject to the real value of the principal of $2 million being preserved;

                    income generated from investment of the principal may be applied to provide the student accommodation; and

                    any excess income generated from the investment of the principal is permitted to be spent on other university activities.

    Based on these facts and circumstances, on gaining control of the endowment of $2 million, University A determines that there are no related amounts for the $2 million