Financial Statements 2019/2020
MIDDLESEX UNIVERSITY NOTES TO THE ACCOUNTS (continued)
Year Ended 31 July 2020 L. Investments Non-current asset investments
Non-current asset investments, including investments in subsidiaries and jointly controlled entities are held on the Statement of Financial Position at original cost of the investment less a provision for impairment in value where appropriate in the University’s accounts. Impairment is assessed by comparing the carrying value of the investment against either an earnings or asset-based valuation of each entity as applicable to the business concerned.
Current asset investments
Current asset investments comprising of funds held on deposit in money market funds are recognised at cost less impairment. Current asset investments comprising listed equity investments or investment funds are stated at fair value with movements recognised in the surplus or deficit. Interest is accrued on a daily basis.
M. Stock
Stocks of finished goods and work-in-progress are held at the lower of cost and estimated net realisable value, and are measured using an average cost formula.
Where appropriate, a provision is made for obsolete, slow moving or defective items.
N. Cash and cash equivalents
Cash includes cash in hand, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty.
Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value. These include investments held as part of the University’s treasury management activity with a maturity date of three months or less at the date of deposit.
Cash flows comprise increases or decreases in cash and cash equivalents.
O. Provisions, contingent liabilities and contingent assets
Provisions are recognised in the Financial Statements when:
a) the University has a present obligation (legal or constructive) as a result of a past event;
b) it is probable that an outflow of economic benefits will be required to settle the obligation; and
c) a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
A contingent liability arises from a past event that gives the University a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the University. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.
A contingent asset arises where an event has taken place that gives the University a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the University.
Contingent assets and liabilities are not recognised in the Statement of Financial Position but are disclosed in the notes.
P. 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. The University is recognised as a charity by HM Revenue & Customs (Ref. XN92247). It is therefore a charity within the meaning of Paragraph 1 of Schedule 6 to the Finance Act 2010. Accordingly, the University is potentially exempt from UK taxation in respect of income or capital gains received within categories covered by Section 287 Corporation Tax Act 2009 (CTA 2009) and sections 471, and 478-488 of CTA 2010 (formerly enacted in section 505 of the Income and Corporation Taxes Act 1988 (ICTA)), 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.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date.
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