6. Accounting principles assets and liabilities
Intangible fixed assets
Goodwill
Goodwill has been valued at historical cost after deduction of amortization. As of August 1, 2006, TIAS Business School BV acquired TiasNimbas Business School Utrecht B.V. and TiasNimbas Business School Germany GmbH whereby the historical cost price of €7,097,000 has been capitalized as goodwill. The basis for the decision to amortize this goodwill on a straight-line basis over the expected useful 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 significant long-term benefits. Goodwill is assessed annually for potential extraordinary depreciation by calculating the unit's recoverable amount. 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 recoverable amount exceeds the book value of the unit. To date, there are no indications of extraordinary depreciation of goodwill.
Tangible fixed assets
Tangible fixed assets, unless otherwise indicated, are valued at acquisition or manufacturing cost including directly attributable costs, after deduction of straight-line depreciation over the expected future useful life and extraordinary depreciation taking into account any residual value.
If major components of an item of tangible fixed asset are distinguishable from one another and differ in useful life or expected pattern of use, those components are depreciated separately.
Buildings and grounds
Grounds are valued at their acquisition value and is not depreciated. Buildings including fixed installations as well as the development of grounds are valued at acquisition cost after deduction of depreciation. Tilburg University has phased in the component method for valuing its real estate with effect from 2015. All newly capitalized projects are depreciated according to the classification of shell 60 years, completion 30 years, technical installations, built-in components, and site facilities 20 years, and fixed design 10 years. Construction interest as a result of investments is capitalized to the extent that financing with borrowed capital is involved.
Buildings under construction
Buildings under construction are valued at acquisition cost and are not depreciated. Depreciation occurs after transfer to the “buildings” category after the buildings are placed in service.
Major maintenance
No provision for major maintenance has been made for future costs of major maintenance of the company buildings. The costs are recognized in the result annually by depreciation of the investment in major maintenance via the component method.
Equipment and inventory
Equipment and inventory are capitalized to the extent the acquisition value per asset exceeds €30,000. Capitalized equipment and inventory are valued at acquisition cost after deduction of depreciation. Depreciation is straight-line and based on the acquisition value and expected operating life.
Technical replacements
Technical replacements are considered investments and capitalized.
Financial fixed assets
Participating interests
Participating interests in which significant influence can be exercised are valued according to the equity method (net asset value). When 20% or more of the voting rights can be exercised, significant influence is presumed to exist.
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 principles of the respective participating interests are used.
If, according to the net asset value, the valuation of a participating interest is negative, it is valued at nil. If and to the extent that, in this situation, the institution fully or partially guarantees the debts of the participating interest or has the firm intention of enabling the participating interest to pay its debts, a provision is made for this.
The initial valuation of purchased participating interests is based on the fair value of the identifiable assets and liabilities at the time of acquisition. For subsequent valuation, the policies applicable to these financial statements are applied, based on the values at initial valuation.
Recognized as revenues is the amount by which the book value of the participating interest has changed since the previous financial statements as a result of the result achieved by the participating interest.
Participating interests over which no significant influence can be exercised are valued at acquisition price. The dividend declared by the participating interest in the year under review is taken into account as revenues, with dividends not paid out in cash being valued at fair value.
If there is an extraordinary depreciation, valuation takes place at the realizable value. The write-down is charged to the statement of revenues and charges. For the determination of whether there is an extraordinary depreciation, see “Extraordinary depreciation of fixed assets.”
Securities
Securities are measured at fair value upon initial processing. Subsequently, securities included under financial fixed assets are valued at fair value. Increases in value of these securities are recorded directly in the revaluation reserve. The moment the relevant securities are no longer included in the balance sheet, the cumulative increase in value is processed in equity in the statement of revenues and charges. If the fair value of an individual security falls below its (amortized) cost, the reduction in value is charged to the statement of revenues and charges. For interest-bearing financial assets, interest revenues are recognized using the effective interest method. Tilburg University values its securities at fair market value because, in principle, there is no intention to hold securities until maturity.
Extraordinary depreciation of 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 recoverable amount of the asset is determined. If it is not possible to determine the recoverable amount for the individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An extraordinary depreciation loss occurs when the book value of an asset exceeds its recoverable amount; the recoverable amount is the higher of the net realizable value and value in use. An extraordinary depreciation loss is recognized immediately as an expense in the statement of revenues and charges while simultaneously reducing the book value of the asset in question.
If it is determined that an extraordinary depreciation loss recognized in the past 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 extraordinary depreciation loss had been recognized for the asset. Extraordinary depreciation of goodwill is not reversed.
Also for financial instruments, the institution assesses at each balance sheet date whether there is objective evidence of extraordinary depreciation of a financial asset or a group of financial assets. If objective evidence of extraordinary depreciation exists, the institution determines the amount of the extraordinary depreciation loss and processes it directly in the statement of revenues and charges.
For financial assets measured at amortized cost, the amount of extraordinary depreciation is determined as the difference between the book value of the asset and the best possible estimate of future cash flows calculated at present value at the effective interest rate of the financial asset as determined at initial processing of the instrument.
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 on the basis of the eligible project costs incurred in relation to the estimated total eligible project costs. If the result cannot (yet) be reliably estimated, revenues are recognized up to the amount of the incurred project costs to the extent that they are likely to be recoverable. Foreseeable losses (as a matter of prudence) are taken entirely directly to revenues. Projects in progress for which the invoiced instalments exceed the realized project revenues are presented under current liabilities.
Receivables
Receivables are initially measured at the fair value of the consideration. Receivables are measured after initial processing at amortized cost. If receipt of the receivable is deferred on the basis of an extended agreed payment period, the fair value is determined on the basis of the present value of the expected receipts and interest revenues based on the effective interest rate is credited to the statement of revenues and expenditure. Provisions for bad debts are deducted from the book value of the receivable.
Liquid assets
Liquid assets are stated at face 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 a segmentation into public and private funds.
Earmarked reserves are reserves with a more limited spending option, which the Board has put in place.
General buildings reserve
The general buildings reserve is intended to express the blocked portion of equity related to the ownership of the property and the financing of part of it with the university’s own funds.
General reserves
These are the freely disposable funds at the balance sheet date from the operating balances up to and including the reporting year.
Earmarked reserves
These are the funds already appropriated at the balance sheet date from the operating balances up to and including the reporting year.
Revaluation reserve
If revaluations are included in the revaluation reserve, realized revaluations are credited to the statement of revenues and charges.
Third-party interest
Third-party interest as part of group equity is measured at the amount of the net interest in the net assets of the related party in question.
Provisions
Provisions are formed for legally enforceable or constructive obligations that exist at the balance sheet date, for which it is probable that an outflow of resources will be required and the amount of which can be reliably estimated.
Provisions are determined based on the best estimate of the amounts necessary to settle the obligations at the balance sheet date. Provisions are measured at the present value of the expenditures expected to be necessary to settle the obligations and losses unless the time value of money is not material. If the time value of money is not material, the provision is stated at face value.
Severance pay
The severance pay provision relates to a provision for former employees who may claim redundancy payments. Entitlement to a redundancy payment is assessed on the basis of decisions issued on the balance sheet date within the framework of redundancy pay and (non-statutory) unemployment benefits. The provision is set at 100% of the calculated maximum liability. Paid benefits are withdrawn from the provision.
Long-term illness
The long-term illness provision has been formed for employees who are on long-term sick leave on the balance sheet date and who are not expected to return to active service (in part or in full). The provision is calculated for a period up to two years after the first notification of illness.
Long-term savings Leave
The long-term savings leave provision was created in connection with obligations related to the multi-year savings of leave days based on the actual hourly rate per employee.
WIA/WGA self-insurance
Tilburg University bears the risk for both the fixed and flexible WGA. A fixed WGA benefit is awarded to employees who enter the WGA from a permanent employment contract. A flexible WGA benefit is awarded to employees who left employment while on sick leave, have received a benefit under the Sickness Benefits Act, and subsequently, after two years of illness, enter the WGA.
It was agreed in the Collective Labour Agreement that the change in the wage-related WGA will be repaired at the employer's expense effective July 1, 2017. It is currently being examined whether agreements can be made for several universities. As a result, no estimate is yet possible. Therefore, this is not included in the provision.
Service Milestones
This provision was created in connection with the obligations associated with future 25-year, 40-year and 50-year service milestone renumerations for staff; the periodic increase is an allocation to the provision.
Reorganization provision
Tilburg University has chosen to redesign its support organization. In October 2015, the Redundancy Plan BEST (Building Excellent Support at Tilburg University) was adopted in which provisions were made for employees who become redundant due to the reorganization. A decision to reorganize was also made in the past for TSHD. As a result, a number of employees became redundant. A reorganization provision was made for the related expenses, the last withdrawal of which took place in 2022.
Other provisions
The other provisions consist of a provision for transition 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 transition compensation was formed in connection with the obligations related to the expiration of employment contracts of salaried staff under the WAB.
Current liabilities
Current liabilities are measured at fair value upon initial processing. Short-term liabilities are valued after first processing at amortized cost, being the amount received taking into account paid-in surplus or discount and after deduction of transaction costs. This is usually the nominal value.
Financial instruments
Securities included under current assets, to the extent that 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 valued at (amortized) cost. Fair value is the amount for which an asset could be traded, or a liability settled between knowledgeable, willing, and independent parties. If no reliable fair value is readily identifiable, 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 using recent similar "at arm's length" transactions, the discounted cash flow method (present value of cash flows), and/or option pricing models, taking into account specific circumstances.
