Accounting estimates and judgements

The following accounting judgements are considered critical in applying the University’s accounting policies:

Partnership Income Recognition The University applies judgment in determining the agency/principal relationship with its franchise partners. Where the University is exposed to the majority of the benefits and risks of the relationship the University considers itself to be acting as a principal and the student income is recognised on a gross basis. Where the University is not exposed to the majority of the benefits and risks of the relationship the University considers itself to be acting as an agent and the income is recognised on a net basis.

The primary factors that the University considers indicative when determining whether or not it is exposed to the majority of the benefits and risks of the relationship are:

1. A direct relationship with the Student

Loan Company for the tuition fees of the students.

2. A direct relationship with the Office for Students for the teaching grants of the students.

3. A direct relationship with HESA for the students number return for those students.

4. The University having full contractual responsibility for teaching out the students if the partner fails.

5. The University bearing the risk of investment in the development of the course programmes which it designs as well as the inventory risk.

6. The University controlling the price of all courses charged to students.

Accounting for Chiltern Student Village The University is a third member of Chiltern Student Villages Ltd (CSV), a charitable company whose objects include the advancement of education through the provision of housing and associated services to students of the University and other educational institutions.

During 2016-17 the University completed the sale of its student accommodation to CSV as part of a wider refinancing arrangement with an alternative finance provider. This resulted in the University committing to an operating rental lease of the buildings on the site from Aviva as part of the transaction for a period of 30 years.

In the arrangements that exist above management have considered two key items in reviewing the application of appropriate accounting treatment:

1. Whether or not the University has control over CSV – it is concluded that management has no control over

CSV as it is obliged to act within its objects which are not exclusively for the benefit of students of the

University, Charity’s trustees are bound by charity law to act within the objects of CSV regardless of who appoints them. The University does have the right to remove the bank from CSV; however doing so would cause a significantly adverse commercial impact on the entity that this would never take place in practice.

2. Whether the arrangement with Aviva is an operating or finance lease – it has been concluded by management that the arrangement is an operating lease because at the end of the arrangement there is no beneficial financial arrangements with regards to continuing with the lease or the purchase of the asset. The life of the asset is 53 years as opposed to the length of the lease which is 30 years and the NPV of the minimum lease payments is significantly lower than the deemed value of the asset.

Accounting for bad debt provisions The University has bad debt provisions in respect of student, partnership, commercial and research debts. The bad debt provision is calculated on a specific basis according to where the student or student sponsor is in the debt collection cycle with a general provision calculated for remaining debtors with regards to the ageing of the debt to provide for balances which may prove irrecoverable due to the economic effects of Covid-19 on debtors. The specific provision takes into consideration the debtors engagement with the University and if their account has been placed with an external collector, if it is awaiting legal action and if there is an agreed payment plan in place.

Debt deemed to be uncollectable during the year is written off to the Consolidated Statement of Income and Expenditure.

Estimates for the accounting for employee benefits FRS 102 requires that certain assumptions are made in order to determine the amount to be recorded for retirement benefit obligations and pension plan assets for certain of the University’s defined benefit plans. These are mainly actuarial assumptions such as discount rate, mortality rates and expected inflation rates. In determining the appropriate assumptions, the University has regard to various external sources, including as provided by actuaries.

Differences arising from actual experience or future changes in assumptions will be reflected in future years. The key assumptions made for 2022 are included in note 26.