Commentary for 31 December 2020 reporting by universities and wānanga

The most currently available model financial statements for Tutuki Tertiary Institute are for the year ended 31 December 2019. Other than for the limited number of disclosures discussed below, these model financial statements remain relevant for universities’ and wānanga financial statements for the year ended 31 December 2020.

The table below notes the updates to those disclosures in the 2019 model that should be considered by universities and wānanga in preparing their 31 December 2020 financial statements.

There are additional changes for the subsidiaries of Te Pūkenga—New Zealand Institute of Skills and Technology (Te Pūkenga). Some reporting matters are currently being considered and we will provide commentary for these Te Pūkenga subsidiaries when this has been finalised.

2019 model section	Discussion
Various – references to legislation	The Education and Training Act 2020 came into force on 1 August 2020. It replaces the Education Act 1989. Consequently, some legislative references included in the model financial statement disclosures should be replaced as follows. Note 1 Statement of accounting policies: Reporting entity and statement of compliance sections – The reference to the Education Act 1989 is now the Education and Training Act 2020. Note 2 Revenue: Accounting policy for Performance-Based Research Fund – The reference to section 159YA of the Education Act 1989 is now section 425 of the Education and Training Act 2020. Note 12 Property, plant and equipment: Restrictions on title – The reference to the Education Act 1989 is now the Education and Training Act 2020. Note 21 Equity: Capital management – The reference to the Education Act 1989 is now the Education and Training Act 2020.
Note 1 Statement of accounting policies – Standards issued and not yet effective and not early adopted	Other than as noted below, the standards issued and not yet effective disclosures of the most recent 2019 TEI model financial statements remain relevant. In August 2020, the New Zealand Accounting Standards Board approved the deferral of the adoption date of PBE FRS 48 Service Performance Reporting by one year to reporting periods beginning on or after 1 January 2022. Illustrative text for PBE FRS 48 is provided below for those TEIs that have not early adopted PBE FRS 48. *PBE FRS 48 Service Performance Reporting* PBE FRS 48 replaces the service performance reporting requirements of PBE IPSAS 1 Presentation of Financial Statements and is effective for annual reporting periods beginning on or after 1 January 2022. The Institute has not yet determined how application of PBE FRS 48 will affect its statement of service performance. It does not plan to adopt the standard early.
Note 2 Revenue: Accounting policies for Student Achievement Component funding and Fees-free revenue	The Minister of Education and the Tertiary Education Commission (TEC) agreed that the TEC will not recover 2020 investment plan and fees free funding because of either, non-achievement of Education Performance Indicators, or under-delivery during the 2020 year. In late March 2020, the TEC sent a letter to TEIs to confirm this. We have updated our suggested revenue accounting policies for these decisions: *Student Achievement Component funding* Student Achievement Component (SAC) funding is the Institute’s main source of operational funding from the Tertiary Education Commission (TEC). The Institute considers SAC funding to be non-exchange revenue. 31 December 2019 comparative year The Institute recognises SAC funding as revenue when the course withdrawal date has passed, based on the number of eligible students enrolled in the course at that date and the value of the course. 31 December 2020 year In response to the COVID-19 pandemic, the TEC confirmed that it will not seek repayment of 2020 investment plan funding, which includes SAC funding, if there is under-delivery in the 2020 year. Therefore, the Institute has recognised in full the 2020 investment plan funding as revenue during the financial year. [In the event that the TEI has over-delivered and is entitled to additional funding, then the TEI will need to update the wording.] *Fees-free revenue* The Institute considers fees-free revenue is non-exchange revenue and has presented funding received as part of tuition fees. This is on the basis that receipts from the TEC are for payment on behalf of the student as specified in the relevant funding mechanism. 31 December 2019 comparative year The Institute recognises revenue when the course withdrawal date for an eligible student has passed. 31 December 2020 year In response to the COVID-19 pandemic, TEC confirmed that it will not seek repayment of 2020 fees-free funding if there is under-delivery in the 2020 year. Therefore, the Institute has recognised in full the 2020 funding as revenue during the financial year.
New note on Covid-19	The Covid-19 pandemic has significantly affected the TEI sector and therefore will have an impact on TEI’s 31 December 2020 financial statements and performance information. TEIs will need to consider how to effectively communicate the impact of COVID-19 to the users of the financial statements and performance information, including the uncertainties regarding future impacts and providing additional disclosures when required by generally accepted accounting practice. When there are material uncertainties related to a TEI’s ability to continue as a going concern, specific disclosures about those uncertainties will need to be made. This includes information about the principal events or conditions giving rise to those material uncertainties and the governing body’s plans to mitigate these. PBE IPSAS 1 Presentation of Financial Statements paragraphs 38 to 41.2 provide further guidance on going concern uncertainty disclosures. A suggested starting point for a COVID-19 financial statement disclosure is provided below. TEIs will need to ensure their disclosure appropriately captures their specific facts and circumstances. *Note [xx] The effects of COVID-19 on the Institute* On 11 March 2020, the World Health Organisation declared the outbreak of COVID-19 a pandemic and two weeks later the New Zealand Government declared a State of National Emergency. From this, the country was in lockdown at Alert Level 4 for the period 26 March to 27 April and remained in lockdown at Alert Level 3, thereafter, until 13 May. During this period, the Institute closed all delivery sites and brought forward the mid-semester break to align with the new timing of the school holidays in New Zealand. Most staff moved to a ‘work from home’ model and teaching was changed to on-line delivery after the mid-semester break. After 13 May, when New Zealand moved to lower Alert Levels, students were able to attend classes on-site or continue to access classes remotely. The effect on our operations is reflected in these financial statements based on the information available to the date these financial statements are approved. The main impacts on the Institute’s financial statements due to COVID-19 are explained below. This includes information about key assumptions concerning the future and other sources of estimation uncertainty due to COVID-19. The main impacts on the Institute’s performance measures are explained in the statement of service performance on page X. Government funding The TEC confirmed during March 2020 that 2020 funding for Investment Plans and Fees Free will continue and that it will not recover 2020 funding because of either non-achievement of Education Performance Indicators or under-delivery during the 2020 year. This provided the Institute with certainty that it could continue to deliver to students despite the disruption caused by COVID-19. As a consequence of this, the Institute has recognised this funding in full as revenue during the financial year. Student numbers and fees revenue [Disclose information about the extent of change in international and domestic student numbers and fee revenue and if the revenue decrease is substantial the Institute’s actions and plans in response]. Accommodation revenue [Disclose information about any significant changes in accommodation revenue]. Operating expenses As a result of COVID-19, the Institute has incurred additional expenditure of $ … on: [Describe the significant impacts on operating expenses, such as additional costs of implementing alternative methods of delivery to students, changed working arrangements or any restructuring or redundancy costs. Also explain any significant responses to additional costs and any significant cost savings achieved such as travel costs.] Valuation of investment property [When a property valuer includes a material valuation uncertainty statement in their valuation report, provide information about this]. Further information about the key valuation assumptions used in estimating the fair value of investment property at 31 December 2020 are provided in [cross-reference to investment property note]. Valuation of land and buildings [When a property valuer includes a material valuation uncertainty statement in their valuation report or their fair value assessment report, provide information about this]. Further information about the key valuation assumptions used in estimating the fair value of land and buildings at 31 December 2020 are provided in [cross-reference to the property, plant and equipment note]. Impairment of tangible and intangible assets An impairment assessment has been completed for tangible and intangible assets. The result of this assessment was [explain whether any impairment loss has been recognised and cross‑reference to where the impairment disclosures are made]. Other [Include information on any other financial statement item that has been significantly affected. For example: Financial investments, such as significant fair value movements in bonds, shares/funds before and after balance date. Debtors, such as significant provisions for impairment.] If the information on the impact of COVID-19 on a TEI’s operations and the TEI’s response to COVID-19 is provided outside of the financial statements (for example in the Chief Executive’s report or other management discussion and analysis within the Annual Report), then the financial statements can cross-reference to this information.
Note 26 Adoption of PBE IPSAS 34 – PBE IPSAS 38	The disclosures for the first-time adoption of PBE IPSAS 34 –PBE IPSAS 38 are not required to be repeated in the 31 December 2020 financial statements.
Appendix 2: PBE IFRS 9	PBE IFRS 9 Financial Instruments was available for early adoption if the TEI’s initial application was before 1 January 2020. For TEIs that have early adopted PBE IFRS 9, the note 27 disclosures for early first-time adoption would have been in the 31 December 2019 financial statements so are not required to be repeated in the 31 December 2020 financial statements. For TEIs that have not early adopted PBE IFRS 9, the disclosures in Appendix 2 are not applicable. However, if TEIs have not early adopted PBE IFRS 9, they can early adopt PBE IPSAS 41 Financial Instruments. PBE IPSAS 41 is effective for financial years beginning on or after 1 January 2022, with early adoption permitted. PBE IPSAS 41 is almost identical to PBE IFRS 9 but PBE IPSAS 41 includes PBE specific guidance and examples. TEIs can use the PBE IFRS 9 accounting and disclosures in the model financial statements as a guide for PBE IPSAS 41. We would expect the TEI to refer to PBE IPSAS 41 for the exact requirements of the standard.