FRS102. Tanya Hitchen & Izzy Clayton Contact:

Transcription

1 FRS102 Tanya Hitchen & Izzy Clayton Contact:

2 FRS102 What is FRS102? Impact on: Income Expenditure Other Comprehensive Income Balance Sheet Timeline What do I need to do?

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

4 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

5 FRS102 - Income 3 Types of income under FRS102, impact on revenue recognition: Exchange Transactions Non-exchange Transactions Government Grants

6 FRS102 - Income Exchange Transactions Sale of goods and services in return for consideration Tuition Fees Commercial Research Consultancy and some Other Income Income for delivery of services recognised on % completion (can use e.g. time or cost allocation) No change to current accounting policies

7 FRS102 - Income Non-Exchange Transactions & Government Grants Funder does not receive equal value exchange for cash Includes both revenue and capital grants DCG reserve no longer exists New Accounting Policy: Income recognised in line with performance conditions Matching concept no longer exists Timing differences between income and expenditure

8 FRS102 - Income 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. Extract from FRS102

9 FRS102 - Income Research Grants If funder receives benefit = exchange transaction = no change If funder does not receive benefit = non-exchange transaction = new rules Most research grant funding is conditional on: Delivery of specified research Incurring pre-determined expenditure Therefore performance condition is delivery of a particular level of service, measured by proportion of costs incurred. No impact despite different accounting policy.

10 FRS102 - Income Research Grants If terms and conditions do not include performance conditions (e.g. donations), income must be recognised on entitlement. Mis-match between income and expenditure. Only a small proportion of research income affected in 2013/14 impact would have been 150k. Use SUBJ1 D03 for Research Income without Performance Conditions usually D01.

11 FRS102 - Income Other Grants Revenue grants to be recognised as income upon completing any performance conditions. If no performance conditions, recognise upon entitlement. Capital grants received included as income (previously in deferred capital grant reserve). Use performance conditions accounting rules.

12 FRS102 - Income Endowments & Donations Currently only unrestricted donations recognised as income. Endowments received taken to endowment reserve via STRGL FRS102 all new endowments and donations will be recognised as income upon entitlement.

13 FRS102 - Income Service Concessions: Impact on Income and Expenditure for value of student rents (UPP arrangement 2013/14 13m) Increase in assets and liabilities as we recognise the one year liability for any nominations made (UPP arrangement 2013/14 13m) Consideration to be made when setting up any major new contracts

14 FRS102 - Income Financial Statements Presentation Original Income 2013/14 000s 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 Restated 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

15 FRS102 - Expenditure Main areas of change to expenditure under FRS102: Service concessions as previously noted Pension changes Annual leave accrual Component accounting

16 FRS102 - Expenditure Pension schemes: Changes for both USS and ERBS USS - Now we need to account for deficit recovery plan Large impact on Balance Sheet pension liability Impacts staffing costs Awaiting the latest USS valuation in order to calculate the recovery plan Volatile based on triennial valuations

17 FRS102 - Expenditure Pension schemes: ERBS Difference in the calculation of the finance charges Estimated 2m additional operating cost for 2013/14 Corresponding credit to the actuarial movement below the line

18 FRS102 - Expenditure Annual leave accrual Need to account for any unused annual leave at year-end as this is essentially a liability of the University Results in increased cost in first year and then variable year-on-year Component accounting Splitting out assets into smaller components Impact on depreciation with buildings broken into smaller components

19 FRS102 - Expenditure Financial statements presentation Expenditure 2013/14 000s 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

20 FRS102 Other Comprehensive Income Inclusion of certain transactions that used to only be recognised in reserves. Movements in market value of investments Actuarial gains / losses on pension schemes Changes in the fair value of financial instruments Volatility of other comprehensive income Considering appropriate performance measures for the sector

21 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 40,166

22 FRS102 Balance Sheet Per the 2013/14 Financial Statements Restated Under FRS FIXED ASSETS 000s Non-Current Assets 000s 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, ,457 Investments 29,161 Investment in joint venture 3,048 ENDOWMENT ASSETS 30,265 Total Non-Current assets 715,978 CURRENT ASSETS Current assets Stocks 437 Stock 437 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 Investments 30,276 Investments 30,276 Cash and cash equivalents 77,955 Cash at bank and in hand 76,693 Total current assets 156, ,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

23 FRS102 Balance Sheet Per the 2013/14 Financial Statements 2014 Restated Under FRS CREDITORS: AMOUNTS FALLING DUE 000s Creditors: amounts falling due after more than one year 000s AFTER MORE THAN ONE YEAR -219,140 Reimbursable to the funding council 656 Bank loans and external borrowing 199,088 LESS: PROVISION FOR LIABILITIES 0 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 48,640 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 30,265 Income and expenditure reserve (excl Pension Reserve) 89,291 Income and expenditure reserve - restricted reserve - Pension Reserve -26,551 Unrestricted Reserves - Income and expenditure reserve (incl Pension Reserve) 62,740 Income and expenditure reserve - unrestricted 156,774 Revaluation reserve 302,936 Revaluation reserve 302, ,675 Total Restricted and Unrestricted Reserves 489,975 TOTAL FUNDS 540,231 Total Reserves 489,975

24 FRS102 Conversion timeline March 2013 March July July July 2016 FRS 102 issued (revised Aug 2014 Statement of Recommended Practice approved by the FRC Transition date Comparative Balance Sheet First reporting date

25 FRS102 - Timeline Date Task Status 20 May Council FRS102 Impact Paper & KPMG assurance report Sent 12 June Deadline to produce accounting policy papers etc for Audit Committee Restatement of opening balance sheet Uni & Group Reserves reconciliation / explanation Uni & Group Sent 2 July Workshop to HoFs and Finance Teams 7 July Workshop to HoFs and Finance Teams 31 July Document of changes to coding for colleges and services & timetable for future requirements July Council to approve 2015/16 Accounting Policies 1 Aug Implement new coding for FRS Sept Draft Financial Statements under current UK GAAP Oct-Dec Restate 2014/15 Financial Statements under FRS102 Jan 16 KPMG audit of restated 2014/15 Feb 16 Restatement of 2015/16 Budgets in time for 2016/17 budget setting Sept 16 Produce 2015/16 Financial Statements under FRS102 Timetable for budgeting changes still to be agreed

26 FRS102 What do I need to do? Corporate Accounting to circulate details of code changes. Colleges / services need to consider whether there is any income with/without performance conditions that will need to be restated for 2014/15. Process to identify non-exchange transactions with / without performance conditions on an ongoing basis. Consider whether there will be an impact on business plans at college / service level. Be prepared to produce next business plan under FRS102.

27 Any questions? Further Details: