Financial Statements 2019/2020


MIDDLESEX UNIVERSITY NOTES TO THE ACCOUNTS (continued)


Year Ended 31 July 2020 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS


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. However, given the judgemental nature of such estimates, actual results could be different from the assumptions used.


Key areas subject to judgement are as follows: a. Leases classification (see note 28)


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.


b. Financial instruments


To determine whether an asset or liability that arises from a contact is a basic financial instrument and accounted for in accordance with FRS 102 Section 11 or Section 12 which applies to other, more complex financial instruments and transactions.


c. Impairment of tangible assets


Determine whether there are indicators of impairment of the University and Group’s tangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash-generating activity, the viability and expected future performance of that activity. The University has further reviewed factors for impairment in the light of COVID-19 and determined that no impairment is considered appropriate.


Other key areas of estimation uncertainty are as follows:


a. Local Government Pension Scheme (LGPS) defined benefit pension scheme (see note 31) Obligation to fund pensions


The University has obligations to pay pensions benefits under the defined benefit LGPS pension scheme. The cost of these benefits and the estimate of the present value of the obligation depend on a number of critical underlying assumptions including: longevity (member life expectancy), anticipated future salary increases, asset valuations and the discount rate on corporate bonds. Variations in these assumptions have the ability to significantly influence the value of the liability recorded and annual defined benefit expense.


Sensitivity analysis


The sensitivities regarding the principal assumptions used to measure the scheme liabilities calculated by a qualified independent actuary are set out below:


Change in financial assumptions at 31 July 2020


0.5% decrease in the real discount rate for liabilities 0.5% increase in the rate of increase in salaries


0.5% increase in the rate of increase in pensions (CPI increases)


Approximate % increase to defined benefit obligation


11% 1%


9%


Approximate monetary amount (£’000)


39,865 4,323


34,718


96


Middlesex University


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132  |  Page 133  |  Page 134