Basis of preparation
The financial statements have been prepared in accordance with both the FE/HE Statement of Recommended Practice (SORP) and with Financial Reporting Standard (FRS) 102. We are a public benefit entity and therefore have applied the relevant public benefit requirements of FRS102.
The financial statements are prepared under the historical cost convention (modified by the revaluation of fixed assets and noncurrent and current asset investments).
Going concern
The Group financial statements have been prepared on a going concern basis. After reviewing the University’s forecasts, which cover the period to 31 July 2026 (the outlook period), Council confirms that it has reasonable expectation that we have adequate resources to continue in operation for the foreseeable future. In reaching this conclusion it has considered a downside scenario in student recruitment levels; however, Council is satisfied that the strategies, plans and policies in place will help ensure that the University has sufficient funds to meet its liabilities as they fall due over the outlook period.
Council regularly reviews performance using the key performance indicators included in these accounts in areas that are relevant to financial sustainability. Council, through the Audit and Risk Assurance Committee (ARAC) regularly reviews strategic and operational risks and any financial assessment of these as determined by management. Council, through Finance Committee, reviews the compliance with financial covenants in our loan documentation and is confident that the agreed covenants will be met throughout the outlook period. Council is not aware of any material uncertainties related to events or conditions existing at the date of signing these accounts, that cast significant doubt upon the University’s ability to continue as a going concern. Therefore, Council continues to adopt a going concern basis for preparing the Annual Accounts.
Basis of consolidation
These financial statements consolidate the results of our and our subsidiary undertaking for the financial year to 31 July 2024.
The consolidated financial statements do not include those of our Students’ Union as it is a separate organisation over which we do not exert control, nor exercise dominant influence, over their policy decisions.
Recognition of income
Income from the sale of goods or services is credited to the Statement of Consolidated Income (SOCI) when the goods or services are supplied to the external customer or the terms of the contract have been satisfied or using a percentage of completion method when there is certainty that a margin will be made on the sale.
Fee income is stated gross of any expenditure which is not a discount and credited to the SOCI over the period in which the students are studying. Bursaries and scholarships are accounted for gross as expenditure and not deducted from income.
All income from short-term investments and deposits (including those held as endowments) is credited to the SOCI on a receivable basis.
Grant funding
Grant funding, including Funding Council grant; research grants from government sources; and grants (including research grants) from non-government sources are recognised as income when we are entitled to the income and performance-related conditions have been met. Income received in advance of the performance-related condition being met is recognised as deferred income within creditors on the balance sheet and released to income as the conditions are met.
Donations and endowments
Non exchange transactions without performance-related conditions include donations and endowments. Those with donor-imposed restrictions are recognised in income when we are entitled to the funds. Income is retained within the restricted reserve until such time that it is utilised in line with such restrictions, at which point the income is released to the general reserve through a reserve transfer. Donations freely given, with no donor-imposed restriction, are recognised in income when we are entitled to the funds.
There are four main types of donations and endowments identified within reserves:
- restricted donations – the donor has specified that the donation must be used for a particular objective
- unrestricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream for our general benefit
- restricted expendable endowments - the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and we have the power to use this capital
- restricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective
Capital grants
Capital grants are recognised as income when we are entitled to the income and performance-related conditions have been met.
Accounting for retirement benefits
We participate in the following principal pension schemes: Universities Superannuation Scheme (USS), the Avon Pension Fund (APF), part of Local Government Pension Scheme (LGPS), the University of Bath Group Pension Plan (UoBGPP), and The Institute for Advanced Automotive Propulsion Systems (IAAPS) Ltd Group Pension Plan.
USS and LGPS are hybrid schemes containing elements of defined benefit and defined contributions, however both schemes are accounted as defined benefit schemes. The other schemes are defined contribution schemes and are accounted for on this basis.
All these schemes have assets in separate trustee administered funds. The costs are funded by contributions from the University group and its staff. USS & LGPS are valued every three years by professionally qualified independent actuaries.
Defined benefit scheme
Defined benefit schemes are post-employment benefit schemes other than defined contribution schemes. Our obligation is to provide the agreed benefits to current and former employees, and actuarial risk (that benefits will cost more or less than expected) and investment risk (that returns on assets set aside to fund the benefits will differ from expectations) are borne, in substance, by us. We recognise a liability for our obligations under defined benefit schemes net of scheme assets.
This net defined benefit liability is measured as the estimated amount of benefit that employees have earned in return for their service in the current and prior periods, discounted to determine its present value, less the fair value (at bid price) of scheme assets. The calculation is performed by a qualified actuary using the projected unit credit method. Where the calculation results in a net asset, recognition of the asset is limited to the extent to which we are able to recover the surplus either through reduced contributions in the future or through refunds from the scheme.
Universities Superannuation Scheme (USS)
As a multi-employer scheme, it is not possible to identify our share of the underlying assets and liabilities due to the mutual nature of the scheme. Therefore, as required by Section 28 of FRS 102 “Employee Benefits”, we are required to account for it as if it were a defined contribution scheme. The SOCI represents the contributions payable to the scheme and the deficit recovery contributions payable under the scheme’s Recovery Plan.
Where a scheme valuation determines that the scheme is in deficit on a technical provisions basis (as was the case following the 2020 valuation), the trustee of the scheme must agree a Recovery Plan that determines how each employer within the scheme will fund an overall deficit. We recognise a liability for the contributions payable that arise from such an agreement (to the extent that they relate to a deficit) with related expenses being recognised through SOCI. Further disclosures relating to the deficit recovery liability can be found in note 20.
Local Government Pension Scheme (LGPS)
The LGPS is a funded scheme. The assets of the LGPS are measured using the closing fair values. LGPS liabilities are measured using the projected unit credit method and discounted at the current rate of return on a high-quality corporate bond of the equivalent term to the liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The amounts charged to the operating surplus are the current service costs and the cost of scheme introductions, benefit charges, settlements, and curtailments. They are included as part of staff costs as incurred. Net interest on the net defined benefit liability or asset is also recognised in the SOCI and comprises the interest cost on the defined benefit obligation and interest income on the schemes assets, calculated by multiplying the fair value of the schemes assets at the beginning of the period by the rate used to discount the benefit obligations.
Defined contribution schemes
Defined contribution schemes are post-employment benefit schemes under which we pay fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension schemes are recognised as an expense in the SOCI in the periods during which services were rendered by employees.
Employee benefits
Short-term employment benefits, such as salaries and compensated absences (paid annual leave) are recognised as an expense in the year in which the employees render service to us. Any unused benefits are accrued and measured as the additional amount that we expect to pay as a result of the unused entitlement.
Foreign currency
Transactions denominated in foreign currencies are translated using the rate of exchange ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the end of the financial period, with all resulting exchange differences being recognised in the SOCI. Exchange differences arising on the translation of a financial liability designated as an effective hedge against a foreign denominated investment are recognised in the SOCI as Other Comprehensive Income.
Leases
Operating leases are where we do not assume substantially all the risks and rewards of ownership, rental costs under operating leases are charged to the SOCI as the costs are incurred. Any lease premium or incentives are spread over the minimum lease term.
Finance leases are where we assume substantially all the risks and rewards of ownership of the asset. Leased assets acquired by way of a finance lease and the corresponding lease liability are initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease so as to produce a constant rate of interest on the remaining balance of the liability.
Fixed Assets
Land and buildings
Land and buildings are measured using the revaluation model. Under the revaluation model, assets are revalued to their fair value. We have a policy of ensuring all assets are revalued by an external valuer, such that the fair value is not materially different to the current value. Each building is revalued twice over a four-year cycle, with all buildings being revalued in the first year of the cycle and in each of the remaining three years approximately a third of all buildings are revalued again and the others are indexed each year. The basis of the valuation is a combination of depreciated replacement cost, existing use and open market value depending on the nature of the property.
Freehold and leasehold land are not depreciated as they are considered to have an indefinite useful life.
Buildings are depreciated over a maximum period of 50 years. The remaining expected life of buildings is provided by the external valuer and reviewed annually by management and, where material, the future depreciation is adjusted in accordance with FRS102. Land and assets in the course of construction are valued at cost, less any estimated potential impairment against a valuation at completion. Depreciation commences at the beginning of the quarter following occupation.
Building refurbishments are depreciated over the remaining expected life of the building in which the refurbishment takes place, up to a maximum of 25 years. At the next revaluation the entire building will be re-lifed as appropriate.
Assets under the course of construction include a mixture of new buildings and refurbishments and improvements to existing buildings.
Interest is capitalised where it is incurred in the construction of new buildings which are substantially funded by loans arranged by us. The cost is depreciated in line with the building.
Equipment
Equipment costing less than £25k per individual item is written off in the year of acquisition unless it forms part of a group of related items or part of a capital project, in which case it is capitalised.
Capitalised equipment is stated at cost or, where donated, at valuation, and depreciated, on a straight-line basis, as follows:
- general equipment – 5 to 10 years
- furniture - 5 years
- catering equipment - 7 years
- equipment required for specific grants - 3 years
Where equipment is donated, the asset is recorded at valuation. The donation is recorded as income in the SOCI in the year it is received.
Where equipment requires commissioning before it can become operational then these costs can be capitalised as part of the equipment, this can include external and internal direct costs.
Intangible Fixed Assets
Computer Software
Where software is acquired, it may be capitalised at cost where the benefit of this cost will exist over several years. Cost includes the purchase price (net of any discounts and rebates) and other directly attributable costs of preparing or configuring the asset for its intended use. Subsequent recurrent licencing costs would be charged as recurrent expenditure. Direct expenditure including employee costs, which enhances or extends the performance of computer software beyond its specifications, and which can be reliably measured, is added to the original cost of the software.
Annual computer software licences will not be capitalised as the cost incurred represents the consumption of the service.
Amortisation is on a straight-line method as follows:
- computer software – 3 to 5 years
Maintenance of premises
The cost of routine corrective maintenance and planned maintenance are both charged to the SOCI in the period in which they are incurred. We have a planned maintenance programme, which is reviewed on an annual basis.
Investments
Non-current and current asset investments are held at fair value where this can be readily determined and amortised cost where no market exists. The fair value movement in non-current and current asset investments is recognised in the SOCI.
Loans
Loans which meet the criteria for basic financial instruments as defined by paragraph 11.9 of FRS 102 are initially recorded and subsequently measured at amortised cost.
Certain of the University’s loan notes are subject to foreign exchange hedges held by US investors. The hedges protect the investors against future foreign exchange exposure should the University decide in the future to repay part or all of the debt early. Under FRS 102, these instruments are classed as non-basic and measured at fair value through the SOCI.
Fair value
The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the market is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, the fair value is estimated by using a valuation technique.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Cash at bank
Cash includes cash in hand, and in our current accounts and deposits repayable on demand. Deposits are repayable on demand if, in practice, they are available within 24 hours without penalty.
Assets that form Endowment funds are included within Cash at bank or Investments as appropriate.
Provisions, contingent liabilities, and contingent assets
Provisions are recognised in the financial statements when:
- we have a present (legal or constructive) obligation as a result of a past event
- it is probable that a transfer of economic benefit will be required to settle the obligation
- 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 flow at a pre-tax rate that reflects risks specific to the liability.
Contingent liabilities arise from a past event that gives us a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within our control. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resource 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 us a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within our control.
Contingent assets and liabilities are not recognised in the Balance Sheet but disclosed in the notes when required.
Taxation status
We are an exempt charity within the meaning of Schedule 3 of the Charities Act 2011. The University is therefore a charity within the meaning of Paragraph 1 Schedule 6 Finance Act 2010 and therefore the University meets the definition of a charitable company for UK corporation tax purposes.
Accordingly, we are 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 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.
We receive 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. Our subsidiary companies are subject to corporation tax and VAT in the same way as any commercial organisation.
Intra-group transactions
Gains or losses on any intra-group transactions are eliminated in full. Amounts in relation to debts and claims between undertakings included in the consolidation are also eliminated.
Key sources of estimation uncertainty and judgements in applying accounting policies
Estimation uncertainty in fixed assets
Land and buildings are held at fair value. An annual valuation exercise is undertaken by an external qualified chartered surveyor on a sample of buildings to ensure the carrying value of the assets are not materially different to their fair value. We will extrapolate the methodology adopted by the external surveyor to other buildings in the same valuation class to ensure the assets are not materially misstated in the financial statements. Tangible fixed assets, other than investment properties, are depreciated over their remaining useful economic lives taking into account residual value, where appropriate, see note 13 for the carrying amount of property, plant, and equipment. An annual review of residual values of assets is undertaken. In reassessing asset lives, factors such as technological innovation and maintenance programmes are taken into account.
Estimation uncertainty in the Local Government Pension Scheme (LGPS)
The present value of the LGPS defined benefit liability depends on a number of factors that are determined on an actuarial basis using a variety of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions, which are disclosed in note 25, will impact the carrying amount of the pension liability. Sensitivity analysis is also included in the note based on the assumptions used. Furthermore, a roll forward approach which projects results from the latest full actuarial valuation performed at 31 March 2022 has been used by the actuary in valuing the pensions liability at 31 July 2024. Any differences between the figures derived from the roll forward approach and a full actuarial valuation would impact on the carrying amount of the pension liability.
Estimation uncertainty in the Universities Superannuation Scheme (USS)
The present value of the USS provision depends on a number of estimates used by management in respect of discount rate, future salary increases and numbers of staff in the USS. Any changes in these assumptions, which are disclosed in note 25, will impact the carrying amount of the pension liability. FRS 102 makes the distinction between a group plan and a multi-employer scheme. A group plan consists of a collection of entities under common control typically with a sponsoring employer. A multi-employer scheme is a scheme for entities not under common control and represents (typically) an industry-wide scheme such as USS. The accounting for a multi-employer scheme where the employer has entered into an agreement with the scheme that determines how the employer will fund a deficit results in the recognition of a liability for the contributions payable that arise from the agreement (to the extent that they relate to the deficit) with the resulting expense charged through the profit or loss account in accordance with section 28 of FRS 102.
At 31 July 2023, our balance sheet included a liability of £96,023,899 for future contributions payable under the deficit recovery agreement which was concluded on 30 September 2021, following the 2020 valuation when the scheme was in deficit. No deficit recovery plan was required from the 2023 valuation, because the scheme was in surplus. Changes to contribution rates were implemented from 1 January 2024 and from that date we were no longer required to make deficit recovery contributions. The remaining liability of £98,232,448 was released to the profit and loss account. Further disclosures relating to the deficit recovery liability can be found in note 20.
Impairment of debtors
We make an estimate for the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience. See note 15 for the net carrying value of the debtors.
Fair value of non-basic financial instruments
The fair value of the non-basic financial instruments has been measured by discounting expected future cash flows to present value using a discount rate based on market rates for similar debt instruments. The discount rate has been calculated based on the yield of the gilt with the closest maturity date to that of the financial instruments, and then an additional spread is added to the gilt yield to reflect the University’s credit profile. The discount rate is then applied to the principal amount and to future interest rate payments.
The impact of the fair value is to recognise a loss of £2.1m (2022- 23: gain of £17.5m) in the statement of comprehensive income and to recognise a fair value of the loan note of £66.9m (31 July 2023: £64.8m) in the balance sheet.
The University’s non-basic financial instruments contain foreign exchange options held by certain US investors, which are required to be recognised at fair value as part of the instrument, in accordance with FRS 102. The options have been assessed as only having a potential fair value when early prepayment of part or whole of the instrument is triggered. The University has conducted significant scenario analysis, based on a base case position of market conditions at the valuation date together with forward rates, assessed as being the best estimate of future rates. The modelling flexed the key variables of UK gilt yields, US treasury yields and the GBP/USD exchange rate to establish whether the options could have a positive impact in the future, such that a fair value would occur. The conclusion of the analysis is that it would take extreme opposing movements in both UK and US interest rates for the options to have a positive fair value and that this event is highly unlikely, therefore no value has been attributed to the foreign exchange.