FRS102 – Donations & Endowments Tanya Hitchen Contact: financialreporting@exeter.ac.uk

FRS102  What is FRS102? Impact on: Restated Financial Statements Donations Endowments Investment returns Restated Financial Statements What do I need to do?

What is FRS102? Change in UK Accounting Standards Driven by harmonisation with International Accounting Standards  FRS102 is a reduced version of full IFRS 1st year of FRS102 accounts is 2015/16 BUT Need to restate 2014/15 financial statements Restate opening balance sheet as at 1 August 2014

What is FRS102? What have we done so far? FE/HE SORP – applying FRS102 to the HE sector Impact of FRS102 understood by Audit Committee and Council Accounting policy choices approved by Audit Committee and Council Opening balance sheet restated and approved by Auditors Template accounts created Some APTOS coding changes Communication & Training

FRS102 - Donations 3 Types of donation under FRS102: Donation with no restrictions Donation with restrictions Donation with performance conditions Note that under current GAAP, donations with restrictions and/or performance conditions are treated as expendable endowments.

FRS102 - Donations Performance Condition: A condition that requires the performance of a particular level of service or units of output to be delivered, with payment of, or entitlement to, the resources conditional on that performance. Restriction: A requirement that limits or directs the purposes for which a resource may be used that does not meet the definition of a performance condition. Extract from FRS102

FRS102 - Donations Donation with no restrictions Recognise donation as income upon entitlement. Entitlement = receipt for donations, or grant of probate for legacies Monies held in general reserves – no ring-fenced fund Expenditure recognised as incurred Mismatch between income & expenditure impacts surplus/deficit

FRS102 - Donations Donation with restriction Use of the funds is specified. No specific level of service or units of output (e.g. teaching hours) – currently treated as expendable endowment Recognise donation as income upon entitlement. Monies held in restricted reserves Expenditure recognised as incurred Mismatch between income & expenditure impacts surplus/deficit

FRS102 - Donations Donation with Performance Conditions Specified level of service or units of output (e.g. teaching hours), and no intention of donor to set up an endowment. Expected to be rare. Recognise donation as income upon meeting performance conditions. Monies held in restricted reserves Expenditure recognised as incurred Less mismatch between income & expenditure impacts surplus/deficit

FRS102 - Endowments Types of Endowment Fund Expendable Endowment Permanent Endowment - Restricted Permanent Endowment – Unrestricted Same definitions as current rules, but change in accounting.

FRS102 - Endowments Expendable Endowments Funds donated with specific intention to create an endowment fund, or Funds donated with a specific restriction so large in relation to the area of spend to which it relates that it will need to be retained over more than a short period of time. The SORP considers that a timeframe of less that 2 years is unlikely to create an expendable endowment.

FRS102 - Endowments Expendable Endowments New endowments received recognised as income upon entitlement Note currently new endowments are taken to endowment reserves via the STRGL Fund held in endowment reserves Expenditure recognised as incurred No accounting adjustment to net I&E/SoCI to nil Mismatch between income and expenditure – budgeting & forecasting

FRS102 - Endowments Expendable Endowments UoE receive a £100k donation. This is spent over a 4 year timescale: Year 1 Year 2 Year 3 Year 4 Income 100,000 Expenditure (26,000) Investment Gain 3,000 (1,000) 2,000 Surplus/ (Deficit) 77,000 (27,000) (24,000)

FRS102 - Endowments Permanent Endowment - Restricted Donor stipulation that the capital element of the endowment must be held in perpetuity. Specific restriction on use of endowment. Accounting as per Expendable Endowment Total Return rules still apply re how much can be withdrawn from funds each year.

FRS102 - Endowments Permanent Endowment - Unrestricted Donor stipulation that the capital element of the endowment must be held in perpetuity. No restriction on use of endowment. Accounting as per Expendable Endowment Total Return rules still apply re how much can be withdrawn from funds each year.

FRS102 - Investments Investment Portfolios Investment income (interest and dividends) recognised as income Market value gains/losses included within surplus (previously in STRGL) Endowment assets category no longer on the Balance Sheet. Now split between cash and investments Endowment reserves details total endowment funds

FRS102 - Income Financial Statements Presentation Original Restated Funding Body Grants 47,497 Tuition Fees 150,623 Research Income 60,071 Other Income 62,279 Investment Income 3,350 Total incl JVs 323,820 Less share of JVs -19,360 Total Income 304,460 Income 2013/14 £000s Tuition Fees 150,623 Funding Body Grants 44,677 Research Income 57,663 Other Income 54,703 Investment Income 3,350 Total before G&D 311,017 Donations/Endowments 1,294 Other grant income 7,278 Total Income 319,589

FRS102 - Expenditure Financial statements presentation Staff costs 168,465 Other operating expenses 108,750 Depreciation 21,944 Interest & other finance costs 7,750 Total Expenditure 306,909 Expenditure 2013/14 £000s Staff costs 164,167 Fundamental restructuring costs - Other operating expenses 110,725 Depreciation 37,215 Interest & other finance costs 8,621 Total Expenditure 320,728 No change re expenditure from endowment funds

FRS102 – Other Comprehensive Income Statement of Comprehensive Income £’000s Total income 319,589 Total expenditure 320,728 Surplus/deficit before other gains/losses and share of surplus/deficit in joint ventures associates (1,140) Gain/(loss) on investments 2,970 Share of operating surplus/ (deficit) in joint venture(s) 499 Surplus / (deficit) for the year 2,329 Unrealised surplus on revaluation of land and buildings 45,104 Actuarial (loss)/gain in respect of pension schemes (7,367) Change in fair value of hedged financial instrument(s) 100 Total comprehensive income for the year 40,166 Total comprehensive income for the year comprises: Endowment comprehensive income for the year 1,118 Restricted comprehensive income for the year (1,562) Unrestricted comprehensive income for the year 40,610

FRS102 – Balance Sheet Per the 2013/14 Financial Statements Restated Under FRS102 2014 FIXED ASSETS £000s Non-Current Assets Tangible assets 663,079 Intangible assets and goodwill 3,391 Investment assets 7,330 Tangible fixed assets 673,207 Investment assets - Joint ventures 3,048 Heritage assets 7,171 673,457 Investments 29,161 Investment in joint venture ENDOWMENT ASSETS 30,265 Total Non-Current assets 715,978 CURRENT ASSETS Current assets Stocks 437 Stock Debtors - Amounts falling due within one year 31,155 Trade and other receivables 47,614 Debtors - Amounts falling due after more than one year 16,459 30,276 Cash and cash equivalents 77,955 Cash at bank and in hand 76,693 Total current assets 156,283 155,020 Creditors - amounts falling due within one year CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR -72,819 Reimbursable to funding council 571 Bank loans and external borrowing 3,823 Obligations under finance leases 13,652 Other creditors 69,760 Total creditors (amounts falling due within one year) 87,805 NET CURRENT ASSETS 82,201 Net current (liabilities) / assets 68,477 TOTAL ASSETS LESS CURRENT LIABILITIES 785,923 Total assets less current liabilities 784,455

FRS102 – Balance Sheet Per the 2013/14 Financial Statements 2014 Restated Under FRS102 CREDITORS: AMOUNTS FALLING DUE £000s Creditors: amounts falling due after more than one year AFTER MORE THAN ONE YEAR -219,140 Reimbursable to the funding council 656   Bank loans and external borrowing 199,088 LESS: PROVISION FOR LIABILITIES Obligations under Finance leases 19,396 Other 26,700 TOTAL NET ASSETS EXCL. PENSION LIABILITY 566,783 Total creditors (amounts falling due after more than one year) 245,840 NET PENSION LIABILITY -26,551 Provisions Pension provisions 48,640 Other provisions - Total provisions TOTAL NET ASSETS INCL. PENSION LIABILITY 540,232 Total net assets 489,975 DEFERRED CAPITAL GRANTS 144,291 ENDOWMENTS Expendable 9,039 Permanent 21,226 30,265 Restricted Reserves RESERVES Income and expenditure reserve - endowment fund Income and expenditure reserve (excl Pension Reserve) 89,291 Income and expenditure reserve - restricted reserve Pension Reserve Unrestricted Reserves Income and expenditure reserve (incl Pension Reserve) 62,740 Income and expenditure reserve - unrestricted 156,774 Revaluation reserve 302,936 365,675 Total Restricted and Unrestricted Reserves TOTAL FUNDS 540,231 Total Reserves

FRS102 – What do I need to do? New coding required for Types of donation / endowment New donations/endowments within income Gains/losses on investments in SoCI. Process to identify types of donation/endowment within DARO. Restate 2015/16 business plan – to go to October Council. Be prepared to produce next business plan under FRS102.

Any questions? Further Details: Email financialreporting@exeter.ac.uk