Keele statement of accounts 20/21 | Page 41

Statement of Accounts 2020 / 21

Statement of Accounting Policies ( continued ) For the year ended 31 July 2021

19 . 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 ( maturity being less than three months from the placement date ), highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value .

20 . Provisions , contingent liabilities and contingent assets

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 Balance Sheet but are disclosed in the notes .

21 . Taxation

Current tax , including UK Corporation Tax and foreign tax , is provided at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the reporting date .

Deferred tax is provided in full on timing differences that exist at the reporting date and that result in an obligation to pay more tax , or a right to pay less tax in the future . The deferred tax is measured at the rate expected to apply in periods in which the timing differences are expected to reverse , based on the tax rates and laws that are enacted or substantively enacted at the reporting date . Unrelieved tax losses and other deferred tax assets shall be recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits . Deferred tax assets and liabilities are not discounted .

The University is an exempt charity within the meaning of Schedule 3 of the Charities Act 2011 . 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 UK Corporation Tax 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 group receives no similar exemption in respect of Value Added Tax (“ VAT ”). Irrecoverable VAT on expenditure ( revenue and capital ) is included in the costs of such expenditure .

The University ’ s subsidiary companies are subject to Corporation Tax and VAT in the same way as any other commercial organisation .

22 . Financial instruments

The Group and University has elected to adopt Sections 11 and 12 of FRS 102 in respect of the recognition , measurement , and disclosure of financial instruments . Financial assets and liabilities are recognised when the Group and University becomes party to the contractual provision of the instrument and they are classified according to the substance of the contractual arrangements entered into . A financial asset and a financial liability are offset only when there is a legally enforceable right to set off the recognised amounts and an intention either to settle on a net basis , or to realise the asset and settle the liability simultaneously .

Financial assets

Basic financial assets include trade and other receivables , cash and cash equivalents , and investments including commercial paper ( i . e . deposits and bonds ). These assets are initially recognised at transaction price unless the arrangement constitutes a financing transaction , where the transaction is measured at the present value of the future receipts discounted at a market rate of interest . Such assets are subsequently carried at amortised cost using the effective interest rate method . Financial assets are assessed for indicators of impairment at each reporting date . If there is objective evidence of impairment , an impairment loss is recognised in the statement of comprehensive income .

For financial assets carried at amortised cost the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows , discounted at the asset ’ s original effective interest rate .

Other financial assets , including investments in equity instruments which are not subsidiaries , associates , or joint ventures are initially measured at fair value , which is typically the transaction price . These assets are subsequently carried at fair value and changes in fair value at the reporting date are recognised in the statement of comprehensive income . Where the investment in equity instruments are not publicly traded and where the fair value cannot be reliably measured the assets are measured at cost less impairment .

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