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University of PretoriaAnnual Financial Review

2011 Financial Review ii

Composition of the Council and Executive of the University of Pretoria as on 31 December 2011Council of the University of Pretoria

Members nominated by the MinisterMs B DibateDr PZ DubeMs NFT MpumlwanaDr B-A RibeiroMr AW Taylor

Members elected by the ConvocationMr AD BothaDr BP Botha (Deputy Chairperson)Dr EC BothaOne vacancy

Members elected by SenateProf I PikirayiProf RF SandenberghProf A Ströh

Members elected by the DonorsMr LL DippenaarProf DJ du Plessis

Members appointed by Council based on expertise/experienceDr SF BooysenProf RM LoubserMs D MagugumelaMs NT Mtoba (Chairperson)Mr IB SkosanaDr J van Zyl

Members appointed by the Tshwane local authorityMs PF Mashaba

Student representativesMr K MalatjiMr C Oberholzer

Employee representative (academic)Prof JH Potgieter

Employee representative (non-academic)Prof A van Aswegen

Principal and Vice-Principals (ex officio)Prof CM de la Rey (Vice-Chancellor and Principal)Prof RM Crewe (Vice-Principal)Prof SG Burton (Vice-Principal)Prof NA Ogude (Vice-Principal)Prof CR de Beer (Seconded as Administrator: University of Zululand as of 1 May 2011)

Executive of the University of Pretoria

Prof CM de la Rey (Vice-Chancellor and Principal)Prof RM Crewe (Vice-Principal)Prof SG Burton (Vice-Principal)Prof NA Ogude (Vice-Principal)Prof NJ Grové (Registrar)Prof AM de Klerk (Executive Director)Prof C Koornhof (Executive Director)Prof AP Melck (Executive Director)Prof CR de Beer (Seconded as Administrator: University of Zululand as of 1 May 2011)One vacancy

Addresses of the University

Physical addressUniversity of Pretoria Lynnwood Road Pretoria

Postal addressOffice of the RegistrarRoom 4-23Administration BuildingUniversity of Pretoria Pretoria0002

2011 Financial Review 1

ContentsScope of the summarised consolidated annual financial statements 2

Annual financial review for 2011 2

Report on internal administrative/operational structures and controls 5

Report on risk exposure assessment and the management thereof 6

Approval of the consolidated financial statements 6

Independent auditor’s report to the Council of the University of Pretoria 7

Summary of accounting policies 9

Consolidated statement of financial position 22

Consolidated income statement 24

Consolidated statement of comprehensive income 25

Consolidated statement of changes in equity 26

Consolidated statement of cash flows 27

Notes to the consolidated financial statements 28


SCOPE OF THE SUMMARISED CONSOLIDATED ANNUAL FINANCIAL STATEMENTSThis report provides a financial profile of the University of Pretoria for the year ended 31 December 2011. The financial statements

includes revenues, expenses, assets and liabilities, as well as the transactions of all the operations and organisations under the

jurisdiction of the University.

ANNUAL FINANCIAL REVIEW FOR 2011INCOME AND EXPENDITURE

The University’s total income increased by R563 million to R4 811 million during the period under review.

The first main source of income remains the block grant received from the Department of Higher Education and Training, together

with earmarked grants to veterinary science, clinical training, foundation year programmes and teaching development initiatives.

The block grant of R1 476,26 million in 2011 represents an increase of 11,4% over 2010.

Tuition fees, the second main source of income, increased by 7%, despite an average increase of 8% in student fees raised for the

University’s programme offerings. The difference is primarily attributable to a decline in student numbers.

The following table provides a summary of the University’s sources of income:

Table 1: Total income of the University of Pretoria in 2011

Income2011 2010 Change

Rm Rm Rm %

Government grants 1 652 1 405 247 18

Tuition fees 1 000 931 69 7

Accommodation and meal fees 220 203 17 8

Investment income – profits on disposal 214 90 124 138

Interest / Dividend Income 197 229 (32) (14)

Expected return on plan assets 416 370 46 12

Income from contracts and other 475 489 (14) (2,9)

Service rendering 456 436 20 4,6

Donations and gifts 181 95 86 91

Total 4 811 4 248 563 13

Operating expenses were kept within the bounds of affordability by adopting measures to promote effectiveness and efficiency

and by maintaining stringent budget control. Operating expenses increased by 6,6% (2010: 13,7%) from R3 643 million in 2010

to R3 886 million in 2011.


ASSETS AND LIABILITIES

The total assets increased by 8% (2010: 13%) to R8 878 million (2010: R8 191 million). The most significant categories of assets

are Property, Plant and Equipment, and Investments:

Property, Plant and Equipment

Property, Plant and Equipment increased from R2 200 million to R2 741 million, mainly due to the completion of the Engineering 3

Building and the Plant Sciences Building during the year. The University received infrastructure grants from the Department of

Higher Education and Training of R305,6 million for these and other infrastructure projects. The investment in these projects

supports the University’s objectives to increase the number of graduates in engineering and natural sciences.

Investments

At 31 December 2011, the market value of the University’s investment portfolio was R3 075 million (2010: R2 469 million). The

major portion of investments is categorised under specifically funded activities that are either restricted or designated by Council.

The University’s investment funds serve the following purposes:

(1) Meet part of the short-term requirements of the University – these liabilities have a maximum term of 24 months. The risk

profile emphasises the need for capital protection over short periods and a high degree of liquidity.

(2) Meet some of the medium-term liabilities (two to five years) of the University – the risk appetite for these liabilities is a

combination of a moderate return relative to inflation (3,5% p.a.) plus capital protection over a period of three years.

(3) Meet the long-term liabilities (five years and more) of the University – the main requirement is a good return relative to

inflation (6% p.a.). The liquidity requirement is lower than for the other liabilities.

(4) A special class of the long-term liabilities is the University’s obligation to post-retirement medical aid benefits.

Portfolio Primary performance target Actual returns

Long-term capital portfolio 6% p.a. (net of fees) outperformance of consumer

price inflation over any rolling eight-year period.

6,4% p.a. real

Stable portfolio 3,5% p.a. (net of fees) outperformance of

consumer price inflation over any rolling three-

year period.

2,9% p.a. real

Money Market portfolio Performance in line with the STEFI (composite)

index

2,3% real

Continuation Medical Aid portfolio 6% p.a. (net of fees) outperformance of consumer

price inflation over any rolling eight-year period.

7,2% p.a. real


STUDENT FINANCIAL AID

During 2011, the University administered financial aid to the amount of R631 million, as reflected in the table below. This

represents an overall increase of 16% compared to financial aid provided in the previous year (2010: R543 million).

Table 2 : Scholarship and loan awards for 2011:

UNDERGRADUATE POSTGRADUATE GRAND TOTAL

R’000 R’000 R’000

UP-funded bursaries 64 529 42 360 106 889

UP-controlled bursaries 61 193 80 046 141 239

UP-administered bursaries 149 383 24 732 174 115

BURSARIES TOTAL 275 105 147 138 422 243

UP loans 9 243 1 546 10 789

NSFAS loans 131 493 5 802 137 295

Eduloan 26 350 34 367 60 717

LOANS TOTAL 167 086 41 715 208 801

GRAND TOTAL 2011 442 191 188 853 631 044

GRAND TOTAL 2010 381 759 161 749 543 508

Black*: Black, Indian and Coloured students

YEAR-END CLOSING OF THE FINANCIAL STATEMENTS

Notwithstanding an uncertain economic outlook and a sharp increase in costs, the University was able to show a surplus on its

operating account for the year.


The University of Pretoria accepts that it has both an

obligation and a responsibility regarding the disclosure of

reliable financial information. To fulfil its responsibility in

this regard, the University maintains proper internal control

systems. These systems are designed to provide reasonable

assurance that the University’s assets are safeguarded

against unauthorised acquisition, use or disposal, and that the

accounting records provide a reliable basis for the preparation

of financial statements.

The internal control systems are based on an organisational

structure and the division of responsibilities. The University’s

established policies and procedures, including its Code of

Ethics, are communicated throughout the organisation to

foster a strong ethical climate. The University has also adopted

a Fraud Policy and Response Plan, as well as a Whistle Blowers

Policy to set the University’s stance on fraud and corruption

and to reinforce existing systems, policies and procedures

aimed at deterring, preventing, detecting, reacting to and

reducing the impact of fraud and corruption.

The University’s internal audit activities are performed by

the Department of Risk Management and Internal Audit,

while certain elements are co-sourced to an independent

firm of auditors. Internal control systems, in accordance with

the annual Internal Audit Plan, as approved by the Audit and

Risk Management Committee of Council, are appraised on a

continuous basis by either the Department of Risk Management

and Internal Audit, or the co-sourced independent internal

auditors. Such audit plan is largely based on the strategic risks

facing the University that emanated from the University’s risk

management process.

The internal audit function operates under the supervision

of the University Council. The Audit and Risk Management

Committee and the Standing Committee of Council exercise

the supervision on behalf of the Council. Weaknesses identified

in respect of the internal control systems are brought to the

attention of management and the Audit and Risk Management

Committee. Recommendations made to obviate weaknesses

are also submitted to management for appropriate action.

The effectiveness of any system of internal control is subject

to limitations. These limitations include the possibility

that human errors and the circumvention and overriding of

controls can occur. Effective internal control systems can only

provide reasonable assurance regarding the preparation of

financial statements and the safeguarding of assets. However,

the effectiveness of the systems can vary as circumstances

change.

REPORT ON INTERNAL ADMINISTRATIVE/ OPERATIONAL STRUCTURES AND CONTROLS


REPORT ON RISK EXPOSURE ASSESSMENT AND THE MANAGEMENT THEREOF

The design, implementation and monitoring of the process of

risk management is the responsibility of the University. In this

regard, management is accountable to the University Council.

A Strategic Risk Management Committee, comprising members

of the Executive and a nominated Dean and Director, evaluates

and coordinates the management of identified strategic risks,

both financial and non-financial, faced by the University. Risk

management processes are reviewed regularly for continuing

relevance and effectiveness. The Strategic Risk Management

Committee reports to the Executive.

A report on the risk management process that is being

followed, as well as a summary of the risk register and

appropriate risk treatment plans, is presented to the Audit

and Risk Management Committee and to the Council of the

University on a regular basis.

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements presented on pages

10 to 63 represent an extract of the full statements of

the University of Pretoria. These financial statements were

approved by the Council of the University of Pretoria at a

meeting held on 13 June 2012.

The full financial statements were prepared in accordance

with International Financial Reporting Standards and in the

manner required by the Minister of Higher Education and

Training in terms of section 41 of the Higher Education Act,

1997 (Act 101 of 1997), as amended.

The “going concern” approach has been adopted in the

preparing of the financial statements. Based on forecasts and

available cash resources, Council believes that the University

of Pretoria will remain a “going concern” for the foreseeable

future. The viability of the institution is borne out by the

content of the financial statements.

The financial statements have been audited by

PricewaterhouseCoopers Inc, who was given unrestricted access

to all financial records and related data, including the minutes

of meetings of Council and of all its committees. Council

believes that all representations made to the independent

auditors during their audit were valid and appropriate.

PROF CM DE LA REY PROF C KOORNHOFVice-Chancellor and Principal Executive Director

6 September 2012 6 September 2012


INDEPENDENT AUDITOR’S REPORT TO THE COUNCIL OF THE UNIVERSITY OF PRETORIAREPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

IntroductionWe have audited the consolidated financial statements of the University of Pretoria and its subsidiaries as set out on pages

10 to 63, which comprise the consolidated statement of financial position as at 31 December 2011, the consolidated income

statement and the consolidated statement of comprehensive income, statement of changes in equity and statement of cash

flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory

information.

Council’s responsibility for the financial statementsCouncil is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with

International Financial Reporting Standards and the requirements of the Higher Education Act of South Africa, and for such

internal control as it determines is necessary to enable the preparation of consolidated financial statements that are free from

material misstatements, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our

audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements,

and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of

material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial

statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the

overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers Inc, 2 Eglin Road, Sunninghill 2157, Private Bag X36, Sunninghill 2157, South Africa

T: +27 (11) 797 4000, F: +27 (11) 797 5800, www.pwc.co.za

Executive: S P Kana (Chief Executive Officer) T P Blandin de Chalain D J Fölscher P J Mothibe S Subramoney F TonelliResident Director in Charge: E R MackeownThe company’s principal place of business is at 2 Eglin Road, Sunninghill where a list of directors’ names is available for inspection.Reg. no. 1998/012055/21, VAT reg.no. 4950174682


OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the

University of Pretoria and its subsidiaries as at 31 December 2011, and their financial performance and cash flows for the year

then ended in accordance with International Financial Reporting Standards.

Other matterThe accompanying financial statements are not the statutory financial statements of the University and do not include all the

disclosures required by the Higher Education Act of South Africa. The statutory financial statements are available for inspection

at the Department of Higher Education and Training.

PricewaterhouseCoopers Inc.

Director: JFM Kotze

Registered Auditor

Johannesburg

6 September 2012

1 Summary of accounting policies



UNIVERSITY OF PRETORIA and its subsidiariesSUMMARY OF ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER 2011

1. General information

The consolidated financial statements were authorised for

issue by Council on 13 June 2012.

The University of Pretoria is a Higher Education Institution

governed by the Higher Education Act 101 of 1997 as amended

by Act 54 of 2000. The University of Pretoria is domiciled in

South Africa and the operations and principal activities of

the University relate to teaching, research and community

engagement. The presentation currency of the University of

Pretoria is South African Rands. All amounts are rounded to the

nearest thousand Rand.

2. Basis for preparation

The University prepared consolidated annual financial

statements in terms of International Financial Reporting

Standards (IFRS). The consolidated financial statements

are prepared in terms of the historical cost method and are

modified to accommodate the revaluation of available-for-

sale financial investments.

The preparation of financial statements in conformity with

IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgement in the

process of applying the University’s accounting policies. The

areas involving a higher degree of judgement or complexity,

or areas where assumptions and estimates are significant to

the University’s financial statements are disclosed in note 2.4.

The principal accounting policies adopted in the preparation

of these consolidated financial statements are set out below

and are consistent with those of the previous year, unless

otherwise stated.

2.1 Going concern

The University’s forecast and projections, taking account of

reasonably possible changes in operating circumstances, show

that the University should be able to operate within its current

financing. Council has a reasonable expectation that the

University has adequate resources to continue in operational

existence for the foreseeable future. The University therefore

continue to adopt the going concern basis in preparing its

annual financial statements.

2.2 New and amended standards adopted by the University

The accounting policies adopted are consistent with those of

the previous financial year, except for the following new or

amended standards and interpretations that were adopted

from the annual period beginning 1 January 2011:

• Amendment to IFRS 7, Financial Instruments: Disclosures –

This amendment clarifies certain of the disclosures relating

to credit risk.

• Amendment to IAS 1, Presentation of Financial Statements

– This amendment clarifies disclosures required for each

component of equity.

• Amendment to IAS 24, Related party disclosures – This

amendment clarifies and simplifies the definition of a

related party.

2.3 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted

IFRS 1 (Amendment): First-time Adoption of International

Financial Reporting Standards – Removal of Fixed Dates for

First-time Adopters (effective for financial periods beginning

on or after 1 July 2011). The amendment replaces references


to a fixed date of ‘1 January 2004’ with ‘the date of transition

to IFRSs’, thus eliminating the need for companies adopting

IFRSs for the first time to restate derecognition transactions

that occurred before the date of transition to IFRSs.

IFRS 7 (Amendment): Financial Instruments: Disclosures –

Transfer of Financial Assets (effective for financial periods

beginning on or after 1 July 2011) – The amendment

will allow users of financial statements to improve their

understanding of transfer transactions of financial assets,

including understanding the possible effects of any risks that

may remain with the entity that transferred the assets. It

will also require additional disclosures if a disproportionate

amount of transfer transactions are undertaken around the

end of the reporting period.

IFRS 7 (Amendment): Financial instruments: Disclosures –

IFRS 9 Transitional Disclosures (effective for financial periods

beginning on or after 1 January 2015). The amendment

requires additional disclosures on the transition from IAS 39

to IFRS 9. This is only required where IFRS 9 is adopted for

financial periods beginning on or after 1 January 2013. If an

entity adopts IFRS 9 for financial period beginning on or after

1 January 2012 and before 1 January 2013, the entity can

either provide additional disclosure or restate prior periods.

IFRS 7 (Amendment): Financial instruments: Disclosures –

Offsetting of financial assets and financial liabilities (effective

for financial periods beginning on or after 1 January 2013). The

amended disclosures will require more extensive disclosures

than are currently required under IFRS. The disclosures focus

on quantitative information about recognised financial

instruments that are offset in the statement of financial

position as well as those recognised financial instruments

that are subject to master netting or similar arrangements

irrespective of whether they are offset.

IFRS 9, Financial instruments (effective for financial periods

beginning on or after 1 January 2015):

• IFRS 9 addresses classification and measurement of

financial assets. It uses a single approach to determine

whether a financial asset is measured at amortised

cost or at fair value;

• IFRS 9 was amended to incorporate financial

liabilities. The accounting and presentation for

financial liabilities and for derecognising financial

instruments has been relocated from IAS 39, ‘Financial

instruments: Recognition and measurement’,

without change, except for financial liabilities that

are designated at fair value through profit or loss.

The amendment introduces new requirements that

address the problem of volatility in profit or loss

(P&L) arising from an issuer choosing to measure its

own debt at fair value. With the new requirements,

an entity choosing to measure a liability at fair value

will present the portion of the change in its fair value

due to changes in the entity’s own credit risk in the

other comprehensive income (OCI) section of the

statement of comprehensive income, rather than

within P&L.

IFRS 10 Consolidated Financial Statements (effective for

financial periods beginning on or after 1 January 2013) – IFRS

10 establishes principles for the presentation and preparation

of consolidated financial statements when an entity controls

one or more other entities and supersedes IAS 27 Consolidated

and Separate Financial Statements. IFRS 10 changes the

definition of control so that the same criteria are applied to all

entities to determine control. The revised definition of control

focuses on the need to have both power and variable returns

before control is present. The standard provides additional

guidance to assist in determination of control where this is

difficult to assess.

IFRS 13 Fair Value Measurement (effective for financial periods

beginning on or after 1 January 2013) – IFRS 13 defines fair

value, sets out in a single IFRS a framework for measuring

fair value, and sets out disclosure requirements on fair value

measurements.

IAS 12 (Amendment): Income taxes – Deferred tax: Recovery

of underlying assets (effective for financial periods beginning

on or after 1 January 2012) – A limited scope amendment to

the recovery of underlying Basis of preparation continued

IAS 32 (Amendment): Financial instruments: Presentation

(effective for financial periods beginning on or after 1 February

2014) – Offsetting of financial assets and financial liabilities

has been amended to clarify that the right to offset must be

available today – that is it is not contingent on a future event.

It must also be legally enforceable for all counterparts in the

normal course of business, as well as in the event of default,

insolvency or bankruptcy. The amendments also clarify that

gross settlement mechanisms (such as through a clearing

house) with features that both (i) eliminate credit and liquidity

risk and (ii) process receivables and payables in a settlement

process are effectively equivalent to net settlement; they

would therefore satisfy the IAS 32 criterion in these instances.


2.4 Critical accounting estimates and judgements

Some of the amounts included in the consolidated financial

statements involve the use of judgement and/or estimation.

These judgements and estimates are based on management’s

best knowledge of the relevant facts and circumstances,

having regard to prior experience, but actual results may

differ from the amounts included in the consolidated

financial statements. Information about such judgements and

estimations is contained in the accounting policies and/or the

notes to the consolidated financial statements, and the key

areas are summarised below.

Areas of judgement and key sources of estimation uncertainty

that have the most significant effect on the amounts

recognised in the consolidated financial statements are:

Impairment of receivables

The University tests whether trade receivables have suffered

any impairment in accordance with the accounting policy in

note 11. Assets that are individually significant are considered

separately for impairment. When these assets are impaired,

any impairment loss is recognised directly against the related

asset. Assets that are individually significant and that are not

impaired, and groups of smaller balances are considered for

impairment on a portfolio basis, based on similar credit risk.

Impairment losses are recognised in an “allowance account for

credit losses” until the impairment can be identified with an

individual asset, and, at that point, the allowance is written off

against the individual asset. Subsequent recoveries of amounts

previously written off are credited in the income statement.

Refer to note 7 for the carrying amount of receivables and the

impairment losses provided for in 2011.

Provisions

Provision for postretirement benefits has been recognised

in accordance with the accounting policy in note 20. The

cost of postemployment benefits is determined using

actuarial valuations. The actuarial valuation involves making

assumptions about discount rates, mortality rates and income

at retirement. Due to the long-term nature of these plans,

such estimates are subject to significant uncertainty. The main

assumptions and carrying amounts related to postretirement

benefits are summarised in note 10.

Deferred revenue

The University recognises private grants received, to

compensate for expenses incurred, as income. These grants are

subject to various requirements and therefore each grant is

recognised over a certain period (specific to each grant) under

the terms of the grant. In several instances, the contract’s

terms do not specifically determine that unspent amounts

are refundable but the nature of the grants and historic

experience necessitate the deferral of unspent amounts

to deferred income. Grants received are therefore limited

to the expenses incurred and the balance is recognised as

deferred income in the statement of financial position. Grants

obtained, to reimburse expenses incurred, are analysed on an

“individual contract” basis by grouping similar grants together.

The deferral of income therefore necessitates a degree of

judgement by management. Refer to note 14 for the carrying

amount of deferred income.

3. Reserve funds

3.1 Unrestricted operating fund

The unrestricted operating fund reflects the University’s

subsidised activities and also includes the tuition fees and

expenditure in respect of the formal courses of the Gordon

Institute of Business Science (GIBS). Additions to these funds

mainly comprise formula-subsidy, tuition fees and the sales

and services of educational activities (patient fees at the

Veterinary Academic Hospital) as well as transfers from other

funds to finance expenditure.

Expenditure mainly comprises direct expenses in academic

departments for teaching and learning, research and

community service as well as other support service expenses

such as academic administration, library facilities, bursaries

and loans. Institutional expenses, such as expenses incurred

for the Executive, student services, information technology

and operating costs regarding land and buildings, are also

recorded here.

3.2 Restricted funds

These funds may be used only for the purposes that have been

specified in legally binding terms by the provider of such funds

or by another legally empowered person.

3.3 Council designated funds

These funds fall under the absolute discretion/control of

Council, e.g. sales of goods and services; non-prescriptive


donations and grants; income from investments that are

not held as cover for trust; specific purpose endowments or

administrated funds; etc.

3.4 Non-distributable reserves

These funds consist of the available-for-sale investment

revaluation reserve. Gains/losses on the fair value adjustments

of investments are recognised in a revaluation reserve until

such time as the investment is disposed, in which case the

gain/loss will be recognised in the income statement.

4. Revenue recognition

Revenue is generally recognised at the fair values of the

amounts of goods received or receivable. Revenue is shown

net of value-added tax, returns, rebates and discounts and

after eliminating sales within the group.

4.1 Government and other grants relating to income

Grants from the government are recognised at their fair value

where there is a reasonable assurance that the grant will be

received and the University will comply with all attached

conditions. The University follows the income approach

whereby the grant is taken to income (over one or more periods,

where relevant) and not the capital approach whereby the

grant is credited directly to shareholders’ interest. Government

grants relating to costs are deferred and recognised in the

income statement over the period necessary to match them

with the costs that they are intended to compensate. Private

gifts, grants and donations are recognised as income at the

fair value of the consideration received or receivable in the

period to which they relate. Any such income is recognised as

income in the financial period when the University is entitled

to use those funds. Therefore, funds that will not be used until

some specified future period or occurrence are recognised as

deferred income and released to the income statement as the

University becomes entitled to the funds. Grants received to

compensate for expenses to be incurred are often prescriptive

in nature and therefore it is recognised over a certain period

under the terms of the grant. Prescriptive grant income

is recognised with reference to the stage of completion

at the reporting date. If the stage of completion cannot be

measured reliably, the recognition of this income is limited to

the expenses incurred. The balance is recognised as deferred

income in the statement of financial position.

4.2 Government and other grants relating to assets

Government grants relating to property, plant and equipment

are included in non-current liabilities as deferred government

grants and are recognised in the income statement on a

straight-line basis over the expected lives of the related assets.

The portion of the grants that will be released to the income

statement during the next 12 months are included in current

liabilities.

4.3 Tuition fees and residence fees

Tuition fees and residence fees are recognised as income at

the fair value of the consideration received or receivable in

the period to which they relate. Revenue for tuition and

residence services is recognised with reference to the stage of

completion at the reporting date, based on services performed

to date as a percentage of total services to be performed.

Deposits provided by prospective students are treated as

current liabilities until the amount is billed as being due to the

University.

4.4 Restricted and earmarked funds

The University recognises grants received to compensate for

expenses incurred as income. These grants are often prescriptive

and therefore they are recognised over a certain period under

the terms of the grant. The recognition of this income is limited

to the expenses incurred. The balance is recognised as deferred

income in the statement of financial position.

4.5 Donations and gifts

Donations and gifts are recognised on receipt at fair value.

Donations in kind are recognised at the fair value thereof.

4.6 Investment income

Investment funds are pooled and the investment income is

apportioned to the various participating funds in proportion

to their balances.


Interest income is recognised in profit or loss on a time-

proportion basis using the effective interest rate method.

Dividend income is recognised in profit or loss when the right

to receive payment is established.

When a receivable is impaired, the University and its

subsidiaries reduce the carrying amounts to its recoverable

amount, being the estimated future cash flow discounted

at the original effective interest rate of the instrument, and

continues unwinding discount as interest income. Interest

income on impaired loans is recognised using the original

effective interest rate.

4.7 Other income

Inter-departmental income and expenditure are eliminated.

Occasional sales and services are recognised in the period in

which they accrue.

5. Subsidiaries

Subsidiary entities are those entities over which the University

has the power, directly or indirectly, to exercise control.

Control is the power to govern the financial and operating

policies generally accompanying a shareholding of more than

one half of the voting rights. All subsidiaries are consolidated.

Subsidiaries are consolidated with effect from the date on

which effective control is transferred to the University and are

no longer consolidated with effect from the date of disposal

or when control ceases.

The acquisition method of accounting is used to account for

the acquisition of subsidiaries by the University. The cost of an

acquisition is measured as the fair value of the assets given,

equity instruments issued and liabilities incurred or assumed

at the date of exchange, plus costs directly attributable to

the acquisition. Identifiable assets acquired and liabilities and

contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date,

irrespective of the extent of any non-controlling interest.

The excess of the cost of acquisition over the fair value of

the University’s share of the identifiable net assets acquired

is recorded as goodwill. If the cost of acquisition is less than

the fair value of the net assets of the subsidiary acquired, the

difference is recognised directly in the income statement.

All inter-company transactions, balances as well as unrealised

gains and losses, are eliminated. Where it was found to be

necessary, accounting policies for subsidiary companies are

changed to ensure consistency with the policies adopted by

the University.

6. Non-controlling interest

The University and its subsidiaries apply a policy of treating

transactions with non-controlling interests as transactions

with parties external to the group. Disposals to non-controlling

interests result in gains and losses for the group and are

recorded in the income statement. Purchases from non-

controlling interests result in goodwill, being the difference

between any consideration paid and the relevant share

acquired of the carrying value of net assets of the subsidiary.

7. Associated companies

Associates are all entities over which the University and its

subsidiaries have significant influence but not control, generally

accompanying a shareholding of between 20% and 50% of

the voting rights. Investments in associates are accounted

for using the equity method of accounting and are initially

recognised at cost. The investment in associates includes

goodwill identified on acquisition, net of any accumulated

impairment loss.

The University and its subsidiaries’ share of its associates’

post-acquisition profits or losses is recognised in the income

statement, and its share of post-acquisition movements

in reserves is recognised in reserves. The cumulative post-

acquisition movements are adjusted against the carrying

amount of the investment. When the University and its

subsidiaries’ share of losses in an associate equals or exceeds

its interest in the associate, including any other unsecured

receivables, the University and its subsidiaries do not recognise

further losses, unless it has incurred obligations or made

payments on behalf of the associate.


Unrealised gains on transactions between the University, its

subsidiaries and its associates are eliminated to the extent of

the group’s interest in the associates. Unrealised losses are

also eliminated unless the transaction provides evidence of

an impairment of the asset transferred. Accounting policies

of associates have been changed where necessary to ensure

consistency with the policies adopted by the University and

its subsidiaries.

Dilution gains and losses arising in investments in associates

are recognised in the income statement.

8. Foreign currencies

The consolidated annual financial statements are presented

in South African Rand, the functional and presentation

currency of the University. Foreign currency transactions are

accounted for at the exchange rates prevailing at the date

of the transactions. Monetary balances are translated at

the exchange rates prevailing at year end. Gains and losses

resulting from the settlement of such transactions and from

the translation of monetary assets and liabilities denominated

in foreign currencies are recognised in the income statement

in the year in which they arise.

9. Financial instruments

Financial instruments carried on the statement of financial

position include cash and bank balances, available-for-sale

investments, receivables, other receivables, trade payables and

borrowings. The particular recognition methods adopted are

disclosed in the individual policy statements associated with

each item.

The purchases and sale of financial assets that require delivery

are recognised on trade date, being the date on which the

University commits to purchase or sell the asset.

The University and subsidiary companies recognise a financial

asset or a financial liability on its statement of financial

position when, and only when, the group becomes a party to

the contractual provisions of the instrument.

Financial assets are derecognised when the rights to receive

cash flows from the financial asset have expired or have been

transferred and the group has transferred substantially all risks

and rewards of ownership. Financial liabilities (or a part of the

financial liability) is removed from the statement of financial

position when the obligation specified in the contract is

discharged or cancelled or expires.

10. Goodwill

Goodwill represents the excess of the cost of an acquisition

over the fair value of a subsidiary of the University’s share of

net assets of the acquired subsidiary undertaking at the date

of the acquisition. The carrying amount of goodwill is reviewed

annually and adjusted for impairment where it is considered

necessary.

11. Intangible assets

Computer software development costs

Costs incurred on development projects (relating to the design

and testing of new or improved products) are recognised as

intangible assets when the following criteria are fulfilled:

• it is technically feasible to complete the intangible

asset so that it will be available for use;

• management intends to complete the intangible

asset and use or sell it;

• there is an ability to use or sell the intangible asset;

• it can be demonstrated how the intangible asset will

generate probable future economic benefits;

• adequate technical, financial and other resources

to complete the development and to use or sell the

intangible asset are available; and

• the expenditure attributable to the intangible asset

during its development can be reliably measured.

Development costs include expenditure relating to the

implementation partner, additional staff employed specifically

for the Enterprise Resource Planning System, hardware and

software purchased specifically for the Enterprise Resource

Planning System. Capitalised development costs are amortised

from the point at which the asset is ready for use on a straight-

line basis over its estimated useful life of 10 years, however

the method of depreciation, useful live and residual value are

reviewed annually. Intangible assets are not revalued.


Artwork

Artwork is recorded at cost or the estimated fair value at

the date of the donation. The fair value is deemed to be a

reasonable market value at the date of the donation or the

purchase price of the item. The market value at the date of the

donation is determined by an art appraiser. The useful life of

artwork is considered to be indefinite as artwork is not subject

to wear and tear. Intangible assets are not revalued. The

carrying amount is tested for impairment and whenever there

is an indication that the intangible asset may be impaired.

There was no indication that artwork should be impaired.

Vodacom league licence and franchise fee

Licences and franchise fees are shown at historical cost. Both

these categories have a definite useful life and are carried at

cost less accumulated amortisation. Amortisation is calculated

using the straight-line method to allocate cost of licences and

franchise fees over the estimated useful lives of 20 years for

licences and five years for franchise fees.

An intangible asset is regarded as having an indefinite useful life

when, based on all relevant factors, there is no foreseeable limit

to the period over which the asset is expected to generate net

cash inflows. Amortisation is not provided for these intangible

assets. For all other intangible assets amortisation is provided

on a straight line basis over their useful life. The amortisation

period and the amortisation method for intangible assets are

reviewed every period-end.

Reassessing the useful life of an intangible asset with a

definite useful life after it was classified as indefinite is an

indicator that the asset may be impaired. As a result the asset

is tested for impairment and the remaining carrying amount is

amortised over its useful life.

Internally generated brands, mastheads, publishing titles,

customer lists and items similar in substance are not

recognised as intangible assets.

12. Financial assets

Financial assets are classified in the following categories:

loans and receivables (student loans and loans to staff,

trade receivables) and available-for-sale financial assets.

The classifications depend on the purpose for which the

financial assets were acquired. Management determines the

classification of its investments at initial recognition.

All financial assets are accounted for at trade date.

Prepaid expenses comprise that portion of expenses that is

paid in the current year, but is applicable to the following

financial year. Prepaid expenses are not classified as a financial

asset and are included under non-financial assets.

12.1 Loans and receivables

Loans to students and staff are non-derivative financial assets

with fixed or determinable payments that are not quoted in

an active market. They are initially measured at fair value, plus

transaction costs and are included in current assets, except

for maturities greater than 12 months after the end of the

reporting period.

These are classified as non-current assets. The University’s

loans and receivables comprise “student and other loans”

and “cash and cash equivalents” in the statement of financial

position (notes 5, 7 & 8).

Subsequently, items included in this category are measured

at the amortised cost, calculated based on the effective

interest method, and interest income is included in profit or

loss for the period. Net gains or losses represent reversals of

impairment losses, impairment losses and gains and losses

on derecognition. Net gains or losses are included in “other

income” or “other expenses”.

Short-term receivables with no stated interest rate are

measured at the original invoice amount if the effect of

discounting is immaterial.

Trade receivables are non-derivative financial assets with fixed

or determined payments that are not quoted in an active

market. Financial assets classified as receivables are initially

recognised at fair value plus transaction costs. Subsequent to

recognition, receivables are carried at amortised cost using the

effective interest rate method, less provision for impairment.

Short term receivables which are due within 12 months, with

no stated interest are measured at the original invoice amount

if the effect of discounting is immaterial.

A provision for impairment for trade receivables is established

when there is objective evidence that the University will not

be able to collect all amounts due according to the original

terms of receivables. Significant financial difficulties of the

debtor and default or delinquency in payments are considered

indicators that the trade receivable is impaired. An impairment

loss is recognised in profit or loss when the carrying amount

of the asset exceeds its recoverable amount. The recoverable

amount is calculated as the present value of the estimated


future cash flows discounted at the original effective interest

rate of the instrument.

Impairment losses are recognised on loans and receivables

when there is objective evidence of impairment. An impairment

loss is recognised in profit or loss when the carrying amount

of the asset exceeds its recoverable amount. The recoverable

amount is calculated as the present value of the estimated

future cash flows discounted at the original effective interest

rate of the instrument.

Assets that are individually significant are considered

separately for impairment. When these assets are impaired,

any impairment loss is recognised directly against the related

asset. Assets that are individually significant and that are not

impaired, and groups of small balances are considered for

impairment on a portfolio basis, based on similar credit risk.

Impairment losses are recognised in an “allowance account for

credit losses” until the impairment can be identified with an

individual asset, and, at that point, the allowance is written off

against the individual asset. Subsequent recoveries of amounts

previously written off are credited in the income statement.

12.2 Available-for-sale financial assets

Financial assets classified as available-for-sale are initially

recognised at fair value plus transaction costs. Subsequent to

initial recognition, available-for-sale financial assets are carried

at fair value. The fair value of financial instruments traded in

active markets is based on quoted market prices at year end.

The quoted market price used for financial assets is the current

bid price as per the Johannesburg Stock Exchange. If the market

value of an investment cannot be determined, the investment is

measured using an acceptable valuation method.

Unrealised gains and losses arising from the change in fair

value are recognised directly in equity until the asset is

derecognised or impaired, at which time the cumulative gain

or loss previously recognised in equity is recognised in the

income statement. However, interest income on these items,

calculated using the effective interest method, is recognised

in profit or loss. Dividend income is recognised when the

University’s right to payment has been established and it is

included in “other income”. Net foreign exchange gains or

losses on monetary available-for-sale financial assets are

recorded directly in profit or loss as part of “other income”

or “other expenses”. Cumulative gains or losses accumulated

in equity are recognised in profit or loss upon disposal or

impairment of the financial asset, as part of net gains or losses,

and are included in “other income” or “other expenses”.

The University and its subsidiaries assess at each year end

whether there is objective evidence that a financial asset

or group of assets is impaired. A financial asset is impaired if

its carrying amount is greater than its estimated recoverable

amount. Available-for-sale financial assets will become impaired

when a significant or prolonged decline in the fair value of the

investment below its cost price or amortised cost is noted.

If any objective evidence of impairment exists for available-

for-sale financial assets, the cumulative loss, measured as the

difference between the acquisition cost and current fair value,

less any impairment loss on the financial asset previously

recognised in profit or loss, is removed from equity and

recognised in the income statement. If, in a subsequent period,

the fair value of a debt instrument classified as available-for-

sale increases and the increase can be objectively related to

an event occurring after the impairment loss was recognised

in profit or loss, the impairment loss is reversed through the

income statement.

Investments exclude entities of which the operating results

are included in the consolidated financial statements of the

University.

13. Property, plant and equipment

Land and buildings mainly consist of lecture halls, laboratories,

hostels and administrative buildings. All property, plant and

equipment are recorded at cost less accumulated depreciation.

Cost includes expenditure that is directly attributable to

the acquisition of the items. Property, plant and equipment

acquired by means of donations are recorded at fair value at

the date of the donation.

Depreciation is calculated as follows, using the straight-line

method to write off the cost of each asset to its residual

values over its estimated useful life:

• Buildings 15–50years

• Vehicles 5years

• Computerequipment(average) 3–5years

• Furnitureandequipmentandlaboratory

equipment 5–10 years

• Library items are depreciated in full in the year of

acquisition.


• Landisnotdepreciatedasitisdeemedtohaveanindefinite

life.

• The methods of depreciation, useful lives and residual

values are reviewed annually where the specific assets

differs from the norm.

• Depreciationischargedtotheincomestatement.

Routine maintenance costs are charged to income as they are

incurred. The costs of major maintenance or overhaul of an

item of property, plant or equipment are recognised in the

carrying amount of the item of property, plant and equipment

if it is probable that future economic benefits associated with

the item will flow to the University and the cost of the item

can be measured reliably. Expenditure incurred to replace

a component of an item is capitalised to the cost of the

item. Any remaining carrying amount of the replaced part is

derecognised.

Property, plant and equipment are assessed at each reporting

date to determine whether there is an indication that the

carrying amount of the asset may be impaired. If such an

indication exists, the recoverable amount of the asset is

determined. The recoverable amount of an asset is the

higher of its fair value less costs to sell and its value in use. In

determining the value in use, the estimated future cash flows

of the asset is discounted to their present value based on pre-

tax discount rates that reflects current market assessments

of the time value of money and the risks that are specific to

the asset. If the value in use of an individual asset for which

there is an indication of impairment cannot be determined,

the recoverable amount of the cash-generating unit to which

the asset belongs is determined. An asset’s cash-generating

unit is the smallest group of identifiable assets that includes

the asset and that generates cash inflows from continuing use

that are largely independent from cash inflows from other

assets.

An impairment loss is recognised in profit or loss when the

carrying amount of an individual asset or of a cash-generating

unit exceeds its recoverable amount. Impairment losses

recognised on cash-generating units are firstly allocated to

goodwill and secondly, on a pro rata basis, to the other assets

in the cash-generating unit.

Impairment losses recognised on goodwill are not reversed.

With regard to other assets, impairment losses are reversed if

there has been a change in the estimates used to determine

the recoverable amount of the asset or cash-generating unit.

Reversals of impairment losses on cash-generating units are

allocated on a pro rata basis to the assets in the unit, excluding

goodwill. Impairment losses are reversed only to the extent

that the carrying amount of the asset does not exceed the

carrying amount that would have been determined if no

impairment loss had been recognised in the past. Reversals of

impairment losses are recognised directly in profit or loss.

Gains and losses on the disposal of property, plant and

equipment are determined by reference to their carrying

amounts and are taken into account in determining operating

profit.

14. Accounting for leases

14.1 Finance lease

Leases of property, plant and equipment in respect of which

the University assumes the benefits and risks of ownership are

classified as finance leases. Finance leases are capitalised at

the estimated fair value of the leased assets, or, if lower, at

the present value of the underlying lease payments. Each lease

payment is allocated to the liability and finance charges so as

to achieve a constant rate on the outstanding finance balance.

The corresponding rental obligations, net of finance charges,

are included in other long-term payables. The interest element

of the finance charge is charged to the income statement over

the lease period. The property, plant and equipment acquired

under finance leasing contracts are depreciated over the

shorter of the useful life of the asset and the lease term.

14.2 Operating lease

Leases of assets, in terms of which all the risks and benefits of

ownership are effectively retained by the lessor, are classified

as operating leases. Payments made in terms of operating

leases are charged to the income statement on a straight-line

basis over the period of the lease.

When an operating lease is terminated before the lease period

has expired, any payment required to be made to the lessor

by way of penalty is recognised as an expense in the period in

which termination takes place.


15. Inventories

Inventories are initially measured at cost and subsequently

valued at the lower of cost and net realisable value. Any write-

down to net realisable value is recognised in profit or loss. Cost

is determined on the weighted average-cost basis and when

a perpetual inventory system is not present it is determined

at the most recent purchase price. Net realisable value is an

estimate of the selling price in the ordinary course of business,

excluding the cost of completion and selling expenses.

16. Cash and cash equivalents

Cash and cash equivalents are initially recognised at fair

value and subsequently measured at amortised cost. For

the purposes of the cash-flow statement, cash and cash

equivalents comprise cash in hand, deposits held at call with

banks and investments in money market instruments, net of

bank overdrafts. In the statement of financial position, bank

overdrafts are included in borrowings under current liabilities.

Cash equivalents are short term highly liquid investments that

are readily convertible to known amounts of cash and which

are subject to insignificant changes in value.

17. Trade payables

Trade payables are obligations to pay for goods or services that

have been acquired in the ordinary course of business from

suppliers. Accounts payable are classified as current liabilities

if payment is due within one year or less (or in the normal

operating cycle of the business if longer). If not, they are

presented as non-current liabilities.

Trade payables are recognised initially at fair value and

subsequently measured at amortised cost using the effective

interest method.

18. Provisions

Provisions are recognised when the University has a present

legal or constructive obligation as a result of past events, it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation, and a reliable

estimate of the amount of the obligation can be made.

Provisions are measured based on the best estimate of the

expenditure required to settle the present obligation at the

reporting date. Where the effect of the time value of money is

material, the amount of the provision is discounted to present

value using a pretax rate that reflects current assessments of

the time value of money. The increase in the amount of the

provision as a result of the passage of time is recorded in profit

or loss for the year.

19. Borrowings

Borrowings are recognised initially at fair value, net of

transaction costs incurred. Borrowings are subsequently stated

at amortised cost; any difference between the proceeds (net

of transaction costs) and the redemption value is recognised in

the income statement over the period of the borrowings using

the effective interest method.

Borrowings are classified as current liabilities unless the

University has an unconditional right to defer settlement of

the liability for at least 12 months after the year end.

20. Current and deferred income tax

The tax expense for the period comprises current and deferred

tax. Tax is recognised in the income statement, except to the

extent that it relates to items recognised directly in equity. In

this case, the tax is also recognised in equity.


The current income tax charge is calculated on the basis

of the tax laws enacted or substantively enacted at year

end in South Africa where the University’s subsidiaries and

associates operate and generate taxable income. Management

periodically evaluates positions taken in tax returns with

respect to situations in which applicable tax regulations is

subject to interpretation and establishes provisions where

appropriate on the basis of amounts expected to be paid to

the tax authorities.

Deferred income tax is provided in full, using the liability

method, on temporary differences arising between the tax

bases of assets and liabilities and their carrying amounts in

the consolidated financial statements. However, the deferred

income tax is not accounted for if it arises from initial

recognition of an asset or liability in a transaction other than

a business combination that at the time of the transaction

affects neither the accounting, nor taxable profit or loss.

Deferred income tax is determined using tax rates (and laws)

that have been enacted or substantially enacted by year end

and are expected to apply when the related deferred income

tax asset is realised or the deferred income tax liability is

settled.

Deferred income tax assets are recognised to the extent that it

is probable that future taxable profit will be available against

which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences

arising on investments in subsidiaries and associates, except

where the timing of the reversal of the temporary difference is

controlled by the group and it is probable that the temporary

difference will not reverse in the foreseeable future.

21. Postemployment benefits

21.1 Pension and provident fund contributions

The University contributes towards two pension schemes

namely the AIPF and the UP Pension Fund as well as towards

one provident fund known as the UP Provident Fund. The

AIPF is registered and managed in terms of the Pension Funds

Act for Associated Institutions. The UP Pension Fund and

the UP Provident Fund are managed by Boards of Trustees

and are registered in terms of the provisions of the Pension

Funds Act. The schemes are funded through payments to

trustee-administered funds, determined by periodic actuarial

calculations.

A defined contribution plan is a pension plan under which

the entity pays fixed contributions into a separate entity. The

entity has no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to

pay all employees the benefits relating to employee service

in the current and prior periods. A defined benefit plan is a

pension plan that is not a defined contribution plan. Following

the above-mentioned definitions, the University therefore

contributes towards one defined contribution plan (the AIPF

Fund) and two defined benefit plans (the UP Pension Fund and

the UP Provident Fund). The UP Provident Fund is a “defined

contribution” plan with regards to members’ retirement

benefits. However, the disability and death benefits stipulated

in the rules of the Provident Fund represent a “defined benefit”

component. As a result of the defined benefit component, the

UP Provident Fund is classified as a defined benefit plan.

The asset recognised in the statement of financial position

in respect of defined benefit plan is measured at the lower

of (1) the fair value of the plan assets less the present value

of the defined benefit obligation at year end together with

adjustments for unrecognised actuarial gains or losses and

past service costs; and (2) the sum of the present value of any

economic benefits in the form of refunds from the plan or

reductions in future contributions to the plan and any balance

of unrecognised actuarial losses or unrecognised past service

costs. The defined benefit obligation is calculated annually

by independent actuaries using the projected unit credit

method. The present value of the defined benefit obligation is

determined by discounting the estimated future cash outflows

using interest rates of high-quality corporate bonds that are

denominated in the currency in which the benefits will be paid

and that have terms to maturity approximating to the terms

of the related pension liability.

For defined contribution plans, the University pays

contributions to privately administered pension insurance

plans on a mandatory, contractual or voluntary basis.

The University has no further payment obligations once

the contributions have been paid. The contributions are

recognised as employee benefit expense when they are due.

Prepaid contributions are recognised as an asset to the extent

that a cash refund or a reduction in the future payments is

available.


Actuarial gains and losses are recognised immediately in the

year in which they occur. Actuarial gains and losses arising

from experience adjustments are charged or credited to the

statement of comprehensive income.

Past-service costs are recognised immediately in income,

unless the changes to the pension plan are conditional on the

employees remaining in service for a specified period of time

(the vesting period). In this case, the past-service costs are

amortised on a straight-line basis over the vesting period.

21.2 Medical aid fund contributions

In accordance with the existing personnel practice, the Council

has undertaken to make certain medical aid fund contributions

on behalf of retired staff and certain future retirees.

The expected costs of these benefits are accrued over the period

of employment using the same accounting methodology as

used for defined benefit pension plans. Actuarial gains and

losses arising from experience adjustments are charged or

credited to income. These obligations are valued annually by

independent qualified actuaries.

Actuarial gains and losses are recognised immediately in the

year in which they occur in the statement of comprehensive

income.

22. Agency funds

There are funds administered on behalf of beneficiaries of

deceased employees and other third parties. These funds are

recognised at the fair value thereof and subsequently carried

at amortised cost.

These funds are held in available-for-sale investments or cash

and cash equivalents until payments are requested by the

beneficiaries of these funds.

23. Leave accrual

Members of staff with leave with gratuity value to their

credit at the end of 2006 had a choice of either disbursing

the accumulated leave (as at 31 December 2006) to them

at the end of March 2007, or to retain such leave credits in

the system at the value as determined above. Leave credits

retained will be disbursed to the relative staff member upon

termination of service or on request at any time after March

2007, at the value as at 31 December 2006.

24. Research costs

Research costs are written off in the year in which they arise,

since both these types of costs are inherent in the normal

operations of a university. Research costs are not recorded or

disclosed separately.

25. Borrowing costs

Borrowing costs incurred for the construction of any qualifying

asset are capitalised during the period of time that is required

to complete and prepare the asset for its intended use. Other

borrowing costs are expensed.

2 Consolidated statement of financial position



UNIVERSITY OF PRETORIA and its subsidiariesSUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2011

Notes 2011 2010

Rm Rm

ASSETS

Non-current assets 6 623 5 411

Property, plant and equipment 1 2 741 2 200

Intangible assets 2 268 164

Available-for-sale investments 3 3 075 2 469

Investment in associate companies 23 2 2

Defined benefit assets 9 445 481

Non-current loans and receivables 4 92 95

Current assets 2 255 2 780

Inventories 5 10 10

Defined benefit assets 9 6 64

Receivables and prepayments 6 341 299

Cash and cash equivalents 7 1 898 2 407

Total assets 8 878 8 191

EQUITY AND LIABILITIES

Total funds 7 428 6 774

Non-distributable reserves

Available-for-sale investment revaluation 352 472

Reserve funds

Restricted funds 4 238 3 870

Council designated funds 2 838 2 432

Non-controlling interest (6) 2

Non-current liabilities 374 285

Borrowings 8 18 15

Deferred income 12 311 237

Agency funds 24 45 33

Current liabilities 1 082 1 130

Trade payables, accruals and other liabilities 11 470 577

Deferred income 12 400 390

Student deposits 211 162

Provisions 10 1 1

Total funds and liabilities 8 878 8 191


UNIVERSITY OF PRETORIA and its subsidiariesSUMMARISED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011

Notes 2011 2010

Rm Rm

Operating revenue 14 3 985 3 555

Less operating expenses 3 580 3 372

Staff costs 16 1 851 1 703

Other operating expenses 17 1 519 1 472

Depreciation and amortisation 1 & 2 210 197

Net surplus from operations 405 183

Income from investments 15 828 689

Other non-recurrent income (1) 4

Finance expense 18 (304) (268)

Other non-recurrent expenses (3) (3)

Surplus before tax 925 605

Less tax - (2)

Surplus for the year 925 603

Surplus for the year attributed to: 925 603

University of Pretoria 927 602


3 Consolidated income statement


UNIVERSITY OF PRETORIA and its subsidiariesSUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

Notes 2011 2010

Rm Rm

Surplus for the year 925 603

Other comprehensive income for the year (273) 32

Actuarial gain/(loss) on defined benefit medical plan 9 (71) 23

Actuarial gain/(loss) on defined benefit pension plan 9 (60) (80)

Actuarial loss on defined benefit provident plan 9 (22) (58)

Fair value adjustment on available-for-sale investments 3 (120) 147

Total comprehensive income for the year 652 635

Total comprehensive income attributed to: 652 635

University of Pretoria 654 634


4 Consolidated statement of comprehensive income


UNIVERSITY OF PRETORIA and its subsidiariesCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

Unrestricted operating

fund

Council designated

and restricted funds – other

Council designated

and restricted property, plant and equipment

funds

Restricted student

accommodation fund

Total

Rm Rm Rm Rm Rm Balance at 31-12-2009: credit 72 3 053 2 998 17 6 140

Net (decrease)/increase in funds 53 271 300 10 634

Net income – surplus 226 264 51 61 602

Other comprehensive income - 32 - - 32

Net transfers (to)/from other funds (173) (25) 249 (51) -

Balance at 31-12-2010: credit 125 3 325 3 297 27 6 774

Non-distributable reserves - 472 - - 472

Council designated 125 1 938 369 - 2 432

Restricted – other - 915 2 928 27 3 870

Balance at 31-12-2010: credit 125 3 325 3 297 27 6 774

Net (decrease)/increase in funds (54) 225 510 (27) 654

Net income – surplus 288 550 57 32 927

Other comprehensive income - (273) - - (273)

Net transfers (to)/from other funds (342) (52) 453 (59) -

Balance at 31-12-2011: credit 71 3 550 3 807 - 7 428

Non-distributable reserves - 352 - - 352

Council designated 71 2 239 528 - 2 838

Restricted – other - 959 3 279 - 4 238

5 Consolidated statement of changes in equity


UNIVERSITY OF PRETORIA and its subsidiariesCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

Note 2011 2010

Rm Rm

CASH FLOW FROM OPERATING ACTIVITIES 865 830

Cash generated from operations 21 668 605

Interest and dividend income 15 198 229

Taxation (paid)/received (1) (4)

CASH FLOW FROM INVESTING ACTIVITIES (1 377) (803)

Purchase of property, plant and equipment 1 (737) (675)

Purchase of intangible assets 2 (122) (63)

Increase in available-for-sale investments 3 (1 917) (2 703)

Proceeds on disposal of property, plant and equipment 1 2

Proceeds on disposal of investments 1 398 2 637

CASH FLOW FROM FINANCING ACTIVITIES 3 4

Increase in interest-bearing borrowings 3 4

INCREASE IN CASH AND CASH EQUIVALENTS FOR THE YEAR (509) 30

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 2 407 2 377

CASH AND CASH EQUIVALENTS AT THE END OF YEAR 7 1 898 2 407

6 Consolidated statement of cash flows


7Notes to the consolidated financial statements


UNIVERSITY OF PRETORIA and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

1. Property, plant and equipment

Land and Buildings

Furniture, equipment and

vehicles

Library books and journals

Computer equipment

Total

Rm Rm Rm Rm Rm

Year ended 31 December 2010

Opening net carrying amount 1 394 197 - 126 1 717

Additions 487 111 51 27 676

Disposals/write-offs - (3) - (3) (6)

Depreciation charge (37) (42) (51) (57) (187)

Closing net carrying amount 1 844 263 - 93 2 200

At 31 December 2010

Cost 2 113 712 525 426 3 776

Accumulated depreciation (269) (449) (525) (333) (1 576)

Net carrying amount 1 844 263 - 93 2 200

Year ended 31 December 2011

Opening net carrying amount 1 844 263 - 93 2 200

Additions 518 116 50 53 737

Disposals/write-offs - (5) - (1) (6)

Depreciation charge (44) (47) (50) (49) (190)

Closing net carrying amount 2 318 327 - 96 2 741

At 31 December 2011

Cost 2 631 824 575 478 4 508

Accumulated depreciation (313) (497) (575) (382) (1 767)

Net carrying amount 2 318 327 - 96 2 741

A complete schedule of land and buildings is available at the administration building of the University of Pretoria. Buildings to the amount of R126,9 m (2010: R116,5 m) included above, were erected on land belonging to the Gauteng Administration. Included in land and buildings is expenditure of R61,9m (2010: R347,2 m) which relates to projects, that are still under construction.


2. Intangible assets

Artwork

Enterprise resource planning system

Total

The University of Pretoria approved the phased replacement of a number of Legacy applications in various domains. The primary objective of the project is to provide the University of Pretoria with a fully integrated Enterprise Resource Planning system.

Amortisation of intangible assets are included in “depreciation and amortisation” in the income statement.

Rm Rm Rm

As at 31 December 2010

Opening carrying amount 14 96 110

Additions - 64 64

Amortisation charge - (10) (10)

Closing carrying amount at end of the year 14 150 164

Cost 18 160 178

Accumulated amortisation (4) (10) (14)

14 150 164

As at 31 December 2011

Opening carrying amount 14 150 164

Additions 1 121 122

Amortisation charge - (18) (18)

Closing carrying amount at end of the year 15 253 268

Cost 19 281 300

Accumulated amortisation (4) (28) (32)

Accumulated amortisation

15 253 268

Remaining amortisation period n/a 9 years


3. Available-for-sale investments

2011 2010

A complete schedule of investments is available for inspection at the Administration Building of the University.

Rm Rm

Cost

Listed shares 1 645 1 346

Unlisted shares 15 1

Bonds, annuities and other 240 79

Foreign investments 823 573

2 723 1 999

Valuation

Market value of listed shares 1 866 1 730

Management’s valuation of unlisted shares 15 1

Market value of bonds, annuities and other 241 109

Market value of foreign investments 953 629

3 075 2 469

Movement in available-for-sale investments

2011 2010

There were no impairment provisions on available-for-sale financial assets for the 2011 or 2010 financial years.

Rm Rm

Beginning of year 2 469 2 166

Disposals of available-for-sale investments (1 191) (2 547)

Additions to available-for-sale investments 1 869 2 702

Unrealised (loss)/gain recognised in other comprehensive income

(120) 147

Interest and dividends capitalised 48 1

End of year 3 075 2 469

Available-for-sale financial assets include the following:

2011 2010

The cost price of unlisted securities is considered to be the fair value of the securities.

None of the financial assets is either past due or impaired.

Rm Rm

Listed securities:

- Equity securities – Rand 1 866 1 730

- Equity securities – US Dollar 953 629

- Bond securities – Rand 241 109

Unlisted securities: Investment in SABINET 15 1

3 075 2 469


Available-for-sale financial assets are denominated in the following currencies:

2011 2010The maximum exposure to credit risk at reporting date is the fair value of bond securities available-for-sale.

The maximum exposure to equity price risk is the fair value of equity in available-for-sale investments.

Rm Rm

Rand 2 122 1 840

US Dollar 953 629

3 075 2 469

4. Non-current loans and receivables

2011 2010 The current University policy is that all student loans are due within five years from the end of the financial year in which they were granted. The weighted average interest rate applied was as follows:Student loans: 6,32% (2010: 6,80%)Loans to employees: 6,58% (2010: 7,75%)

The fair value of student loans amount to R39,7 m (2010: R 27,2 m) at year end, discounted at the prime rate of 9% over 5 years. The fair value of staff loans amount to R4,0 m (2010: R3,0 m) at year end, discounted at the rate of 7% over 4 years.

Rm Rm

Financial assets: 76 79

Student loans 34 35

General funds 14 13

University funds 37 36

Less: Impairment provision (17) (14)

Loans to employees 5 4

Provident fund receivable 37 40

Non-financial assets: 16 16

Loan to SERA venture fund 15 15

Purco Agreement 1 1

92 95

Credit risk of student loans

2011 2010 Student loans that are less than two years past due date are not considered impaired. As of 31 December 2011, student debtors of R34,2 m (2010: R34,9 m ) were past due date but not impaired.

Rm Rm

Student loans past due and not impaired 34 35

Student loans impaired 17 14

Other student loans 51 49


The ageing of student receivables past due but not impaired is as follows:

2011 2010As at 31 December 2011, student loans of R16,8 m (2010: R13,8 m) were impaired and provided for. The individually impaired receivables mainly relate to students who are experiencing financial difficulties.

Rm Rm

Students enrolled for current year 7 13

Students enrolled for previous years 27 22

34 35

Movements in the provision for impairment of student loans are as follows:

2011 2010

Financial assets in this category are secured by means of sureties.

Rm Rm

At 1 January 14 2

Provision for student loans 4 15

Receivables written off during the year (1) (3)

At 31 December 17 14

5. Inventories

2011 2010

The cost of inventories recognised as an expense and included in “other operating expenses” amounted to R63,8 m (2010: R82,0 m). Inventory valued at net realisable value is R nil (2010: R nil).

Rm Rm

Laboratory and medical 1 1

Stationary 3 2

Technical 2 2

Other - -

Study materials 3 4

Food 1 1

10 10


6. Receivables and prepayments

2011 2010

Rm Rm

Financial assets

Trade and other receivables 385 326

Student receivables 184 121

Other trade receivables 201 205

Less: Impairment provision (61) (46)

Student receivables (44) (34)

Other trade receivables (17) (12)

Non-financial assets

Prepayments 13 16

SARS 1 1

Payroll debtors 2 1

Other 1 1

17 19

Current portion 341 299

The fair values of trade and other receivables, which approximate their carrying values, are as follows:

2011 2010

Rm Rm

Trade receivables 324 280

Prepayments 13 16

SARS 1 1

Payroll debtors 2 1

Other 1 1

341 299

Credit risk of student receivables

2011 2010Student debtors less than two years past due date are not considered impaired.

As of 31 December 2011, student debtors of R139,9 m (2010: R86,5 m) were past due date but not impaired.

Rm Rm

Other trade receivables neither past due nor impaired - -

Other trade receivables past due and not impaired 140 87

Other trade receivables impaired 44 34

Other trade receivables 184 121


The ageing of these student receivables is as follows:

2011 2010 As at 31 December 2011, student debtors of R44,1 m (2010: R34,1 m) were impaired and provided for.

The individually impaired receivables mainly relate to students who are experiencing financial difficulties.

Rm Rm

Students enrolled for current year 123 75


140 87

2011 2010

Rm Rm


44 34

Movement on the provision for impairment of student receivables is as follows:

2011 2010The creation and release of provision for impaired student receivables have been included in “other operating expenses” in the income statement. Amounts charged to the income statement are generally written off when there is no expectation of recovering any additional cash. No collateral is held as security.

Rm Rm

At 1 January 34 33

Provision for student receivables 11 12



Credit risk of other trade receivables

2011 2010

For disclosure of credit quality of other trade receivables neither past due nor impaired, refer to Note 26.

Rm Rm

Other trade receivables neither past due nor impaired 11 14

Other trade receivables past due and not impaired 173 179

Other trade receivables impaired 17 12

201 205


2011 2010

Rm Rm

Amount of other receivables that were past due but not impaired

173 179

The ageing of these receivables is as fol-lows:

1 to 3 months past due 68 121

3 months + past due 105 58

173 179

As at 31 December, the following other trade receivables were impaired and pro-vided for

17 12

Movement on the provision for impairment of other receivables is as follows:

2011 2010 The creation and release of provision for impaired receivables are in “other operating expenses” in the income statement. Amounts charged to the income statement are generally written off, when there is no expectation of recovering any additional cash. The maximum exposure to credit risk at the reporting date is the fair value of the receivables. No collateral is held as security.

Rm Rm

At 1 January 12 10

Provision for other receivables 6 11



7. Cash and cash equivalents

2011 2010 The weighted average effective interest rate on short-term bank deposits was 5,75% (2010: 7%).Cash balances held by the University of R45,7 m (2010: R51,5 m) is not available for general use.

The carrying amounts of cash and cash equivalents approximate their fair value.

Rm Rm

Net cash on hand 234 260

Short-term investments 1 664 2 147

Cash at bank and with fund managers 1 593 2 090

Short-term deposits 71 57

1 898 2 407

8. Borrowings

2011 2010The bank borrowings and other current borrowings are unsecured. Redemption loans are guaranteed by Government.

Rm Rm

Non-current 18 15

Loans from related parties (note 24) 18 15

Total borrowings 18 15


The interest rate exposure of the borrowings of the University was as follows:

2011

Rm

2010

Rm

At no interest 18 15

Total borrowings 18 15

Effective interest rates:

Redemption loans – weighted average rates 9,76% 9,69%

The carrying amounts and fair values of borrowings are as follows:

2011 2010

The fair value of redemption loans is based on undiscounted cash flows. The carrying amounts of borrowings, other than redemption loans approximate their fair value.

Rm Rm

Carrying amounts

Borrowings

Other loans 18 15

18 15

Fair values

Non-current borrowings

Other loans 18 15

18 15

Discount rate – redemption loans 7,5% 7,5%

2011 2010

Rm Rm

Maturity of borrowings:

Between 1 and 5 years 18 15

18 15

9. Post employment benefits

9.1 Pension scheme

In terms of section 1 of the Income Tax Act of 1962 and registration in terms of the Financial Services Board, the Fund is classified as a pension fund. The Fund provides defined benefits payable in a combination of lump sums and pensions on disability, death or retirement. A lump sum is payable on withdrawal. The assets of the UP Pension Fund are held independently of the University’s assets in a separate trustee-administered fund. The UP Pension Fund is wholly funded. The UP Pension Fund is valued by an independent actuary at least every three years. The latest actuarial valuation was carried out at 31 December 2009.

The University accounts for postemployment benefits according to its accounting policy note 21.


The information for IAS 19 purposes for the period is as follows:

2011 2010

Rm Rm

Balance at the end of the year

Present value of funded obligations ( 1 340) (1 209)

Fair value of plan assets 1 393 1 325

Defined benefit asset recognised 53 116

The amounts recognised on the statement of financial position are as follows:

2011 2010

Rm Rm

Defined benefit pension asset – Non- current portion

47 81

Defined benefit pension asset – Current portion

6 35

53 116

The movement in the defined benefit obligation over the year is as follows:

2011 2010

Rm Rm

Present value of obligation at the beginning of the period

1 209 1 028

Interest cost 106 88

Current service cost 44 36

Benefits paid ( 58) ( 49)

Actuarial (gain)/loss on obligation 39 106

Present value of obligation at the end of the period

1 340 1 209

The movement in the fair value of plan assets over the year is as follows:

2011 2010

Rm Rm

Fair value of plan assets at the beginning of the period

1 324 1 210

Expected return on plan assets 130 120

Contributions – employee 18 17

Benefits paid ( 57) (49)

Actuarial gain/(loss) on plan assets (22) 27

Fair value of plan assets at the end of the period

1 393 1 325

The actual return on plan assets 109 146


The amounts recognised in the income statement and statement of comprehensive income is as follows:

2011 2010

Rm Rm



Expected return on plan assets (130) (120)


Actuarial (gain)/loss on plan assets 22 (26)

Included in: 80 85

Actuarial (gain)/loss on defined benefit pen-sion plans – other comprehensive income

60 80

Interest cost on defined benefit pension plans

106 88

Expected return on defined benefit pension plans

(130) (120)

Personnel costs 44 37

Expected return on plan assets

The expected return on plan assets is calculated using the adjusted return as follows:

% invested 2011 2010

Combined return estimated 10,00% 10,08%

Bonds 40% 3,65% 3,31%

Equities (Bonds + 3%) 60% 6,35% 6,77%

The expected return on plan assets is calculated using the discount rate plus an equity premium.


The principal actuarial assumptions used were as follows:

2011 2010

Surplus as a % of liabilities 3,96% 9,56%

Surplus as a % of assets 3,81% 8,73%

Expected rate of return on plan assets 10,00% 10,08%

Discount rate: preretirement

Gross discount rate 8,83% 8,28%

Pension increases (general inflation) 6,35% 5,48%

Salary inflation at age 35 8,44% 8,44%




Number of employees who are members of the UP Pension Fund

451 499

Number of pensioners of the UP Pension Fund

561 543

Postretirement mortality – tables PA(90) PA(90)

The major categories of plan assets as a percentage of total plan assets are as follows:

2011 2010

SA equities 38,4% 45,0%

SA bonds 9,2% 8,1%

Cash and cash equivalents 34,1% 30,1%

International equities 15,0% 14,3%

International bonds 3,3% 2,7%

Amounts for the latest actuarial valuation and previous four periods are as follows:

2008 2009 2010 2011

Estimated employer contributions to be paid for the financial year ending 31 December 2012 is expected to be R34,7 m

Rm Rm Rm Rm

Defined benefit obligation (781) (1 028) (1 209) (1 340)

Fair value of plan assets 1 160 1 210 1 325 1 393

Accounting surplus 379 182 116 53

Experience adjustments on plan liabilities 9 (19) 106 39

Experience adjustments on plan assets 27 (51) (26) 22

During 2011, the University’s contributions to the pension fund were financed from the employer surplus account in the fund. This position will be maintained for 2012. At 31 December 2011, the balance of the employer surplus account amounted to R5,5 m (2010: R31,4 m).


9.2 Postemployment medical benefits

The University of Pretoria operates one postemployment medical benefit scheme. In accordance with the existing personnel practice, the Council has undertaken to make certain medical fund contributions on behalf of retired staff and certain future retirees. The method of accounting and the frequency of valuations are similar to those used for defined benefit pension schemes.


Balance at the end of the year:

2011 2010

Rm Rm

Present value of funded obligations (676) (605)

Fair value of plan assets 1 077 1 030

Defined benefit asset recognised 401 425


2011 2010

Rm Rm

Included in defined benefit medical asset – Non-current portion

401 396

Included in defined benefit medical asset – Current portion

- 29

401 425


2011 2010

Rm Rm


605 566

Interest cost 51 52


Benefits paid (32) (29)

Actuarial loss on obligation 38 4


676 607


2011 2010

Rm Rm


1 031 909


Benefits paid (32) -

Actuarial loss on plan assets (32) 27


1 078 1 031

Actual return on plan assets 79 122



2011 2010

Rm Rm


Interest cost 51 52


Actuarial loss on obligation 39 4

Actuarial loss on plan assets 32 (27)

Included in: 25 (52)

Actuarial loss on postemployment medical plan – other comprehensive income

71 (23)

Interest cost on defined benefit plans 51 52

Expected return on defined benefit plans (111) (95)



2011 2010

Medical cost inflation 7,10% 7,10%


Expected return on plan assets 10,80% 10,40%

Members - active 1 057 1 046

Members - pensioner 1 028 1 002

Retirement age 65 years 65 years

Mortality rate

Preretirement mortality

2011 2010

Table Table

Males SA 72–77 SA 72–77

Females (The rates in the table for a person 3 years younger)

SA 72–77 SA 72–77

Postretirement mortality

2011 2010

Males (The rates for a person 1 year younger)

PA (90) PA (90)

Females (The rates for a person 1 year younger)

PA (90) PA (90)

Rate of ill-health early retirement

2011 2010

Rate of ill-health early retirement 40% (SA 56–62) 40% (SA 56–62)

The mortality for ill-health retirements refers to a normal pensioner 10 years older



The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yield on fixed interest investments are based on gross redemption yields as at year end. Expected returns on equity and property investments reflect long-term rates of return experienced in the respective markets.

The expected return on plan assets is calculated using the adjusted return as follows:



Equities (bonds + 3%) 50,5% 5,68% 5,96%

Bonds 29,5% 2,43% 2,69%

International equities (R186 + 4%) 20,0% 2,45% 1,76%



2011 2010

SA equities 50,5% 53,0%

SA bonds 29,5% 32,6%

International equities 20,0% 14,4%

Assumed healthcare fund cost trend rates have a significant effect on the amounts recognised in the income statement. A one percentage point change in assumed healthcare fund cost trend rates would have the following effects:

One percentage point increase

One percentage point decrease

2011 2010

Rm Rm

Effect on the aggregate of the service cost and interest cost

Nil Nil

Effect on defined benefit obligation 95 85

Expected employer contributions to postemployment benefits plans for the year ending 31 December 2012 is R14,8 m.

Amounts for the current and previous four periods are as follows:

2008 2009 2010 2011

Rm Rm Rm Rm

Defined benefit obligation 435 566 605 676

Fair value of the plan assets 809 909 1,030 1,077

Accounting surplus 374 343 425 401

Experience adjustments on plan liabilities 14 49 4 39

Experience adjustments on plan assets 7 - (27) 32


9.3 Provident scheme

In terms of section 1 of the Income Tax Act of 1962 and registration in terms of the Financial Services Board, the Fund is classified as a provident fund. The Fund provides lump sum payments to members on retirement, retrenchment and withdrawal. The benefits payable on retirement, retrenchment and withdrawal are defined contribution benefits. The Fund also provides lump sum benefits payable as lifelong pensions on death and recognised disability. The benefits payable on death and on recognised disability are defined benefits. The University of Pretoria Provident Fund is a defined contribution plan but it also contains a defined benefit component. With regards to members’ retirement benefits, the Fund is a “defined contribution” plan. However, the disability and death benefits stipulated in the rules of the Provident Fund represent a “defined benefit” element.

The assets of the UP Provident Fund are held independently of the University’s assets in a separate trustee-administered fund. The UP Provident Fund is wholly funded. The UP Provident Fund is valued by an independent actuary at least every three years. The latest actuarial valuation was carried out at 31 December 2009.


The information for IAS 19 purposes for the period is as follows:

Balance at the end of the year:

2011 2010

Rm Rm

Present value of funded obligations (1,846) (1,669)

Fair value of plan assets 1,843 1,673

Defined benefit asset recognised (3) 4


2011 2010

Rm Rm

Defined benefit provident asset – Non-current portion

(3) 4

Defined benefit provident asset – Current portion

- -

(3) 4


2011 2010

Rm Rm


1 670 1 509




Actuarial loss/(gain) on obligation 90 40


1 847 1 670



2011 2010

Rm Rm


1 673 1 549


Contributions – employer 138 122


Actuarial (loss)/gain on plan assets 69 (18)


1 844 1 673

Actual return/(loss) on plan assets 243 138


2011 2010

Rm Rm





Actuarial (loss)/gain on plan assets (69) 18

Included in: 145 159

Actuarial loss on defined benefit provident plan – other comprehensive income

22 58

Interest cost on defined benefit plans 147 128

Expected return on defined benefit plans (174) (156)



The return on plan assets is calculated using the adjusted return as follows:



Bonds 40% 8,83% 3,31%

Equities (bonds + 3%) 60% 11,83% 6,77%




2011 2010

Surplus as a % of liabilities (0,16)% 0,24%

Surplus as a % of assets (0,16)% 0,21%

Expected rate of return on plan assets 20,66% 10,08%


Pension increases (general inflation) 6,35% 6,77%





Number of employees who are members of the UP Provident Fund

2 813 2 657

Number of pensioners of the UP Provident Fund

209 196

Postretirement mortality tables PA (90) PA (90)


2011 2010

SA Equities 61,5% 61,0%

SA Bonds 14,9% 16,4%

Cash & Cash Equivalents 6,7% 6,6%

International Equities 13,3% 13,0%

International Bonds 3,6% 3,0%

Amounts for the latest actuarial valuation and the previous two periods are as follows:

2008 2009 2010 2011

Rm Rm Rm Rm

Defined benefit obligation (1 335) (1 509) (1 670) (1 846)

Plan assets 1 361 1 549 1 673 1 843

Surplus/(deficit) 26 40 3 (3)

Experience adjustments on plan liabilities 138 63 40 90

Experience adjustments on plan assets (180) (42) 18 (69)

Estimated employer contributions to be paid for the financial year ending 31 December 2012 is R82,4 m.


10. Provisions

ProvisionsLegalfees

provision A provision of R0,9 m (2010: R1,0 m) has been recognised for the possible legal fees and settlement to be paid for a claim of unfair dismissal brought forward by a former employee. It is expected that this expenditure will be incurred in the next financial year. The former employee seeks compensation in the amount of two years remuneration.

Rm

At 1 January 1

As at 31 December 1

Analysed as:

Current 1

1

11. Trade payables, accruals & other liabilities2011 2010

The fair value approximates the carrying amounts.

Rm Rm

Financial liabilities 322 416

Trade payables 228 199

Supplementation of transfer values from AIPF to UP provident fund

11 111

Advance – NRF 2 11

Accrued expenses 81 95

Non-financial liabilities 148 161

Leave with gratuity value 10 10

Non-accumulative leave 110 117

Bonus accrual 5 4

Receiver of Revenue – VAT 1 1

Department of Health: Joint appointments 16 15

Deposits held in custody for others 6 14

Total 470 577

Leave accrual

Staff with leave with gratuity value to their credit at the end of 2006 had a choice of disbursing the accumulated leave (as at 31 December 2006) to them at the end of March 2007 or to retain such leave credits in the system at the value as determined above.

Leave credits retained will be disbursed to the relative staff member upon termination of service or on request at any time after March 2007, at the value as at 31 December 2006. As it is difficult to predict which portion of the liability will be disbursed to staff in 2011, the total accrual is treated as current.

The portion of non-accumulative leave that is not used within a period of twelve months expires at the end of the period. For this reason the non-accumulative leave is treated as current.


12. Deferred income

2011 2010 Contract work is invoiced in advance. During the contract term claims are received for work done. Recognition of this income is limited to expenses incurred. The balance is recognised as deferred income in the statement of financial position. Claims received in advance for future contracts are also recorded as provisions against the income.

The University recognises grants received, to compensate for expenses incurred, as income. These grants are subject to various requirements and therefore they are recognised over a certain period (specific to each grant) under the terms of the grant. The recognition of this income is limited to the expenses incurred. The balance is recognised as deferred income in the statement of financial position.

Rm Rm

At 1 January 627 497

Charged to the income statement

Received during the year 607 476

Recognised during the year (523) (346)

As at 31 December 711 627

Analysed as:

Current 400 390

Non-current 311 237

711 627

13. State appropriations – subsidies and grants

2011 2010State appropriations – subsidies and grants received are accounted for as grants related to income.Refer accounting policies note 3 and 4 for more detail.

Rm Rm

Subsidy for general purpose 1 652 1 405

1 652 1 405

14. Operating revenue

2011 2010

Rm Rm

State appropriations – subsidies and grants (refer to note 13)

1 652 1 405

Tuition and other fee income 1 220 1 134

Income from contracts

For research 112 105

For other activities 363 328

Rendering of services 456 488

Donations and gifts 182 95

3 985 3 555


15. Income from investments

2011 2010

Rm Rm

Available-for-sale investments 214 90

Gains on sales on available-for-sale investments 214 90

Interest and dividends 198 229

Interest income 163 216

Dividend income 35 13

Expected return on defined benefit plans (note 9) 416 370

828 689

16. Staff costs

2011 2010

Rm Rm

Salaries and wages 1 643 1 524

UP Pension fund: Postemployment benefits (note 9.1)

44 36

Postemployment medical benefits (note 9.2)

14 14

UP Provident fund: Postemployment ben-efits (note 9.3)

150 129

1 851 1 703

Academic professional 913 823

Other personnel 945 867

Non-accumulative leave accrual (7) 13

The number of persons employed by the University on 31 December is:

2011 2010

Full-time 4 371 4 434

Part-time (more than 15 hours per week) 426 612

Joint appointments – Full-time 470 511

Joint appointments – Part-time (more than 15 hours per week)

12 18

5 279 5 575


17. Other operating expenses

The following items have been included in other operating expenses:

2011 2010

Rm Rm

Repairs and maintenance 115 98

Expenditure on computer equipment 47 31

Operating lease rentals 21 17

Plant and machinery 11 9

Property 10 8

Auditor’s remuneration 5 4

- as auditor 3 2

- other

Bad debts 21 39

Bursaries 347 294

Management fees in relation to available-for-sale investments

20 11

Operating leases – group company is lessee

The future minimum lease payments under non-cancellable operating leases are as follows:

2011 2010 The University leases photocopiers and fax machines under various agreements which terminate between 2011 and 2013. The agreements do not include an extension option.

Rm Rm

No later than 1 year 3 6

Later than 1 year and no later than 5 years 5 4

8 10

18. Finance expense

2011 2010

Rm Rm

Interest cost on defined benefit plans (note 9)

304 268

304 268


19. Contingencies

Contingent liabilities

19.1 Housing and loan scheme

At 31 December 2011, the University had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities could arise. In the ordinary course of business, the University has given guarantees amounting to R0,1 m (2010: R0,1 m) to third parties in respect of housing loans granted to employees. The instalments on these loans are paid directly from the employees’ remuneration to the bank. In the event of resignation, the bond is increased with the growth in market value, thereby releasing the University of its Guarantee. Employees are expected to honour their obligations in respect of their housing loans and therefore no future cash flows from the University are expected.

19.2 Legal actions

Management are not aware of any ongoing significant legal matters.

19.3 Bank guarantees

Bank guarantees to creditors was issued to the amount of R2,9 m (2010: R4,9 m), during the normal course of business (such as the placing of orders and services to be rendered). Funds are available from existing sources.

20. Contractual obligations in respect of expenses

The following commitments existed on 31 December in respect of contracts concluded and orders placed:

2011 2010

Rm Rm

Buildings 274 826

Intangible assets: Systems renewal project - 1

Operating expenditure, including movable assets

180 134


21. Cash generated from operations

2011 2010

Rm Rm

Reconciliation of surplus to cash generated from operations:

Surplus before tax 925 605

Adjustments for:

Non-cash items

- Depreciation 192 187

- Amortisation 18 10

- Expected return on defined benefit plans (416) (370)

- Interest cost on defined benefit plans 304 268

- Current service cost on defined benefit plans

207 179

Contributions on defined benefit plans (155) (140)

Medical fund benefits paid by the Univer-sity

- (29)

Loss/(Profit) on sale of property, plant and equipment

4 3

Dividend income (35) (13)

Interest income (163) (216)

Profit on sale of investments (214) (90)

Increase in agency funds 13 (9)

Changes in working capital (12) 220

(Increase)/Decrease in trade and other receivables

(42) (84)

Increase in interest-bearing non-current receivables

3 (29)

(Increase)/Decrease in inventories 1 (3)

Increase in trade and other payables 26 336

Cash generated from operations 668 605

22. Related party transactions

22.1 Key management personnel

The following are considered to be related parties to the University:• University Council members• Management comprises the Executive, Deans of faculties, Directors of support service departments and Directors of subsidiaries

Compensation paid to key management and members of Council

Members of Council

Manage-ment

2011 2010

The motor vehicle loans are unsecured, interest bearing and repayable over 48 months. Refer to note 4 for applicable rates.

R’000 R’000 R’000 R’000

Salaries and other short-term employee benefits

394 67 388 67 782 67 404

Postemployment benefits - - - -

Other long-term benefits - - - -

Loans to Management

Motor vehicle loans - 4 990 4 990 3 754


22.2 Subsidiaries

The University of Pretoria controls and owns 100% of the shares of the following companies and trust:- TuksSport (Pty) Ltd - Enterprises at University of Pretoria (Pty) Ltd (dormant)- Research Enterprises at University of Pretoria (Pty) Ltd (dormant)- Health Enterprises at University of Pretoria (Pty) Ltd (dormant)- TuksFM Trust

The University of Pretoria is the sole beneficiary of Enterprises at University of Pretoria Trust. The Trust owns the following shareholding:- 100% in Business Enterprises at University of Pretoria (Pty) Ltd- 100% in Continuing Education at University of Pretoria Trust- 67,5% in InSiAva (Pty) Ltd- 75% in Vicva Investments (Pty) Ltd (dormant)- 50% in BALSS (Pty) Ltd (dormant)- 30% in Bookmark at UP (Pty) Ltd

The University of Pretoria is the sole beneficiary of TuksFM Trust.

Business Enterprises at University of Pretoria (Pty) Ltd owns 33% of the shares of Consulta Management Consulting (Pty) Ltd, 60% of the shares of Izandla Zethu Consulting (Pty) Ltd (deregistered 1 November 2011) and 100% of the shares of StratoScience (Pty) Ltd. StratoScience is currently dormant.

TuksSport (Pty) Ltd owns 100% of the shares of TS Soccer (Pty) Ltd.

22.3 Postretirement benefit plans

UP Provident FundUP Pension Fund

22.4 Transactions with related parties

No transactions other than loans, lease of office and administration fees have taken place between the University of Pretoria and its subsidiaries. All inter-group transactions were eliminated on consolidation.


The following transactions were carried out with related parties:

2011 2010

The loans are unsecured and bear no interest. There is no bad debt written off during the year that relates to related parties.

R’000 R’000

Income from subsidiaries/trusts:

Consultation 15 191 11 725

Rental 4 633 5 056

Interest 59 59

Expenses to subsidiaries/trusts:

Subcontractor fees 5 573 6 908

Employer contributions paid to:

UP Provident Fund 137 800 122 200

UP Pension Fund - -

Amounts payable at year end to:

TuksSport (Pty) Ltd (Subsidiary) 3 257 1 910

Amounts receivable/(payable) at year end:

Associates

Consulta Management Consultants (Pty) Ltd

- 289

Subsidiaries

TuksSport (Pty) Ltd 1 065 695

Enterprises at University of Pretoria Trust 93 103 87 314

Loans to:

SERA (Pty) Ltd (Associate) 9 116 9 116


Loans from:

SAIP Fund (Pty) Ltd (17 500) (15 018)

Provision for impairment:

SERA (Pty) Ltd (Associate) 9 116 9 116



2011 2010

R’000 R’000

Directors’ remuneration

- As director 567 530

- Other 548 477

2011 2010

R’000 R’000

Trustees’ remuneration

- As trustee 3 290 2 987

23. Investment in associate companies

2011 2010

R R

Shares at cost

SERA (Pty) Ltd – Unlisted 50 50

Bookmark at UP (Pty) Ltd – Unlisted 429 429

Consulta Management Consultants (Pty) Ltd – Unlisted

660 660

Change in control – Consulta Management Consultants (Pty) Ltd – Unlisted

228 785 228 785

Share of accumulated profit/(loss) since acquisition

SERA (Pty) Ltd – Unlisted (50) (50)

Bookmark at UP (Pty) Ltd – Unlisted (171 252) (58 932)


1 464 604 1 409 306

1 523 226 1 580 248

Percentage Holding

Number of shares held

2011 2010 2011 2010

SERA (Pty) Ltd – Unlisted 50% 50% 50 50

Bookmark at UP (Pty) Ltd – Unlisted 30% 30% 429 429


33% 33% 660 660

As of 1 January 2008, the 40% interest in Consulta Management Consultants (Pty) Ltd was diluted to a 33% holding due to a change in shareholding. Consulta Management Consultants (Pty) Ltd is included as an associate for 2011 and 2010. The University’s interest in Bookmark at UP (Pty) Ltd and Consulta Management Consultants (Pty) Ltd are accounted for using the equity method.


The aggregate assets, liabilities and results of operations of associate companies for the financial year ended 31 December 2011 are summarised as follows:

SERA (Pty) Ltd*

Bookmark at UP (Pty) Ltd

Consulta Manage-ment Consultants

(Pty) LtdTotal 2011

R R R R

Total assets 52 765 307 3 799 646 5 726 647 62 291 600

Total liabilities

48 546 791 3 828 587 3 462 200 55 837 578

Revenue - 2 173 004 16 752 615 18 925 619

Profit or (loss)

(3 060 921) (374 451) 1 057 123 (2 378 249)

The aggregate assets, liabilities and results of operations of associate companies for the financial year ended 31 December 2010 are summarised as follows:

SERA (Pty) Ltd*

Bookmark at UP (Pty) Ltd

Consulta Manage-ment Consultants

(Pty) LtdTotal 2010

R R R R

Total assets 52 510 154 4 134 300 4 127 931 60 772 385

Total liabilities

48 561 221 4 192 800 2 109 222 54 863 243

Revenue - 4 586 760 14 520 853 19 107 613

Profit or loss 11 297 658 28 841 1 006 617 12 333 116

*The financial year-end of SERA (Pty) Ltd is 31 March. Results indicated above are based on unaudited financial statements for the year ended 31 December. The University has significant influence but not control over the company and therefore is included as an associate at cost and not as a subsidiary.

24. Agency funds

2011 2010

Rm Rm

Estate funds 19 21

SRC Club Assets 7 6

External bursaries 18 5

Other 1 1

45 33


25. Financial instruments by category

Loans andreceiv-ables

Available-for-sale

investments

Total

Rm Rm Rm

31 December 2011

Assets as per statement of financial position

Available-for-sale financial investments (refer note 3)

- 3 075 3 075

Non-current loans and receivables (refer note 4)

76 - 76

Trade and other receivables (refer note 6) 324 - 324

Cash and cash equivalents (refer note 7) 1 898 - 1 898

Total 2 298 3 075 5 373

Other financialliabilities

Rm

TotalRm

Liabilities as per statement of financial position

Borrowings (refer note 8) 18 18

Trade payables, accruals and other liabili-ties (refer note11)

322 322

Total 340 340

Loans and receivables

Available-for-sale

investmentsTotal

Rm Rm Rm

31 December 2010Assets as per statement of financial posi-tion

Available-for-sale financial investments (refer note 3)

- 2 469 2 469

Non-current loans and receivables (refer note 4)

79 - 79

Trade and other receivables (refer note 6) 280 - 280

Cash and cash equivalents (refer note 7) 2 407 - 2 407Total 2 766 2 469 5 235


Other financialliabilities

Total

R’000 R’000

Liabilities as per statement of financial position

Borrowings (refer note 8) 15 15

Trade payables, accruals and other liabili-ties (refer note11)

416 416

Total 431 431

26. Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates:

2011 2010

Group 1 – existing trade receivables with some defaults in the past.

Group 2 – trade receivables outstanding less than 30 days with no/limited defaults in the past.

Rm Rm

Other trade receivables

Counterparties without external credit rating:

Group 2 11 14

Total other trade receivables (refer note 6)

11 14

2011 2010

Rm Rm

Cash at bank and short-term deposits

Fitch Ratings, Ltd F1+ 1 898 2 407

Total cash and cash equivalents (refer note 7)

1 898 2 407


There are no student loans or student receivables that are neither past due nor impaired

2011 2010

R’000 R’000

Available-for-sale investments

AAA (Non-Government) 8 412 4 345

AA 34 136 2 172

A 52 573 26 069

BBB 52 573 28 242

BB 39 955 21 724

B 46 264 21 724

Unrated 6 572 4 604 Total Bonds, annuities and other (refer note 3) 240 485 108 880

Bonds are placed with Investec Asset Managers and Coronation Fund Managers and consist of South African corporate bonds.

27. Risk management

The University and its subsidiaries are exposed to a variety of financial risks: market risk (including foreign currency risk, interest rate risk and price risk), capital risk, credit risk and liquidity risk.

A Risk Management Committee comprising members of the Executive Committee, identifies, evaluates and co-ordinates the management of strategic risks faced by the University. Risk management processes are reviewed regularly for continuing relevance and effectiveness. The Risk Management Committee reports to the Executive Committee and to the Audit and Risk Management Committee of Council. A report on the risk management process that is being followed, as well as a summary of the risk register, are presented to the Audit and Risk Management Committee and to the Council of the University on a regular basis.

The University varies its investment philosophy by the term of the liabilities and the risk profile. To this end three portfolios have been established, namely:

• Long Term Capital (LTC) Portfolio – Long-term investing (at least 5 years) where the investment objective and risk constraint is set relative to consumer price inflation;

• Stable Portfolio – Medium-term investing (2 to 5 years) where the investment objective and risk constraint is set relative to inflation and a low risk of capital loss over the medium term;

• Money Market Portfolio – Short-term investing (2 years and less) where the investment objective and risk constraint is set relative to short term interest rates and a high degree of capital security.

The University’s investment channels have strong investment characteristics and no portfolios that have speculative characteristics are utilised.


27.1 Financial risk factors

A. Market risk

(i) Foreign currency risk

The University and its subsidiaries have limited foreign exchange exposure in respect of normal operating activities. Foreign investments and foreign bank balances are subject to exchange rate fluctuations. The carrying amounts of financial instruments that are exposed to foreign currency risk are as follows:

2011 2010

Rm Rm

Foreign investments (USD) 953 630

CFC bank account 4 4

Total 957 634

Foreign currency sensitivity analysis ± 10% ± 10%

Foreign investments (USD) 96 63

Total 96 63

At 31 December 2011, if the USD had strengthened by 10% against the Rand with all other variables held constant, the surplus for the year would have been R95,7 m (2010: R63,4 m) higher, mainly as a result of a Rand increase in the fair value of USD denominated investments. If the USD had weakened by 10% against Rand with all other variables held constant, the surplus for the year would have been R95,7 m (2010: R63,4 m) lower, mainly as a result of a Rand decrease in the fair value of USD denominated investments. The 10% variation in the exchange rate is based on the average forward rate for 12 months in respect of the underlying currencies.

(ii) Price risk

The University and its subsidiaries are exposed to equity securities price risk because of investments held by the University and classified as available-for-sale investments. The University and its subsidiaries are not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the University and its subsidiaries diversify its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Investment Committee.

Price sensitivity analysis

2011 2010

Rm Rm

± 10% ± 10%

Listed equities 282 236

At 31 December 2011, if the FTSE/JSE CAPI index increased/decreased by 10% with all other variables held constant and all the University’s equity instruments moved according to the historical correlation with the index, the other comprehensive income for the year would have been R281,9 m (2010: R236,0 m) higher/lower. Due to the unpredictability of equity market returns, a general indicative percentage of 10% is used to highlight the changes in market value on equity investments.


(iii) Interest rate risk

The University and its subsidiaries have no significant interest-bearing liabilities and the University’s income and operating cash flows are substantially independent of changes in market interest rates and therefore no formal interest rate risk management policy exists.

Interest rate sensitivity analysis

2011 2010

Rm Rm

± 50 basis points ± 50 basis points

Cash, bank and cash equivalents 9 12

At 31 December 2011, if the interest rate had been 50 basis points higher/lower, the surplus would have been R9,5 m (2010: R12,0 m) higher/lower. The increase/decrease of 50 basis points in the interest rate is based on the assumption that interest rates on average may increase/decrease in increments of 50 basis points at a time.

B. Credit risk

Potential concentrations of credit risk consist mainly of short-term cash, cash equivalent investments, trade receivables, debt securities classified as available-for-sale financial assets and other receivables. The maximum exposure to credit risk is represented by the carrying amount of all financial assets subject to credit risk.

The University places cash and cash equivalents with reputable financial institutions and a multi-manager approach to the management of investments is followed in order to limit investment risk. Funds are invested in ten divergent portfolio managers (six local and four foreign), with specialist mandates developed to contain risk within set parameters. In order to hedge investment funds against fluctuations, the portfolio managers strive to invest some of the available funds abroad. Adjustments to the fair value of investments are recognised in a revaluation reserve until such time as the investment is sold, in which case the adjustment will be recognised in the income statement.

For detail regarding the nature of credit risk associated with individual assets, refer to notes 3, 4, 6 and 7.

Receivables comprise outstanding student fees, student loans and a number of customers, dispersed across different industries and geographical areas. The University is exposed to credit risk arising from student receivables related to outstanding fees. This risk is mitigated by requiring students to pay an initial instalment in respect of tuition and accommodation fees at registration, the regular monitoring of outstanding fees, the institution of debt collection action in cases of long outstanding amounts. In addition, students with outstanding balances from previous years of study are only permitted to renew their registration after either the settling of the outstanding amount or the conclusion of a formal payment arrangement. The University assists a limited number of financially needy students with loans. Although this represents a credit risk, the risk is mitigated in view thereof that the loans are secured by means of requesting two sureties per agreement. Credit valuations are performed on the financial condition of customers other than students.

C. Liquidity risk

The University and its subsidiaries have minimised risk of liquidity as shown by its substantial cash and cash equivalents. The University manages a cash budget which is continually updated and reported to the Investment Committee. Liquidity is also enhanced by investing in listed security instruments.


The table below analyses the University’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the undiscounted cash flows. Balances due within a year equal their carrying amount as the impact of discounting is not significant.

at 31 December 2011 Less than Between Between More than

1 year 2-3 years 4-5 years 5 years

R’000 R’000 R’000 R’000

Borrowings 93 17 500 - -

Trade payables, accruals and other liabilities 469 473 - - -

469 566 17 500 - -

at 31 December 2010 Less than Between Between More than

1 year 2-3 years 4-5 years 5 years

R’000 R’000 R’000 R’000

Borrowings 118 15 111 - -

Trade payables, accruals and other liabilities 577 425 - -

577 543 15 111 - -

D. Capital risk management

The University of Pretoria and its subsidiaries’ objectives when managing capital (which includes all items of capital and funds as presented on the Statement of Financial Position) are to safeguard the ability of the University of Pretoria and its subsidiaries to continue as a going concern and to maintain an optimal structure to reduce the cost of capital.

In order to maintain the capital structure, the University and its subsidiaries have ensured a sound financial position by limiting exposure to debt and increasing investment and cash balances. This objective is met by a well-planned budget process each year in which the critical strategic objectives of the University of Pretoria and its subsidiaries are addressed.

E. Fair value estimation

Financial instruments that are measured at fair value require disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 – Inputs for the assets or liabilities that are not based on observable market date (that is, unobservable inputs).


The following table presents the University’s financial assets and liabilities measured at fair value at 31 December 2011:

Level 1 Level 2 Level 3 Total

Rm Rm Rm Rm

Financial Assets

Available-for-sale financial assets 3 060 - 15 3 075

Financial Liabilities

None - - - -

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing services or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the University is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily FTSE/JSE 100 equity investments classified as available-for-sale.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The cost price of the unlisted securities approximates their fair values.

Specific valuation techniques used to value financial instruments include:

• Quoted market prices or dealer quotes for similar instruments.• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial

instruments.

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