For the year ended 31 July 2021
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.
1. Accounting convention
Basis of preparation
The accounts have been prepared in accordance with the FRS 102, Statement of Recommended Practice: Accounting for Higher Education Institutions (2019), applicable accounting standards and Companies Act, where appropriate.
The University is a public benefit entity and therefore has applied the relevant public benefit requirements of FRS102. Going concern The Group and parent University’s activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report. The Strategic Report also describes the financial position of the Institution, its cash flows, liquidity position and borrowing facilities. The financial statements have been prepared on a going concern basis which the Governing Council consider to be appropriate for the following reasons.
The Governing Council have prepared cash flow forecasts for a period of at least 12 months from the date of approval of these financial statements. After reviewing these forecasts the Governing Council is of the opinion that, taking account of severe but plausible downsides, including a shortfall in student recruitment, increased costs or ongoing impact of Covid-19, the Group and parent University will have sufficient funds to meet their liabilities as they fall due over the period of 12 months from the date of approval of the financial statements (the going concern assessment period).
Consequently, the Governing Council is confident that the Group and parent University will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. Basis of consolidation Consolidated accounts have been prepared to incorporate the results of the University and its subsidiaries as listed in note 14 to the accounts. The financial results of the University of Derby Students’ Union are not consolidated, as the Union is an independently constituted body.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.
2. Tangible fixed assets
It is the policy of the University to revalue its land and buildings every three years. The valuations are carried out by Gerald Eve LLP, the last full valuation was carried out at 31 July 2019, with a desktop review at 31 July 2021. Land and buildings are carried at cost, or valuation as at 31 July 2021. All other tangible fixed assets are stated at cost. Items of equipment costing less than £10,000 are written off in the year of purchase. Land is assumed to have an indefinite useful economic life and is therefore not depreciated.
Depreciation for all other assets is provided to write off the cost or valuation of fixed assets, over their estimated useful lives on a straight-line basis, at the following annual rates:
- Buildings Between 1.25% and 10%
- Leasehold properties Over the term of the lease
- Plant and equipment Between 10% and 33.3%
- IT infrastructure and computer equipment Between 20% and 33.3%
- Motor vehicles 25%
As residential buildings are depreciated over a period of more than 50 years, an annual impairment review is carried out to ensure the adequacy of the carrying value. All tangible fixed assets, which are over 10 years old, no longer in use and have been fully written down, are removed from the tangible fixed assets schedules.
Assets in the course of construction are treated as capital work in progress in tangible fixed assets until they are commissioned for use. They are then capitalised and depreciated from the date of initial utilisation. Assets that are anticipated to be sold within 12 months of the balance sheet date are transferred from tangible fixed assets to assets held for sale under current assets. A sale is only recognised upon completion of the sales contract.
3. Intangible fixed assets
Intangible assets are non-monetary assets that are identifiable but have no physical appearance, these consist of goodwill and other intangibles.
Goodwill arises on consolidation and is based on the difference between the fair value of the consideration given for the undertaking acquired and the fair value of its separable net assets at the date of acquisition.
Goodwill is amortised over its estimated economic life of 25 years on a straight-line basis. A full year of amortisation is taken in the year of acquisition. Where there is an impairment in the carrying value of goodwill, the loss is incurred in the results of the period.
Negative goodwill relating to non-monetary assets is released to the Statement of Comprehensive Income and Expenditure as those assets are recovered through depreciation or sale. Negative goodwill relating to monetary assets is released to the Statement of Comprehensive Income and Expenditure in the period the monetary assets are realised.
Intangible assets other than goodwill are recognised only if it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably.
As per IFRS 102 the probability recognition criteria is always considered satisfied for intangible assets that are separately acquired. Expenditure on internally generated intangible assets related to research or similar activities is recognised as an expense in the period it is incurred.
Where expenditure can be distinguished between research and development phases, the expenditure related to development activities is capitalised subject to meeting the remaining recognition criteria of internally generated intangible assets. Intangible assets are initially measured at cost.
Subsequent measurement is at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are amortised on a straight-line basis over their useful economic lives, which are reviewed at each reporting date. At the balance sheet date the only class of intangible asset held by the Group is computer software, which is depreciated at an annual rate between 20% and 33.3%.
4. Leased assets
Where the Group, acting as a lessee, enters into financing arrangements that transfer substantially all the risks and rewards incidental to ownership, the leases are treated as being finance leases. These assets are treated as if they had been purchased outright and the corresponding liability to the leasing company is included as an obligation under finance leases. Depreciation on leased assets is charged to income and expenditure account over the economic life of the asset.
The principal repayment is deducted from the lease obligation. All other leases are ‘operating leases’ and the annual rentals payable are charged to the Statement of Comprehensive Income and Expenditure, with no amounts included in the Statement of Financial Position for the asset in use. Where the Group acts as a lessor for assets that are held for rental under operating leases, these assets are recorded as fixed assets. The rental income from operating leases is recognised on a straight-line basis over the period of the lease, irrespective of when such payments are made.
All stocks are stated at the lower of cost and net realisable value.
All other consumables are written off to the Statement of Comprehensive Income and Expenditure account in the year of purchase.
6. Revaluation reserve
The revaluation reserve was established on 1st April 1989 at an amount equivalent to the deemed transfer value of tangible assets, less loans outstanding in respect of those assets, to which the University acquired unrestricted title on that date. Any subsequent net surpluses or deficits arising from revaluations of assets are accounted for within the revaluation reserve, until the carrying amount reaches its depreciated historical cost. An amount corresponding to the depreciation charge on the revalued tangible assets is transferred annually from revaluation reserve to the income and expenditure account. Details of the Group’s valuation policy are contained in accounting principal 2.
Listed investments are held at fair value with movements recognised in the Statement of Comprehensive Income and Expenditure.
8. Retirement benefits
Retirement benefits to employees of the University are provided by the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). It is not possible to separately identify the assets and liabilities of the TPS scheme which are attributable to the University due to the mutual nature of the scheme. Therefore, the University accounts for the scheme as if it were a defined contribution scheme.
Contributions to the TPS scheme are charged to the Statement of Comprehensive Income and Expenditure account so as to spread the cost of pensions over employees’ working lives with the University in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll. The contributions are determined by qualified actuaries on the basis of triennial valuations using a prospective benefit method.
The Group’s share of assets and liabilities within the LGPS scheme can be separately identified and therefore the LGPS scheme is accounted as a defined benefit scheme, which is externally funded.
Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.
The Company determines the net interest expense / (income) on the net defined benefit liability (asset) for the period by applying the discount rate as determined at the beginning of the annual period to the net defined benefit liability / (asset) taking account of changes arising as a result of contributions and benefit payments. The discount rate is the yield at the balance sheet date on AA credit rated bonds denominated in the currency of, and having maturity dates approximating to the terms of the Company’s obligations. A valuation is performed annually by a qualified actuary using the projected unit credit method.
The Company recognises net defined benefit plan assets to the extent that it is able to recover the surplus either through reduced contributions in the future or through refunds from the plan. Changes in the net defined benefit liability arising from employee service rendered during the period, net interest on net defined benefit liability, and the cost of plan introductions, benefit changes, curtailments and settlements during the period are recognised in the Statement of Comprehensive Income and Expenditure. Remeasurement of the net defined benefit liability/asset is recognised in other comprehensive income in the period in which it occurs. Termination benefits Termination benefits are recognised as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Company has made an offer of voluntary redundancy, it is probably that the offer will be accepted, and the number of acceptances can be estimated reliably.
If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.
Corporation tax The University is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2011 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Corporation Tax Act 2010 and the Finance Act 2010, to the extent that such income or gains are applied exclusively to charitable purposes. Value Added Tax The University’s income is exempt from Value Added Tax (VAT) except as regards its commercial undertakings and certain consultancy activities, which are at standard rate. Irrecoverable input VAT is included in the relevant expenditure categories.
Subsidiary companies The University’s trading subsidiary companies, with the exception of Derbyshire Student Residences Limited and University of Derby Theatre Limited (companies limited by guarantee and having the same taxation status as the University), are subject to Corporation Tax and VAT in the same way as any commercial organisation.
10. Research and development
It is the University’s policy to write off all research and development costs in the year in which they are incurred.
11. Foreign currency
Transactions undertaken in foreign currency are translated at the exchange rate prevailing at the time. Any balances held in foreign currency at the year-end are translated at the exchange rate in operation at that date.
Cash includes cash in hand, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash that are subject to an insignificant risk of change in value.
13. Recognition of income
Recurrent grants from the Funding Councils are recognised in the year in which they are receivable. Non-recurrent grants from the Government are recognised in the year in which they are receivable. Where the grant terms require the grant to be matched to specific expenditure the income is recognised to the extent of the equivalent expenditure incurred during the year. Government research grants are recognised within the Consolidated Statement of Comprehensive Income and Expenditure over the periods in which the University recognises the related costs for which the grant is intended to compensate. Where part of a Government grant is deferred, it is recognised as deferred income within creditors and allocated between credits due within one year and due after more than one year as appropriate. Other revenue grants and donations from non-government sources, including research grants from non-government sources, are recognised within the Statement of Comprehensive Income and Expenditure when the University is entitled to the income and performance related conditions have been met.
Income received in advance of performance related conditions being met is deferred on the Statement of Financial Position and released to the Statement of Comprehensive Income and Expenditure in line with such conditions being met. Tuition fees represent all fees chargeable to students, or their sponsors, attributable to the period in which the students are studying. Any fee income received relating to modules taught in future financial years is treated as deferred income at the balance sheet date.
All fee income is shown net of any discounts or amounts waived by the University. Income from research grants, contracts and other services rendered is included to the extent of the equivalent expenditure incurred during the year and any related contributions towards overhead costs. All income from short-term deposits is credited to the Statement of Comprehensive Income and Expenditure in the year in which it is earned. 30 University of Derby
The University provides bursaries to students from its own revenue funds. These bursaries are shown in the Statement of Comprehensive Income and Expenditure gross, as expenditure, and not deducted from income. The University also distributes bursaries on behalf of other organisations. The University acts only as agent and has no interest in these funds. As such, these transactions are not recognised in the Statement of Comprehensive Income and Expenditure, but are set out in note 24 in the accounts.
15. Accounting for non-exchange transactions/donations and endowments
Non-exchange transactions without performance related conditions are donations and endowments. Donations and endowments with donor imposed restrictions are recognised within the Statement of Comprehensive Income and Expenditure when the University is entitled to the income. Income is retained within the restricted reserve until such time that it is utilised in line with such restrictions at which point the income is released to general reserves through a reserve transfer. Investment income and financial appreciation in the value of endowments is recorded in income in the year in which it arises and as either restricted or unrestricted income according to the restrictions applied to the individual endowment fund. Donations and endowments with restrictions are classified as restricted reserves with additional disclosure provided within the notes to the accounts.
There are four main types of donations and endowments with restrictions: Restricted donations - the donor has specified that the donation must be used for a particular objective. Unrestricted permanent endowments - the donor has specified that the fund is to be permanently invested to generate an income stream for the general benefit of the University. Restricted expendable endowments - the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and the University can convert the donated sum into income. Restricted permanent endowments - the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective. Donations with no restrictions are recorded within the Statement of Comprehensive Income and Expenditure when the University is entitled to the income.
Capital Government grants are recognised within the Statement of Comprehensive Income and Expenditure over the same estimated useful life that is used to determine the depreciation charge associated with the tangible fixed asset. Where part of a Government grant is deferred it is recognised as deferred income within creditors and allocated between credits due within one year and due after more than one year as appropriate. Other capital grants and donations from non-government sources are recognised within the Statement of Comprehensive Income and Expenditure when the University is entitled to the income and performance related conditions have been met. Income received in advance of performance related conditions being met is deferred on the Statement of Financial Position and released to the Statement of Comprehensive Income and Expenditure in line with such conditions being met.
The University recognises provisions when it has a legal or constructive obligation as a result of past events where it is probable that a transfer of economic benefit will occur and a reliable estimate can be made of the amount of obligation.
Enhanced Pensions The actual cost of any enhanced ongoing pension to former members of staff is paid by the University annually. An estimate of the expected future cost of any enhancement to the ongoing pension of a former member of staff is charged in full to the Statement of Comprehensive Income and Expenditure in the year that the member of staff retires. In subsequent years a charge (or credit) is made to provisions in the Statement of Financial Position to reflect any change in the current estimate of the value of the provision.
17. Employee benefits
Short-term employment benefits such as salaries and compensated absences are recognised as an expense in the year in which the employee renders service to the University. Any unused benefits are accrued and measured as the additional amount the University expects to pay as a result of the unused entitlement.
Reserves are allocated between restricted and unrestricted reserves. Restricted endowment reserves include balances which, through endowment to the University, are held as a permanently restricted fund as the University must hold the fund to perpetuity. Other restricted reserves include balances through which the donor has designated a specific purpose and therefore the University is restricted in the use of these funds.
19. Financial instruments
All loans, investments and short-term deposits held by the Group are classified as basic financial instruments in accordance with FRS102. These instruments are initially recorded at the transaction price less any transaction costs (historical cost). FRS 102 requires that basic financial instruments are subsequently measured at amortised cost; however, the University has calculated that the difference between the historical cost and amortised cost basis is not material and so these financial instruments are stated on the Statement of Financial Position at historical cost. Loans and investments that are payable or receivable within one year are not discounted.
Annual Report 2021