UNIVERSITY OF EXETER S TAT E M E N T O F P R I N C I PA L A C C O U N T I N G P O L I C I E S
9. TA X AT I O N
Leasehold buildings are depreciated over their expected
The University is considered to pass the tests set out in
useful lives, subject to a maximum of 50 years, on a straight-
Paragraph 1 Schedule 6 Finance Act 2010 and therefore it
line basis.
meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the University is
Improvements, adaptations and remodelling of buildings are
potentially exempt from taxation in respect of income or
capitalised at cost and are depreciated over their expected
capital gains received within categories covered by Chapter 3
useful life, subject to a maximum of 50 years, on a straight-
Part 11 Corporation Tax Act 2010 or Section 256 of the
line basis.
Taxation of Chargeable Gains Act 1992, to the extent that Where expenditure incurred on the development of new
such income or gains are applied exclusively to charitable
premises includes the cost of equipping the premises with
purposes.
furniture and equipment, etc., irrespective of the cost of The University is partially exempt in respect of Value Added
individual items, this expenditure is capitalised together with
Tax, so that it can only recover a minor element of VAT
the construction cost.
charged on the majority of its inputs. Irrecoverable VAT on inputs is included in the costs of such inputs and added to the
Finance costs directly attributable to the construction of land
cost of tangible fixed assets as appropriate, where the inputs
and buildings are capitalised as part of the cost of those
themselves are tangible fixed assets by nature.
assets.
The University’s subsidiary companies are subject to
Where buildings are acquired or improved with the aid of
Corporation Tax and VAT in the same way as any other
specific grants, they are capitalised and depreciated in
commercial organisation.
accordance with the policy above. The related grants are
10. L A N D A N D B U I L D I N G S
and expenditure account over the expected useful life of the
Land and buildings are stated at valuation or, in the case of
buildings.
treated as deferred capital grants and released to the income
buildings in the course of construction or constructed since the last valuation, at cost. The basis of valuation is existing use
All buildings are regularly reviewed for indications of
value for non-specialised buildings, depreciated replacement
impairment. Where there is impairment caused by a clear
cost for specialised buildings or, if appropriate and in certain
consumption of economic benefit the difference between the
circumstances, open market value.
assessed recoverable value of the building and its written down value is charged to the income and expenditure
The University has adopted a policy to fully revalue land and
account. Other impairment losses on revalued fixed assets
buildings every five years with an interim valuation in the third
are recognised in the statement of total recognised gains and
year.
losses and set against any revaluation surplus until the carrying
Freehold land is not depreciated as it is considered to have an
and thereafter in the income and expenditure account.
amount of the fixed asset reaches depreciated historical cost
indefinite useful life. 11. M A J O R R E F U R B I S H M E N T S Major replacement and refurbishment work is capitalised if
Freehold buildings are depreciated over their expected remaining useful lives, subject to a maximum of 50 years, on
the work creates or enhances an existing asset, or improves
a straight-line basis. Buildings in the course of construction are
or substantially overhauls an asset. The costs are depreciated
not depreciated.
over the appropriate period as described elsewhere within the statement of principal accounting policies.
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UNIVERSITY OF EXETER:
F I N A N C I A L S TAT E M E N T S F O R T H E Y E A R E N D E D 3 1 J U LY 2 0 1 1