FRS102 Capital processes and central income recognition Jill Roberts Financial Controller

FRS102 Key SORP impact No deferred capital grants Computer software to be recorded separately and as such new I&E codes (9047 cost & 9048 un-commissioned) have been set up Heritage assets to be recorded separately and as such a new I&E code has been set up

FRS102 New processes - headlines Capital equipment threshold increase from £25k to £50k Introduction of new un-commissioned/under construction equipment and land & buildings I&E codes and their implementation Faculties/areas responsible for understanding and maintaining control of assets under construction Assets only added to the asset register when they are commissioned Income recognition – ALL funded equipment must be on R% or P% code New process for equipment with enabling works >£100k physical verifications undertaken by faculties

FRS102 Overview of capital processes Approval processes Requisition Order Goods received GRNI accrual No accrual at month end Invoice Supplier Invoice matched Approval Invoice posts Dr Asset cost (uncommissioned) £x Cr Purchase ledger creditors (£x) Asset brought into use Dr Asset cost (Commissioned) £x Cr Asset cost (Uncommissioned) (£x) Central process Oracle process Local process Journal MUST: Be on correct SOF Quote order number in the line description State commissioning date

FRS102 Overview of capital processes Asset brought into use Dr Asset cost (Commissioned) £x Cr Asset cost (Uncommissioned) (£x) Central process Oracle process Local process Journal MUST: Be on correct SOF Quote order number in the line description State commissioning date Income recognition journal If SOF is 10 (HEFCE) Dr relevant HEFCE income code Cr 1026 (Hefce capital income) If code is an R code Dr 1207 (relevant SOF) Cr 1206 (relevant SOF) If P code: Dr 1227 (relevant SOF) Cr 1226 (relevant SOF) Asset added to register and depreciation charged (month following commissioning) Data cleansing : from 1/8/2015 all new funded (or under construction) equipment assets must be on R or P codes. Any unfunded elements must be held on other codes

FRS102 Fixed Asset IE Codes Current ListNew List – from 1/4/2015

FRS102 Capital prepayments In some cases large asset costs are prepaid Specific situations in which this can happen, as outlines by the Financial Procedures The University does not normally make payments in advance for goods or services. However, particular circumstances may require such payments. Examples include: Complex items of equipment that have to be individually made or adapted, where the supplier requires payment in advance; or The terms and conditions imposed by a funding body require expenditure by a particular date, but delivery is not possible within that deadline. Payment in advance of delivery shall only take place if all the following conditions are met: 1. The Head of School and the Head of Faculty Finance have both approved the payment in advance; and 2. All University and EU requirements on competitive tendering have been met; and 3. A requisition and purchase order have been authorised and issued For all payments in advance of delivery exceeding £25,000 (excluding VAT), in addition to the rules above: A suitable guarantee must be obtained, ensuring that the University will be protected if the supplier fails to deliver on the contract or goes out of business; and The Faculty Dean and the Director of Finance (who may delegate this role to the Head of Procurement) must approve the arrangements in advance.

FRS102 Oracle treatment Business approval as normal Raise requisition, order etc. Invoice received Discuss with HoSF and seek approval, bank guarantees, DoF signature etc. to prepay the asset. Receipt the goods HoSF creates prepayment (auto-reversing) Review each month to see if prepayment is still required

FRS102 Prepayments Approval processes Requisition Order ‘‘Goods received’’ on Oracle Invoice Supplier Invoice matched Approval Invoice posts Dr Asset cost (uncommissioned) £x Cr Purchase ledger creditors (£x) Dr Asset cost (Commissioned) £x Cr Asset cost (uncommissioned) (£x) Central process Oracle process Local process Authorisation for prepayment of capital equipment Goods received (off system notification) Asset brought into use Create prepayment Dr Prepayment (9367)£x Cr Asset cost (Uncommissioned) (£x) Auto reverses Repeat monthly as required, until goods received Monthly Review - stop when goods actually received

FRS102 Capitalisation Asset purchased Dr Asset cost (uncommissioned) £x Create income recognition entries (R and P codes) Dr Revenue income e.g. IE 1207 Cr Capital income e.g. IE 1206 Create prepayment if required: Dr Prepayment (9367)£x Cr Asset cost (Uncommissioned) (£x) Auto reverses Asset brought into use Update the fixed asset register Post depreciation monthly Maintain list of uncommissioned assets (prepaid and under construction) to reconcile Dr Asset cost (uncommissioned) £x Cr Asset cost (Commissioned) (£x) Central process Local process Oracle process Journal MUST: Be on correct SOF Quote order number in the line description State commissioning date

FRS102 Enabling works A DB code (Estates revenue), with an Estates approver, is set up for the enabling works and the I&E code used would be 9012 (capital equipment under construction) so that the costs all go to capital equipment from the start. The equipment would then be charged to a faculty activity code and also with the I&E code 9012 (capital equipment under construction) and this would have a faculty approver. The costs would not be input to the register until the asset is commissioned. On commissioning, all of the costs on the DB code would be transferred to the faculty code using I&E 9011 (capital equipment). The costs of the equipment already on the faculty code on I&E 9012 would be transferred to I&E The DB code could be closed and the asset then input to the register.

FRS102 Income recognition Income recognition for capital income takes place when the asset is capitalised (assuming there is a PRC to build the asset) In the month of capitalisation, in most cases for equipment the whole of any external income relating to the asset is recognised in that month In the following months depreciation will be charged with no matched income Income related to buildings will be recognised according to the contract. Speak to the capital team for advice.