Annual Report 2021
Statement of Principal Accounting Policies
1. Basis of Preparation
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 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 and the Financial Reporting Standard 102 (FRS102). The University is a public benefit entity and has applied the relevant public benefit requirements of FRS102.
4. 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.
2. Going Concern Council reviews and approves the 18-month forecast, including detailed cash flow forecast, produced annually in order to be fully satisfied that it can meet its working capital needs from its forecast cash balances. Applications for the 2021/22 academic year have been healthy and the University retains a strong cash position. In addition, the University has a £25m revolving credit facility which has yet to be used and the University has forecasted no need to draw upon it.
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.
As a result of the continuing wider uncertainties due to the ongoing Covid-19 pandemic, the University has deemed it prudent to develop a reverse stress test scenario which assesses the impact of a reduction in income against an increase in forecasted expenditure over the next two years. This models any impact on the University’s cash position as well as testing the headroom on its financial covenants. The model shows that a significant financial impact against the Council-approved financial forecasts must occur before any covenants are breached and, as such, the risk of any such occurrence is deemed to be remote.
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 Such transactions take place where income is received without approximately equal value being given in exchange and are accounted for using the performance model. • Government grants (including funding council teaching and other grants, research grants from government sources and capital grants), grants from non-government sources (including research grants from non-government sources and capital grants) and donations are recognised within the Statement of Comprehensive Income and Expenditure when the University is entitled to the income and any performance related conditions have been met. Income received in advance of performance related conditions is deferred on the balance sheet and released to the Statement of Comprehensive Income and Expenditure as such conditions are met.
Financial performance in 2020/21 was strong and the University is confident that it will be able to meet all of its future financial obligations and operate within its financial covenants for the period to 31 July 2023. As a result, these financial statements have been prepared on a going concern basis.
3. Basis of Consolidation The financial statements consolidate the financial statements of the University and its subsidiary undertakings for the financial year to 31 July.
• Where grants or donations have no performance related conditions but have a restriction regarding how they may be spent, the income is retained within the restricted reserve until such time that it is utilised in line with the restrictions, at which point the income is released to general reserves through a reserve transfer.
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.
• Endowments are donations where the donor has specified either that the gift must be invested and only the income 59
