annual report/2006 - University of Melbourne

financial statements/
Notes to and forming part of the Financial Statements
Note 31(c) Nature and Purpose of Reserves
Trust Fund Reserve - this reserve reflects net surpluses derived from endowments and bequests which can only be
applied to restricted purposes.
General Reserve - this reserve is maintained to cover a range of general purposes.
Asset Revaluation Reserves - these reserves arise from the revaluation of the specific assets of Land, Buildings,
Other Collections and Works of Art.
Available-for-Sale Revaluation Reserve - this reserve arises from the revaluation of Available-for-Sale Investments.
Special Purpose Reserve - this reserve is maintained to cover a range of special purposes. The major Special Purpose Reserve
is maintained by the University against possible future claims that may arise under the University’s self insurance licence for
WorkCover. This reserve is in addition to the University’s statutory obligation.
Members Capital Reserve - this reserve is maintained by the Melbourne Business School Ltd, a deemed subsidiary,
for the purpose of recording capital donations principally received from the University and other parties who have subscribed,
or are invited to subscribe to the Memorandum of Association of the Company.
Foreign Currency Translation Reserve - this reserve is maintained by UMEE Ltd, a subsidiary, for recording the effect of
foreign currency exchange rate movements at balance dates in respect of its non-hedged holdings of assets and liabilities of
its overseas subsidiaries.
MBS Contributed Equity - represents the Net Fair Value of Assets identified upon acquisition of Mt Eliza Graduate School of
Business and Government Limited as at 5 March 2004.
Note 32 Financial Instruments
32.1 Financial Risk Management Objectives and Policies
The consolidated entity’s principal financial instruments consist mainly of Listed and Unlisted Shares, Unit Trusts, Interest
Bearing Liabilities. The main purpose of these financial instruments is to raise finance to support the Groups activities.
The Group has various other financial instruments such as Accounts Receivable and Accounts Payable which arise directly
from its operations.
(i) Treasury Risk Management
The Finance Committee meets regularly to monitor and evaluate the University’s financial management strategies in the
context of the most recent economic conditions and forecasts.
The Investment Management Committee meets to monitor and advise on the management of the University’s short term
cash management and long term investments.
All borrowings are subject to approval by Council.
(ii) Financial Risks
The main risks the Group is exposed to through its financial instruments are as follows:
(a) Market Risk
The University has a significant investment in marketable securities. This risk is addressed through investing in Fund
Managers with investment policies aimed at diversification.
(b) Foreign Currency Risk
The Group has transactional currency exposures. Such exposure arises from the purchase in currencies other than the
local currency. The Group also has exposure to International Shares as part of its long term investment portfolio.
(c) Liquidity Risk
Liquidity risk is managed by the University’s Finance Committee through the monitoring of current forecasts. The
University has also established a standby bill facility of $10 million to provide short-term cash should the need arise.
(d) Credit Risk
The Group does not have any material credit risk exposure to any single receivable or group of receivables. Receivable
balances are monitored on an ongoing basis to ensure that the exposure to bad debts is not significant.
(e) Cash flow and Interest Rate Risk
The interest rate on the Group’s long term debt obligations is fixed therefore the group is not exposed to any material
interest rate risk.
The University of Melbourne Annual Report 2006
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