Document ID: chunk:federal_register_of_legislation:F2023C00188:reg:7:p19
Version: federal_register_of_legislation:F2023C00188
Segment Type: reg
Provision Reference: reg 7 (pt 19/91)
Character Range: 58746–61708

of $10.  Charity P controls the voting rights and in accordance with AASB 10 Consolidated Financial Statements consolidates Company S.

    Scope and asset recognition

    Company S determines:

                    the cash from the contribution is an asset acquired by Company S for no consideration to further the objectives of Company S.  Accordingly, the cash injection is within the scope of AASB 1058; and

                    it controls a financial asset within the scope of AASB 9.

    Accounting treatment

    In accordance with paragraph 9, the related amount for the cash asset is accounted for as a contribution by owners.  Charity P is a member (owner) of Company S, and the transfer is from an owner acting in their capacity as an owner.  No services are required of Company S as a result of the contribution, nor is there an obligation to repay the funds.

    The journal entry on initial recognition by Company S is:

      Debit Credit

     Cash  500,000

     Equity – contributed capital  500,000

Financial instruments, bequests and endowments

IE3                 Examples 3 and 4 illustrate the requirements of paragraphs 9 and 10 in AASB 1058 for the accounting treatment for financial instruments, bequests and endowments.  Examples 3A and 4 illustrate the identification of related amounts in the form of a financial instrument, in accordance with AASB 9.  Receiving a bequest or endowment in the form of cash, or paying out the principal and/or interest in the form of cash, requires the application of the financial instrument accounting requirements in AASB 9.

    Example 3—Endowment made to a university

    An alumnus transferred $2 million cash to University A as an endowment.  Under the terms of the endowment:

                    the $2 million cash can be invested at the university's discretion;

                    subject to preserving the real value of the principal, all income generated from investing the principal is required to be applied towards cash scholarships of $20,000 per student for the student to use at their discretion; and

                    if the university breaches the terms of the endowment, the university is required to return the real value of the principal to the alumnus.

    Scope and asset recognition

    University A determines:

                    it has an enforceable agreement with the alumnus, as the university can be required to return the endowment in the event it breaches the terms under which it was given;

                    the $2 million endowment is an asset the university acquired for no consideration to further the objectives of the university. Accordingly, the endowment is within 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