FRS102 Donations & Endowments Tanya Hitchen Contact: [email protected]

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

FRS102 Donations & Endowments Tanya Hitchen Contact: [email protected] FRS102 What is FRS102? Impact on: 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) (26,000) (26,000) (26,000) Investment Gain 3,000 (1,000) 2,000 0

Surplus/ (Deficit) 77,000 (27,000) (24,000) (26,000) 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 Income 2013/14 Funding Body Grants Tuition Fees Restated

000s 47,497 150,623 Income 2013/14 Tuition Fees 000s 150,623 Funding Body Grants 44,677 Research Income 60,071 Research Income 57,663 Other Income

62,279 Other Income 54,703 Investment Income 3,350 Investment Income 3,350 Total incl JVs 323,820 Total before G&D Less share of JVs -19,360

Donations/Endowments 1,294 Total Income 304,460 Other grant income 7,278 Total Income 311,017 319,589 FRS102 - Expenditure Financial statements presentation Expenditure 2013/14 000s

Expenditure 2013/14 Staff costs 168,465 Staff costs Other operating expenses 108,750 Fundamental restructuring costs Depreciation Interest & other finance costs Total Expenditure 21,944 7,750 306,909 Other operating expenses

Depreciation Interest & other finance costs Total Expenditure No change re expenditure from endowment funds 000s 164,167 110,725 37,215 8,621 320,728 FRS102 Other Comprehensive Income Statement of Comprehensive Income Total income Total expenditure Surplus/deficit before other gains/losses and share of surplus/deficit in joint ventures associates 000s 319,589 320,728 (1,140)

Gain/(loss) on investments Share of operating surplus/ (deficit) in joint venture(s) 2,970 499 Surplus / (deficit) for the year 2,329 Unrealised surplus on revaluation of land and buildings Actuarial (loss)/gain in respect of pension schemes Change in fair value of hedged financial instrument(s) Total comprehensive income for the year 45,104 (7,367) 100 40,166 Total comprehensive income for the year comprises: Endowment comprehensive income for the year Restricted comprehensive income for the year

Unrestricted comprehensive income for the year 1,118 (1,562) 40,610 FRS102 Balance Sheet Per the 2013/14 Financial Statements FIXED ASSETS Tangible assets Investment assets Investment assets - Joint ventures ENDOWMENT ASSETS CURRENT ASSETS Stocks Debtors - Amounts falling due within one year Debtors - Amounts falling due after more than one year Investments Cash at bank and in hand CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES Restated Under FRS102 2014 000s 663,079 7,330 3,048 673,457 30,265 437 31,155 16,459 30,276 76,693 155,020 -72,819 82,201 785,923

Non-Current Assets Intangible assets and goodwill Tangible fixed assets Heritage assets Investments Investment in joint venture Total Non-Current assets 2014 000s 3,391 673,207 7,171 29,161 3,048 715,978 Current assets Stock Trade and other receivables Investments Cash and cash equivalents Total current assets

437 47,614 30,276 77,955 156,283 Creditors - amounts falling due within one year Reimbursable to funding council Bank loans and external borrowing Obligations under finance leases Other creditors Total creditors (amounts falling due within one year) 571 3,823 13,652 69,760 87,805 Net current (liabilities) / assets 68,477

Total assets less current liabilities 784,455 FRS102 Balance Sheet Per the 2013/14 Financial Statements CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR LESS: PROVISION FOR LIABILITIES 2014 000s -219,140 0 TOTAL NET ASSETS EXCL. PENSION LIABILITY 566,783 NET PENSION LIABILITY -26,551 TOTAL NET ASSETS INCL. PENSION LIABILITY

540,232 DEFERRED CAPITAL GRANTS 144,291 ENDOWMENTS Expendable Permanent RESERVES Income and expenditure reserve (excl Pension Reserve) Pension Reserve Income and expenditure reserve (incl Pension Reserve) Revaluation reserve TOTAL FUNDS Restated Under FRS102 Creditors: amounts falling due after more than one year Reimbursable to the funding council Bank loans and external borrowing Obligations under Finance leases Other

Total creditors (amounts falling due after more than one year) Provisions Pension provisions Other provisions Total provisions 2014 000s 656 199,088 19,396 26,700 245,840 48,640 48,640 Total net assets 489,975 89,291 -26,551 62,740

302,936 365,675 Restricted Reserves Income and expenditure reserve - endowment fund Income and expenditure reserve - restricted reserve Unrestricted Reserves Income and expenditure reserve - unrestricted Revaluation reserve Total Restricted and Unrestricted Reserves 30,265 156,774 302,936 489,975 540,231 Total Reserves 489,975 9,039 21,226

30,265 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 [email protected]

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