University Annual Report and Financial Statements

Annual Report & Financial Statements

finstatements_2016_17 cover

Annual Report and Financial Statements 2016-17

  • Vice-Chancellor's Introduction
  • Foreword by the Chairman
  • Report of the Treasurer
  • Strategic Plan 2016–2021
  • Student Numbers
  • Rankings
  • Sheffield City Region Update
  • Alumni and Philanthropic Support
  • Our University at a Glance
  • Financial Statements 2016-17

Download Annual Report and Financial Statements 2016-17 (PDF, 7.3MB)

Download Financial Results Infographic 2016-17


What are the new accounting standards?

The Financial Reporting Council required that we adopt a new accounting standard (FRS102) from 2015/16 in place of the old accounting rules we have been following for many years now (old UK 'GAAP' (Generally Accepted Accounting Principles)).

The new accounting standard applies to the entire Higher Education sector, as well as to many other sectors. This means that some areas of the standard are not specific enough for our sector, so we have supplementary rules in the Statement of Recommended Practice for Further and Higher Education (SORP 2015).

Why can't we stay with the old accounting standards?

The old accounting standards are no longer available. If we were to continue to use them rather than adopt the new accounting standards then the University's external auditors would probably 'qualify' their audit opinion. In other words they would cast doubt on the accuracy of our financial results.

Not following the standard also has knock on impacts, such as meaning we don’t follow HEFCE Accounts Direction guidance and are thus not complying with the HEFCE Memorandum of Assurance and Accountability (MAA) (the ‘terms and conditions' between HEFCE, institutions, governing bodies and accountable officers), and also potentially affecting our bank covenants for our existing borrowings.

If organisations could pick and choose which accounting rules to use then readers of accounts would find it harder to really understand what they mean. Without consistency, companies could choose to present according to what suits their financial position.

Why introduce new standards?

There are various answers to the question'why was FRS102 introduced'. In summary UK accounting standards haven't been revised much for many years and were due an overhaul as they were old, lengthy, and increasingly inconsistent with international accounting standards.

As global markets have increased, the lack of comparability due to each country having its own accounting standards became problematic and highlighted the need for standardisation. As a consequence International Financial Reporting Standards (IFRS) were created which certain companies, such as listed companies, have to follow. Alongside this there has been a requirement for more transparency within company accounts as transactions are often deliberately structured to keep assets and liabilities off the books of companies. This was highlighted during the recent financial crash.

For those companies in the UK that don't have to follow IFRS we had a choice of adopting the new FRS102, full IFRS or, if a small company, follow a third accounting standard specific to small companies.

FRS102 is based around the IFRS for small and medium enterprises (SMEs) so should have more comparability to international accounting standards. It is also considerably shorter than old UK accounting standards (although it’s still 350 pages long), and will be subject to review and revision every three years, and therefore should encourage 'transparency'. The use of the word transparency within accounting standards generally relates to being able to see all the transactions of an organisation, rather than ease of understanding.

What are the impacts of FRS102?

We have more assets and liabilities being reflected on our Balance Sheet as part of this move to greater transparency. One of the biggest changes is the University's share of the net USS liability (£67.3m at 31 July 2017) is now shown on our Balance Sheet whereas before it was not on our Balance Sheet by virtue of being a multi-employer scheme.

Changes to values of assets and liabilities that are on the Balance Sheet will now go through the income and expenditure account creating volatility. Examples are movements in pension liability valuations, fixed asset valuations, or changes to values of endowments and investments. For instance external valuers increased the value of our student village properties in 2016/17 by £47.6m and in 2015/16 increased the value of our non-residential estate by £78.3m. This shows as a surplus in the income and expenditure account. Conversely the movement on the net pension liability is a ‘cost’ on the income and expenditure account in 2016/17 of £21.3m and in 2015/16 of £47.0m.

There are also changes to the timing of when income appears on the income and expenditure account. An example is capital grants and depreciation. Historically we would receive a capital grant for an asset, and both the grant income and the depreciation expense would gradually 'drip feed' into the income and expenditure account over the number of years that we expected to use the asset. Now we are required to show the income in total up front, but the depreciation cost will still be shown over many years so we can't match the income to the same time period as the cost of depreciation of the asset. In 2016/17 capital grant income was £21.0m whereas in 2015/16 capital grant income was £62.1m. This creates volatility from year to year in our operating surplus/(deficit) with the movement between these two years being £41.1m. The rationale is that there is no reason to defer showing the full amount of the grant income and we should show it sooner.

Did we have any other options?

Yes, we could have adopted the International Financial Reporting Standards (IFRS). The University's Finance Committee did consider whether we should adopt full IFRS or FRS102 but full IFRS has too many disadvantages to make it worthwhile. In particular it would mean we would be different to the rest of the sector so would lose sectoral comparability, and full IFRS is more complex than FRS102 making our accounts lengthier and arguably more complex to readers.

Why do we present our results as total, underlying, and other activity?

2015/16 is the first year that the sector has reported under the new accounting standard of FRS102. This has had a major impact on how we now report our financial results. The statement of comprehensive income and expenditure (income statement) is showing greater volatility as illustrated above, and the balance sheet includes additional liabilities that were not required to be included previously. The volatility in our results will also arise for other institutions, making it more difficult to measure our performance against the sector.

In order to help understand our income and expenditure account we are internally reporting underlying (operational) and other activities (unusual or infrequent events as required by financial reporting standards). The summary income statement in the Report of the Treasurer within our financial statements presents our 2016/17 results analysed between our underlying and other activities.

What is within 'other activities'?

We have experienced several large items of "other activities" which distort our reported financial performance when compared to our underlying performance. These are unusual or infrequent events as defined by financial reporting standards, rather than our day-to-day operational activities. Examples are:

Capital Grants

During 2016/17 we have recognised as income capital grants of £21.0m (2015/16: £63.1m, 2014/15: £28.7m), which under FRS102 we report ‘up-front’ rather than spreading the grant income over the life of the associated asset. This has the effect of increasing our surplus in year, and also creating big swings from one year to the next year.

Previously capital grant income was gradually fed into the income statement to match the expected life of the asset, but now we will take it all to the income statement when we purchase or build the asset. This results in income peaks and troughs. A single big capital grant recognised in a year can make it seem as though we have suddenly had a 'bumper' financial year. However, we cannot spend these grants on day-to- day activities, as they are to fund specific capital items.

Depending on the timing of grant funded expenditure, we may recognise a lot of capital grants as income in one particular financial year, but then not so many in another year, which creates volatility. This feeds straight into the results of the University. 


In 2016/17 we undertook a revaluation of our student village properties which increased the value of our assets on our Balance Sheet by £47.6m. In 2015/16 we undertook a revaluation of our academic and administrative estate which has increased the value of the assets by £78.3m. Under FRS102 this gain now goes through our income statement, increasing our reported surplus for the year.

This is not actual income that we have received; it is simply saying that our buildings are worth more. If there was a property crash then we could conversely see a negative figure. We would have to sell these buildings to actually realise this income and turn it into cash. It’s also a valuation made at a particular point in time (31 July), and as can be seen with pensions, can be subject to changes depending on what’s happening in the wider market.

Similarly, changes in valuations of investments now go through our income statement. The change will depend on how the stocks and shares are performing in the market on 31 July one year compared to the next year.


Finally, the University of Sheffield Pension Scheme (USPS) has been valued at year end as having an increase in net liabilities of £21.3m (2015/16: £47.0m, 2014/15: £11.7m), taking the total net liability to be included in our accounts for this scheme to £147.2m. This increase in the year end valuation of liabilities on the scheme under FRS102 now goes through our income statement as a cost. 

It should be noted that this is an accounting estimate at the year end and was adversely impacted by a fall in bond yields since the last year end, following the decision to leave the European Union, which will affect the majority of UK defined benefit schemes. This valuation has no impact on the level of future deficit payments to be made by the University which are determined by the triennial actuarial valuation. It also has no effect on the benefits that the scheme undertakes to make available to members under the current scheme rules.

Are our new financial results comparable to our old financial results?

No, we cannot compare our results under FRS102 to those under old UK GAAP as they are prepared on a different basis, and thus it is comparing 'apples and pears'.

This has affected some of our metrics that we monitor, such as those which are expressed as a % of income. Given that our income now has more volatility and earlier recognition, it means that if we compare the old metrics to the new ones, then we could easily draw the wrong conclusion. Similarly we also have impacts on some expenditure items, which may also affect metrics.

What are reserves?

Our reserves are effectively the cumulative total of surpluses and deficits the University has made since we were formed over 100 years ago. A surplus or deficit is not the same as cash, as surpluses/(deficits) include non-cash items, such as depreciation.

How do reserves differ to cash?

Reserves are the cumulative balance of surpluses or deficits we have made since we started ‘trading’. Cash balances are the amount of cash in our bank, which will include cash from borrowings.

We spend from our cash in the bank, rather than from reserves.

What is net debt?

Net debt is our cash balances less the amount we owe on our borrowings. The sector is increasingly moving from a net funds position (more cash than borrowings) to a net debt position (more borrowings than cash).

What are our liquidity days?

Liquidity days are how many days’ cash in the bank we have to continue paying our average daily bills before we run out of cash assuming we do not receive any further cash receipts. We have cash payments which average at approximately £1.4m per day and, say, we have £42m cash in the bank this means we have 30 liquidity days.

It should be noted that our liquidity days will vary depending on when we look at it. Our balance sheet is prepared at 31 July of each year. The Balance Sheet just presents a 'snapshot' of our accounts at a specific point in time. However, if we look at our cash balances at different points throughout the year we will see them go up and down due to the annual cycle of payments and receipts.

What is 'cash generated from operations'?

Our surplus/(deficit) includes non-cash items, such as depreciation. Our cash generated from operations is the net amount of cash that we have generated from our day to day operations before capital investment, capital grant receipts, or servicing of debt (interest paid on borrowings).

A company that cannot recurrently generate cash over the long term signals real financial difficulties as it will struggle to pay its debts.

Previous Annual Report and Financial Statements

Annual Report and Statements Financial Results Infographics Date Published
Annual Report and Financial Statements 2015-16 Financial Results Infographic 2015-16 December 2016
Annual Report and Financial Statements 2014/15 Financial Results Infographic 2014-15 January 2016
Annual Report and Financial Statements 2013/14 Financial Results Infographic 2013-14 January 2015
Annual Report and Financial Statements 2012/13 Financial Results Infographic 2012/13 January 2014
Annual Report and Financial Statements 2011/12 December 2012
Annual Report and Financial Statements 2010/11 January 2012
Annual Report and Financial Statements 2009/10 January 2011
Annual Report and Financial Statements 2008/09 December 2009
Annual Report and Financial Statements 2007/08 December 2008
Financial Statements 2006/07 December 2007
Financial Statements 2005/06 December 2006
Financial Statements 2004/05 December 2005
Financial Statements 2003/04 December 2004
Financial Statements 2002/03 December 2003
Financial Statements 2001/02 December 2002
Financial Statements 2000/01 December 2001
Financial Statements 1999/00 December 2000