Durham University
Statement of Principal Accounting Policies 1. Basis of Preparation
from its forecast cash balances. Accordingly, it continues to adopt the going concern basis in preparing the financial statements.
The financial statements have been prepared under the historical cost convention, other than where land and certain heritage assets were revalued to their fair value at transition to FRS102, with the revalued amount being treated as deemed cost. The financial statements have been prepared in accordance with both the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education (2019 edition) and the Financial Reporting Standard 102 (FRS102). The University is a public benefit entity and has applied the relevant public benefit requirements of FRS102.
2. Basis of Consolidation The financial statements consolidate the financial statements of the University and its subsidiary undertakings for the financial year to 31 July. The consolidated financial statements include the results of student organisations that have elected to opt into a framework enabling them to operate within the organisational and governance structure of the University but do not include those of the student bodies which are separate entities, as the University has no significant control or influence over the policy decisions of those bodies.
There are a number of macroeconomic factors affecting the higher education sector at this time, all of which present a degree of uncertainty and therefore operational and financial risk. The immediate challenges are the impact of the Covid-19 pandemic, the effects of Brexit, unresolved questions over future pension costs and the Review of Post-18 Education and Funding.
The University has investment shareholdings in unquoted companies over which it has no significant influence on policy or strategy decisions. These companies are not consolidated but are accounted for as investments at the lower of cost or net realisable value. The University has taken the exemption permitted under FRS102 to not produce a cash flow statement for the University.
These factors create a degree of uncertainty over the 2020/21 financial outturn however, student admission levels have surpassed pre-Covid targets and fee income is projected to be in line with 2019/20. The Covid-19 pandemic has brought a new liquidity risk to many, as well as a more cautious approach to the shortterm outlook. Our initial response to the pandemic was the introduction of more stringent cost controls. As a precautionary measure and given the underlying uncertainty facing the University these controls remain in place despite the substantial headroom on covenant compliance and healthy cash positions that we forecast over the next twelve months.
3. Recognition of Income Income from the sale of goods or services is credited to the Statement of Comprehensive Income and Expenditure when the goods or services are supplied to the external customers or the terms of the contract have been satisfied. Fee income is stated gross of any expenditure which is not a discount and credited to the Statement of Comprehensive Income and Expenditure over the period in which students are studying. Where the amount of the tuition fee is reduced by a sponsor negotiated discount, income receivable is shown net of the discount. Bursaries and scholarships are accounted for gross as expenditure and not deducted from income.
Given the risks discussed above, we have increased the frequency of our financial modelling, forecasting and reporting, thus giving the Executive and those charged with governance, relevant and timely information upon which to make financial decisions. Our Key Financial Performance Indicators (KFPIs) are the generation of cash from operating activities, compliance with borrowing covenants and staff costs as a percentage of income. We remain confident that all these measures will be maintained within their target ranges. However, should there be a significant deterioration of the financial performance, we remain confident that there are a number of mitigating actions that could be undertaken almost immediately to remedy any downturn. These include but are not limited to suspending the University’s substantial capital investment programme, liquidating our investment positions to quickly increase cash balances and reduce ‘other operating’ and staff costs through further cost cutting and voluntary severance measures if required.
Funds the University receives and disburses as a paying agent on behalf of a funding body are excluded from the income and expenditure of the University where it is exposed to minimal risk or enjoys minimal economic benefit related to the transaction. Investment income and appreciation of endowments is recorded in income in the year in which it arises and as either restricted or unrestricted income according to the terms of the restriction applied to the individual endowment fund.
Non-exchange transactions Financial forecasts, including detailed cash flow forecasts, are prepared for a period of at least twelve months from the balance sheet date of these financial statements and the University is satisfied that it can meet its working capital needs
Such transactions take place where income is received without approximately equal value being given in exchange and are accounted for using the performance model.
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