Keele University
Statement of Accounting Policies ( continued ) For the year ended 31 July 2021
Financial instruments ( continued )
Financial assets are de-recognised - when the contractual rights to the cash flows from the asset expire or are settled or substantially all of the risks and rewards of the ownership of the asset are transferred to another party .
Financial liability
Basic financial liabilities include trade and other payables , bank loans , and intra-group - loans . These liabilities are initially recognised at transaction price unless the arrangement constitutes a financing transaction , where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest . Debt instruments are subsequently carried at amortised cost using the effective interest rate method .
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down .
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers . Accounts payable are classified as current liabilities if payment is due within one year or less . If not , they are presented as non-current liabilities . Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest rate method .
Derivatives , including forward foreign exchange contracts , are not basic financial instruments . Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently re-measured at their fair value at the reporting date . Changes in the fair value of derivatives are recognised in the statement of comprehensive income in finance costs or finance income as appropriate , unless they are included in a hedging arrangement .
To the extent that the Group and University enters into forward foreign exchange contracts which remain unsettled at the reporting date the fair value of the contracts is reviewed at that date . The initial fair value is measured as the transaction price on the date of inception of the contracts . Subsequent valuations are considered on the basis of the forward rates for those unsettled contracts at the reporting date . The Group and University does not apply hedge accounting in respect of forward foreign exchange contracts held to manage cash flow exposures of forecast transactions denominated in foreign currencies .
Financial liabilities are de-recognised when the liability is discharged , cancelled , or expires . 23 . 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 through which the donor has designated a specific purpose and therefore the University is restricted in the use of these funds .
24 . Significant accounting estimates and judgements
The preparation of the financial statements requires management to make judgements , estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities , income and expenses . These judgements , estimates , and associated assumptions are based on historical experience and other factors , including expectations of future events that are believed to be reasonable under the circumstances . The resulting accounting estimates will , by definition , seldom equal the related actual results .
Management consider the areas set out below to be those where critical accounting judgements have been applied and the resulting estimates and assumptions may lead to adjustments to the future carrying amounts of assets and liabilities :
Recoverability of debtors
The provision for doubtful debts is based on an estimate of the expected recoverability of those debts . Assumptions are made based on the level of debtors which have defaulted historically , coupled with current economic knowledge . The provision is based on the current situation of the customer , the age profile of the debt and the nature of the amount due . At the reporting date , the bad debt provision is £ 1,086k ( 2020 : £ 783k ).
Impairment of assets
At each reporting date , assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss as a result of any indications . If there is an indication of impairment , the recoverable amount of any affected asset is estimated and compared with its carrying amount . If the estimated recoverable amount is lower , the carrying value is reduced to its estimated recoverable amount and an impairment loss is recognised immediately in the period it arises . During the year , the Group recognised an impairment charge of £ nil ( 2020 : £ 1,341k ).
Investment properties
Properties are revalued to their fair value at the reporting date by an independent external team of chartered surveyors ( Gerald Eve LLP ). This is updated annually by them following a site visit , based on the current tenant rents and an estimate of the rental yield going forward . During the year , one property transferred from Land and Buildings to an Investment Property as external tenants wholly occupied the building . The Group recognised a gain on investment property of £ 1,350k ( 2020 : loss of £ 750k ). During the year , one property was judged to have become an investment property , and was accounted for as such at 31 July 2021 . The property was transferred from freehold land and buildings to investment property at 31 July 2021 on the balance sheet , and as a result of this a £ 240k unrealised gain was recognised as part of Other Comprehensive Income .