Middlesex University


Financial Statements 2015/16


q. Taxation


The University is an exempt charity within the meaning of Part 3 of the Charities Act 2011, and, as such, is a charity within the meaning of Section 506 (1) of the Income and Corporation Taxes Act 1988. It is therefore a charity within the meaning of Paragraph 1 of schedule 6 to the Finance Act 2010 and accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by section 478-488 of the Corporation Tax Act 2010 (CTA 2010) or section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to exclusively charitable purposes.


The University receives no similar exemption in respect of Value Added Tax (VAT). Irrecoverable VAT on inputs is included in the costs of such inputs. Any irrecoverable VAT allocated to fixed assets is included in their cost.


The University’s UK subsidiaries are liable to Corporation Tax and VAT in the same way as any other commercial organisation.


Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are more likely than not to be recovered. Deferred tax assets and liabilities are not discounted.


r. Financial assets


Financial assets, other than investments, are initially measured at transaction price (including transaction costs) and subsequently held at cost, less any impairment.


S. Financial liabilities


Financial liabilities are classified according to the substance of the financial instrument’s contractual obligations, rather than the financial instrument’s legal form. Financial liabilities are initially measured at transaction price (including transaction costs) and subsequently held at amortised cost.


t. Reserves


Reserves are classified as restricted or unrestricted. Restricted endowment reserves include balances which, through endowment to the University, are held as a permanently restricted fund which the University must hold in perpetuity.


Other restricted reserves include balances where the donor has designated a specific purpose and therefore the University is restricted in the use of these funds.


u. Transition to 2015 SORP


The University is preparing its financial statements in accordance with FRS 102 for the first time and consequently has applied the first time adoption requirements. An explanation of how the transition to 2015 SORP has affected the reported financial position, financial performance and cash flows of the consolidated results of the University is provided in note 37.


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Application of first time adoption grants certain exemption from the full requirements of 2015 SORP in the transition period.


The following exemptions have been taken in these financial statements:


— Fair value or revaluation as deemed cost at 31st July 2014, fair value has been used for deemed cost for properties measured at fair value.


— No cash flow statement has been presented for the University.


2. Accounting estimates and judgments


In preparing these financial statements, the board and management have made judgments, estimates and assumptions that affect the application of the University’s accounting policies and the reported assets, liabilities, income and expenditure and the disclosures made in the financial statements. Estimates and judgments are continually evaluated and are based on historical experience and other facts, including expectations of future events that are believed to be reasonable under the circumstances.


Key areas subject to judgment are as follows:


a. Tangible fixed assets (see note 14) A full valuation of the freehold and long leasehold University buildings was carried out on 31 July 2014 by an independent, professionally qualified valuer which provided the fair value as at the transition date to FRS102. As with all property valuations there is an inevitable degree of judgement as the properties are unique and their value can ultimately only be reliably tested in the market itself.


b. Pension enhancements on termination (see note 21) The critical underlying assumptions in relation to the estimate of the pension enhancement obligation such as life expectancy and the discount rate on corporate bonds. Variations in these assumptions have the ability to significantly influence the value of the provision for unfunded liabilities recorded and annual expense.


c. Onerous contract provision (see note 21) Determine whether contracts entered into by the University and Group as lessee are onerous. These decisions depend on an assessment of whether the aggregate cost required to fulfil the contract are higher than the economic benefit to be obtained from it.


The underlying assumptions in relation to the estimate of the present value of the total commitment under the lease such as the annual obligation over the period of the lease and the discount rate to be used.


d. Leases (see note 26)


Determine whether leases entered into by the University and Group either as a lessor or a lessee are operating or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis.


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