Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p21
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 21/91)
Character Range: 64139–67071

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 as the endowment does not give rise to:

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

                    a contract with a customer within the scope of AASB 15.  Although the promise to provide student accommodation is a promise to transfer goods or services, it is not a sufficiently specific performance obligation relating to the controlled asset.  While the promise to provide student accommodation is distinct and the university can identify at the end of each year whether or not it has delivered the accommodation for one student, it cannot identify when its obligation is fully satisfied and cannot allocate the transaction price as the promise is continuous as long as University A continues to operate as a university.  University A must be able to identify when the performance obligation is satisfied for the promise to be identified as sufficiently specific (paragraph F20 of AASB 15);

                    a lease liability as defined in AASB 16, as the endowment agreement does not provide a right to use a specified asset (the accommodation provided can vary from year to year);

                    a financial liability within the scope of AASB 9 as there is no obligation to provide cash or other financial assets to other parties, only accommodation; or

                    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 10, the endowment of $2 million is accounted for by University A as income immediately in profit or loss on recognition of the financial asset in accordance with AASB 9.

    The journal entry on initial recognition is:

      Debit Credit

     Cash  2,000,000

     Income  2,000,000

    Example 3C – Contract liability under AASB 15

    In this example, the facts of Example 3B apply, except that University A is required to provide the annual scholarship for one student's accommodation for a defined period of 30 years.

    University A determines:

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

                    on gaining control of the endowment, the university does not have related amounts in the form of contributions by owners, a lease liability, a financial liability or a provision.

    However, the promise to provide student accommodation is a sufficiently specific performance obligation related to the asset that AASB 15 applies, as the obligation to provide student accommodation for one