Financial Statements 2011 - Royal Holloway, University of London

Notes to the Financial Statements(continued)1 STATEMENT OF PRINCIPAL ACCOUNTING POLICIES (continued)Where equipment or furniture and fittings are acquired withthe aid of specific grants they are capitalised and depreciatedas above. The related grant is treated as a deferred capitalgrant and is released to income over the expected usefullife of the asset (this is the period of the grant for specificresearch projects).8 Interest Cap and Interest Rate SwapsThe prepayment for an interest rate cap is amortised evenlyover the period of the cap. The College, in the course of itsbusiness, enters into interest rate swap contracts to reduce itsexposure to fluctuations in interest rates on borrowings. Theamounts receivable and payable on these swaps are includedin the income and expenditure account so as to match theinterest payable on the borrowing.9 Picture CollectionThe College houses a collection of paintings gifted by ThomasHolloway, the founder of Royal Holloway College.The pictures are included in the balance sheet with the otherendowment assets. A full valuation was carried out by bya professional valuer in 2011. A professional valuation willcontinue to be carried out at least once every five years inaccordance with FRS15, with an update in year three, alsoperformed by a qualified valuer. The valuation is assessed onthe basis of high auction value.11 StocksStocks are stores of catering supplies, bar supplies and otheritems held by Residence and Catering Services, stores and oilheld by the Estate’s department and central stores of stationeryand computer supplies. They are valued at the lower of costand net realisable value.12 Taxation StatusRoyal Holloway is an exempt charity within the meaning ofSchedule 2 of the Charities Act 1993 and as such is a charitywithin the meaning of Section 506(1) of the Income andCorporation Taxes Act (ICTA) 1988. Accordingly, the College ispotentially exempt from taxation in respect of income or capitalgains received within categories covered by Section 505 of theICTA 1988 or Section 256 of the Taxation of Chargeable GainsAct 1992 to the extent that such income or gains are applied toexclusively charitable purposes. The College receives no similarexemption in respect of Value Added Tax. Royal HollowayEnterprise Limited gift aids the majority of its profits to theCollege, and any profits that are retained are subject to UKCorporation Tax which is provided at the amount expected tobe paid using the tax rates and laws that have been enacted atthe balance sheet date.Three pictures from the collection were sold between 1993and 1995, and the proceeds used to create the Founder’sEndowment Fund under a scheme approved by the CharityCommission. The endowment fund, which is held in a separatetrust, is included within “Permanent Endowments” in thebalance sheet. The use of these assets other than as providedin the scheme is subject to the prior approval of the CharityCommission.Income from the Fund is credited to the Income andExpenditure Account on a receivable basis. Income is appliedin accordance with the purposes of the Scheme; any unappliedincome is disclosed as a restricted reserve.10 InvestmentsEndowment asset investments are included in the balancesheet at market value. Cash balances on deposit, whichcannot be withdrawn without notice, are shown as currentasset investments, if the maturity date is within one year, andas fixed asset investments for maturity dates greater thanone year.20