6. Accounting principles for assets and liabilities
General information
The consolidated financial statements are drawn up in accordance with the statutory provisions of Title 9, Book 2 of the Dutch Civil Code and the firm pronouncements in the Dutch Accounting Standards, as published by the Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving or RJ). These provisions apply under the Annual Reporting Regulations for Education (RJO). The annual statement of accounts is prepared in euros.
Assets and liabilities (excluding group equity) are generally stated at acquisition or manufacturing price, current value, present value, or amortized cost. If no specific accounting principle is stated, valuation is at acquisition price. References are included in the balance sheet, statement of income and expenses, and cash flow statement. These references are used to refer to the explanatory notes.
Comparison to previous year
The accounting principles used are unchanged from the previous year, except for the valuation of real estate due to the gradual introduction of the component method.
In addition, a stricter application of the eXtensible Business Reporting Language (XBRL) structure and the inclusion of the financial statements of the parties to be consolidated in SAP led to a number of changes in the 2020 comparative figure, relative to the annual statement of accounts adopted for 2020. The changes are limited in scope; therefore, this explanation will suffice.
Foreign currency
The consolidated financial statement is prepared in euros. Expenses and revenues resulting from foreign currency transactions (receivables and payables, respectively) are translated at the exchange rate as of the transaction date or balance sheet date, respectively.
Operational lease
Tilburg University has lease contracts in which much of the advantages and disadvantages associated with ownership are not borne by the Institution. These lease contracts are justified as operational leasing. Lease payments, taking into account fees received from the lessor, are recognized in the consolidated profit and loss statement on a straight-line basis over the term of the contract.
Financial instruments
Securities included under current assets, insofar as they relate to the trading portfolio or to equity instruments outside the trading portfolio, are valued at fair value. All other financial instruments included in the balance sheet are measured at (amortized) cost. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. If a reliable fair value is not immediately identifiable, the fair value is approximated by deriving it from the fair value of components or a similar financial instrument, or by using valuation models and valuation techniques. This involves the use of recent similar arm’s length transactions, the discounted cash flow method (present value of cash flows), and/or option valuation models, taking into account specific circumstances.
Intangible fixed assets
Goodwill
Goodwill is stated at historical cost less depreciation. TIAS Business School BV acquired TiasNimbas Business School Utrecht B.V. and TiasNimbas Business School Germany GmbH on August 1, 2006, capitalizing the historical cost of €7,097,000 as goodwill. The basis for the decision to amortize this on a straight-line basis over the expected economic life of 20 years is that the acquisition brought in a renowned full-time MBA program with a carefully built and sustainable international network of companies and alumni with whom significant long-term benefits can be achieved. Goodwill is tested annually for possible extraordinary depreciation by calculating the realizable value of the unit. This is the higher of the net realizable value and the value in use, or the present value of future cash flows. This is used to determine whether the realizable value exceeds the book value of the unit. To date, there are no indications of extraordinary depreciation of goodwill.
Tangible fixed assets
Buildings and land
Land is valued at acquisition cost and is not depreciated. Buildings including fixed installations, as well as the development of land are valued at acquisition cost less depreciation. Starting in 2015, Tilburg University has gradually phased in the component method for valuing its real estate. All new projects to be capitalized are depreciated according to the following classification: shell (60 years), completion (30 years), technical installations, fittings, and site facilities (20 years), and fixed equipment (10 years). The construction interest resulting from investments is capitalized to the extent of debt financing.
Buildings under construction
Buildings under construction are valued at acquisition cost and are not depreciated. Depreciation takes place following transfer to the category “buildings” after the buildings are put into use.
Major maintenance
No provision for major maintenance has been made for future costs of major maintenance to buildings. The costs are justified in the income statement annually through depreciation of the investment in major maintenance using the component method.
Equipment and inventory
Equipment and inventory is capitalized to the extent that the acquisition value per asset exceeds € 30,000. Capitalized equipment and inventory are valued at acquisition cost less depreciation. Depreciation is on a straight-line basis and based on the acquisition cost and expected commercially useful life.
Technical replacements
Technical replacements are regarded as investments and are capitalized.
Extraordinary depreciation of tangible fixed assets
Tilburg University assesses at each balance sheet date whether there is any indication that a fixed asset may be subject to extraordinary depreciation. If such indications are present, the realizable value of the asset is determined. If it is not possible to determine the realizable value for the individual asset, the realizable value of the cash-generating unit to which the asset belongs is determined.
Extraordinary depreciation occurs when the book value of an asset exceeds its realizable value; the realizable value is the higher of the net realizable value and the value in use. A loss due to extraordinary depreciation is directly recognized as an expense in the statement of income and expenses, with a simultaneous reduction in the book value of the asset concerned.
If it is determined that a previously justified loss due to extraordinary depreciation no longer exists or has decreased, the increased book value of the related assets is not set higher than the book value that would have been determined if no loss due to extraordinary depreciation had been justified for the asset. Extraordinary depreciation of goodwill is not reversed.
For financial instruments as well, the Institution assesses at each balance sheet date whether there is objective evidence of extraordinary depreciation of a financial asset or group of financial assets. Where there is objective evidence of extraordinary depreciation, the Institution determines the amount of the loss due to extraordinary depreciation and immediately processes it in the statement of income and expenses.
For financial assets measured at amortized cost, the amount of extraordinary impairment is determined as the difference between the asset's book value and the best possible estimate of future cash flows, discounted at the financial asset’s effective interest rate as determined on initial recognition of the instrument.
Financial fixed assets
Participating interests
Participating interests in which significant influence can be exercised are valued using the equity method (net asset value). Significant influence is assumed if 20% or more of the voting rights can be cast.
The net asset value is calculated in accordance with the accounting policies applicable to these financial statements; for participating interests for which insufficient data are available for adjustment to these policies, the accounting policies of the participation in question are used.
If the valuation of a part according to the net asset value is negative, it is valued at zero. If and to the extent that the institution in this situation wholly or partially guarantees the debts of the participation, or has the firm intention of enabling the participation to pay its debts, a provision shall be made to this end.
The initial valuation of purchased associates is based on the fair value of the identifiable assets and liabilities at the time of acquisition. For the subsequent valuation, the principles applicable to these financial statements are applied, assuming the values at initial valuation.
Recognized as income is the amount by which the book value of the participating interest has changed since the previous annual statement of accounts due to the result achieved by the participation.
Participating interests in which no significant influence can be exercised are valued at acquisition price. The dividend of the participating interest declared in the year under review is taken into account as income, with non-cash dividends being valued at fair value.
If extraordinary depreciation has occurred, valuation occurs according to realizable value. The write-down is charged to the statement of income and expenses. For the determination of whether extraordinary depreciation has occurred, please refer to Note X (“Extraordinary depreciation of fixed assets”).
Other receivables
Other receivables included in financial fixed assets include loans granted and other receivables, as well as purchased loans that will be held to maturity. These receivables are initially valued at fair value. These loans are subsequently valued at amortized cost. If discounts or premiums are incurred when loans are granted, they are credited or charged to income as part of the effective interest rate over the term. Transaction costs are also recognized in the initial valuation and charged to income as part of effective interest. Losses due to extraordinary depreciation are deducted from the statement of income and expenses.
Securities
Securities are valued at fair value on initial recognition. Securities included in financial fixed assets are subsequently valued at fair value. Increases in the value of these securities are directly recognized in the revaluation reserve. Once the securities in question are no longer recognized in the balance sheet, the cumulative increase in value in equity is recognized in the statement of income and expenses. If the fair value of an individual security falls below its (amortized) cost, the extraordinary depreciation is charged to the statement of income and expenses. For interest-bearing financial assets, interest income is recognized according to the effective interest method. Tilburg University values its securities at fair market value because, in principle, there is no intention to hold securities to maturity.
Projects in progress
Projects in progress are valued at realized project revenues (consisting of realized project costs). Profit is taken in proportion to the progress of the project (percentage of completion method). Progress is determined based on the eligible project costs incurred in relation to the estimated total eligible project costs. If the result cannot (or cannot yet) be estimated reliably, revenue is recognized to the extent of likelihood that the project costs incurred can be recovered. Foreseeable loss is (out of prudence) immediately included in full under income. Projects in progress whose invoiced installments exceed realized project revenues are presented under short-term liabilities.
Receivables
Receivables are valued according to the fair value of the consideration on initial recognition. Receivables are valued according to amortized cost price after initial recognition. If the receipt of the receivable has been deferred based on an extended agreed payment period, the fair value is determined according to the present value of the expected receipts, and interest income is credited to the statement of income and expenses based on the effective interest rate. Provisions for uncollectable debts are deducted from the book value of the receivable.
Liquid assets
Liquid assets are valued at nominal value and consist of cash, bank balances, and deposits with maturities of less than 12 months.
Equity
Equity consists of general reserves and earmarked reserves and/or funds. This also includes segmentation by public and private funds.
Earmarked reserves are reserves with more limited spending options, which have been put in place by the Board.
General reserve for buildings
The general buildings reserve is intended to express the blocked portion of the equity related to the ownership of the real estate and the financing of part of it with equity.
General reserves
General reserves are the freely disposable funds as of the balance sheet date of the operating balances up to and including the reporting year.
Designated reserves
Designated reserves are the funds that have already been appropriated as of the balance sheet date from the operating balances up to and including the reporting year.
Revaluation reserve
If revaluations have been accounted for in the revaluation reserve, realized revaluations are credited to the statement of income and expenses.
Third-party share
The third-party share as part of group equity is valued at the amount of the net interest in the net assets of the related party in question.
Facilities
Facilities are formed for legally enforceable or constructive obligations existing as of the balance sheet date, for which it is probable that an outflow of resources will be necessary and the extent of which can be reliably estimated.
Facilities are valued according to the best estimate of the amounts necessary to settle the liabilities as of the balance sheet date. Facilities are valued according to the present value of the expenditures expected to be necessary to settle the obligations and losses, unless the time value of money is immaterial. If the time value of money is immaterial, the facility is justified at nominal value.
Redundancy funds
The redundancy pay facility refers to a facility for former employees who are eligible to claim redundancy payments. Entitlement to redundancy payments is assessed according to decisions issued as of the balance sheet date in connection with redundancy pay and statutory or non-statutory unemployment benefits. The facility is set at 100% of the calculated maximum liability. Benefits paid are withdrawn from the facility.
Long-term illness
The facility for the long-term illness was created for employees who, as of the balance sheet date, are on long-term sick leave and who are not expected to return to active service (in part or in full). The provision is calculated for a period of up to two years after the first notification of illness.
Long-term savings leave
The provision for long-term savings leave was created in connection with obligations related to saving leave days for several years based on the actual hourly rate per employee.
WIA/WGA Deductible
Tilburg University is own risk bearer for fixed and flexible WGA. A fixed WGA benefit is awarded to employees who enter the WGA from permanent employment. A flexible WGA benefit is awarded to employees who left work due to illness, received a benefit under the Sickness Benefits Act and then, after two years of illness, entered the WGA.
The Collective Labor Agreement stipulates that the change in the wage-related WGA is to be repaired at the employer’s expense as of July 1, 2017. The possibility of making arrangements for several universities are currently being considered. An estimate is therefore not yet possible, and it is thus not included in the facility.
Anniversaries
This facility was created in connection with the obligations associated with future 25-year, 40-year, and 50-year anniversary payments for staff. The periodic increase is an addition to the facility.
Reorganization facility
Tilburg University has chosen to redesign its support organization. Adopted in October 2015, the BEST (Building Excellent Support at Tilburg University) Layoff Plan establishes facilities for employees who would become redundant due to the reorganization. In the past, a decision to reorganize was also made for TSHD. This resulted in some employees being made redundant. A reorganization facility has been created for the related expenses.
Other provisions
The other provisions consist of a provision for transitional compensation, a settlement agreement, a provision related to asbestos to be removed, and a provision for deferred corporate income tax at TIAS. The provision for transitional compensation was created in connection with the obligations associated with the expiration of employment contracts of salaried personnel under the Balanced Labor Market Act (WAB).
Long-term liabilities
Long-term liabilities are valued at fair value on initial recognition. Transaction costs directly attributable: To the acquisition of long-term liabilities are valued on initial recognition. After initial recognition long-term liabilities are valued at amortized cost (i.e., the amount received taking premium or discount into account and after deduction of transaction costs).
Short-term liabilities
Current liabilities are valued at fair value on initial recognition. After initial recognition short-term liabilities are valued at amortized cost (i.e., the amount received taking premium or discount into account and after deduction of transaction costs). This is usually the nominal value.
