I am auditing a fund that has a "Distributions Receivable" account in credit balance on the balance sheet, from an unlisted unit trust (related, non-geared trust).
Is this considered as the fund obtaining financial assistance/borrowing? Are there any issues to consider arising from this?
Thank you.
Hi Jason
Yes if a Fund invests in a related non-geared trust it (the trust) must not have any borrowings. (re 13.22C & D of SIS Regulations)
A credit in a receivable account could be treated as a borrowing if it meets the normal concepts of what a borrowing is. If it related to distribution being non materially overpaid in error you should be able to argue that this is not a borrowing.
If you are concerned there may be scope to increase the units held and decrease the liability.
If other members have a view please let the forum know.
Thanks
The Auditors Institute