V
Vel D
Guest
One of the firm’s clients is an Australian university. The international students’ unit of the university receives significant amounts of its funding in the form of government grants but also provides fees for services.
This unit has two primary functions:
i. to provide education services to international students by providing English language tuition to students coming to Australia to further their study.
ii. the unit also has a significant subsidiary which provides education services to full fee paying students in Vietnam. This subsidiary needs to earn sufficient revenue to cover its own costs and any profit needs to be returned to the university.
In the current year the subsidiay has received a grant from the government of $600,000 for the purpose of marketing the program in Vietname overt the next two years. The only conditions attached to the grant relate to reporting obligation.
It has been determined that both the university and the subsidiary are reporting entities.
The issue on which advice is sought relates to the correct accounting treatment for the $600,000 grant:
(a) How should the subsidiary treat the grant in its financial report?
(b) If the grant was paid directly to the university for the purpose of use nu subsidiary, would the treatment of the grant by the university be different to the outlined in a) above?
This unit has two primary functions:
i. to provide education services to international students by providing English language tuition to students coming to Australia to further their study.
ii. the unit also has a significant subsidiary which provides education services to full fee paying students in Vietnam. This subsidiary needs to earn sufficient revenue to cover its own costs and any profit needs to be returned to the university.
In the current year the subsidiay has received a grant from the government of $600,000 for the purpose of marketing the program in Vietname overt the next two years. The only conditions attached to the grant relate to reporting obligation.
It has been determined that both the university and the subsidiary are reporting entities.
The issue on which advice is sought relates to the correct accounting treatment for the $600,000 grant:
(a) How should the subsidiary treat the grant in its financial report?
(b) If the grant was paid directly to the university for the purpose of use nu subsidiary, would the treatment of the grant by the university be different to the outlined in a) above?