The current circumstances will have far-reaching implications for the higher education sector. Carol Rudge outlines the key considerations in our new report.
Universities and other higher education institutions across the country are working in an environment that is completely different to the one they were in just months ago with empty campuses, research projects paused and students learning online. There are also many students, both international and from the UK, considering whether to defer their courses due to the uncertainty around safety, ability to travel and the potential for online learning to continue into the next academic year.
The virus and measures taken to contain it have undoubtedly impacted the higher education sector both operationally and financially. This has several accounting ramifications that universities will need to carefully consider when preparing their financial statements for 31 July 2020 year-ends. Some of the ramifications will directly impact the numbers and disclosures in 2020 financial statements, while others will have more of an impact for the next financial year and will, therefore, need to be considered when looking at going concern.
Due to the significance of the pandemic and the level of impact it is having, we have produced a report on the impact of COVID-19 on the higher education sector. The report focuses on some of key challenges, along with the potential financial reporting and regulatory impacts.
Areas for the higher education sector to consider
Some of the key areas of financial reporting for the higher education sector to consider, and included in more detail in our report, are as follows:
- Where there are indicators for impairments of assets, for example, student accommodation that is not being utilised
- Onerous contract provisions may be required where meeting unavoidable costs outweighs the economic benefits, such as catering contracts that have been committed to or property leases
- Accounting for research grants will need to be reviewed, in particular where the research has had to be postponed or curtailed
- Accounting for government support measures will need to be assessed for each measure individually, in line with the nature of support and its terms and conditions
- Gift aid payments by subsidiaries will need to be carefully reviewed to ensure sufficient distributable reserves are available
- Going-concern assessments will need to include stress testing based on various scenarios under the current uncertainties
Our higher education report also summarises the regulator’s response to the pandemic, and looks into the impact on the audit process, as well as identifying some practical advice on communication with key stakeholders.
Download our report
Get in-depth look into how these and other issues will affect higher education financial reporting.
To discuss the implications for your university, get in touch with Carol Rudge.