Month: March 2020

This includes, but is not limited to, claims for losses arising from errors, or fraud in relation to HM Land Registry’s statutory responsibility as insurer of titles in England and Wales . As at the current accounting date, future claim payments are uncertain in timing and amount. The Indemnity Fund is established on the basis bookkeeping of the best estimate of the expenditure required to settle the obligation. The Indemnity Fund is determined after considering actuarial estimates of the cost of claims reported but not settled, as well as claims incurred but not reported. The estimated cost of claims includes expenses incurred in settling these claims.

On the basis of this analysis work it is reasonably foreseeable that the value of liabilities could be about £11.2m or £84.2m . The assumptions used in the projections are based on analysis of historical claims data, allowance for recent trends and consideration of the potential effects of underlying factors such as the volume of HM Land Registry activity and numbers of registered titles. We provide input to the actuaries on these assumptions, based on the knowledge of the legal team that handles the claims. The presence of large outstanding claims can add significantly to this uncertainty.

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2018/ /18 £’000 £’000 Within one year – 29 In the second to fifth years inclusive – – After five years During the year, investment property rental income of £0.4m was receivable. As in previous years, this was included within miscellaneous income (see note 2.1).

If collection of amounts receivable is expected in one year or less they are classified as current assets. Other property, plant and equipment includes IT and office equipment and machinery. Where appropriate, individual assets falling below the minimum value for capitalisation are grouped. It is HM Land Registry’s policy not to capitalise expenditure on fixtures and fittings, principally office furniture, as they are not considered material. For other assets the depreciation charge is calculated so as to allocate the cost or revalued amount, less the estimated residual value, of non-current assets systematically over their remaining useful lives using the straight-line method.

Decrease projected number of attritional IBNR claims by 10% for incident years since 2013/14 82.5 – 2 11. Increase projected number of large IBNR claims by 10% for incident years since 2013/14 85.9 2 12. Decrease projected number of large IBNR claims by 10% for incident years since 2013/14 82.5 – 2 Future claims inflation 13. Decrease assumed future claims inflation by 1% 79.1 – 6 Extreme favourable scenarios +++++++++ 60.6 Extreme adverse scenarios +++++++++ 107.8 17. However, the value of the Indemnity Fund provisions are subject to future uncertainty. We have also considered extreme adverse scenarios, where the value of liabilities is as much as £12.0m and £107.8m . The long-term open-ended nature of statutory indemnity means that these figures do not represent the maximum possible liability.

The “bottom line”, i.e. the figure showing whether the company is profitable or in the red, is established by taking all the costs of doing business from the revenue.

In conclusion, each of the financial statements described above has its own individual purpose. The P&L shows how assets & liabilities were used, the Balance Sheet is a snapshot of the company at a specific time and the Cash Flow shows the use of money over time, but only when looked at all together do they provide a full picture of the financial state of the company.

Reporting Period

The degree of uncertainty at future accounting dates may be different from that illustrated here. This could be for a number A fixed cost may include all of the following except quizlet of reasons, for example because the profile of claims has changed or because the outlook on future claim trends has changed.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The I&E reserve represents the cumulative retained net income since HM Land Registry became a trading fund. Enrol and complete the course for a free statement of participation or digital badge if available.

Current Annual Report And Financial Statements

The cost of providing employee benefits is recognised in the period in which HM Land Registry receives services from its employees, rather than when it is paid or payable. Short-term employee benefits are recognised as an expense in the period in which the employee renders the service. Performance payments are recognised only when there is a legal or constructive obligation to pay them and the costs can be reliably estimated. Termination benefits are recognised when it can be demonstrated that there is an irreversible agreement to terminate the employment of employee before the schemes’ retirement date or as a result of an offer to encourage voluntary redundancy. IFRS 15 Revenue from Contracts with Customers has been adopted by the FReM with effect from 1 April 2018. The income recognition criteria of IFRS 15 are consistent with HM Land Registry accounting policy. The Revaluation Reserve records the unrealised gain or loss on revaluation of assets.

Although I sign off on this year’s Annual Report and which accounts normally have debit balances, I should emphasise that I did not become Chair until 1 August 2020, and am a relatively recent arrival to the Board of Governors, joining in February 2019. However, I came to the role with a strong personal belief in the contribution education makes to civil society, its role in bringing greater efficiency to the economy, and its ability to address the disparities that currently blight the United Kingdom. We provide health and wellbeing services, financial guidance and support to develop your study skills.

At Roehampton, we are focused on creating new knowledge and ideas that help us to understand our world and make it a better place. This means that if you join us as a student, you will benefit from being taught by leading thinkers from your first year of study. 57% of our costs relate to staff, by far our most important form of expenditure. Rather than setting out separate requirements for presentation of the statement of cash flows, IAS 1.111 refers to IAS 7 Statement of Cash Flows. The effects of changes in the credit risk of a financial liability designated as at fair value through profit and loss under IFRS 9. IAS 1 was reissued in September 2007 and applies to annual periods beginning on or after 1 January 2009. 2018/ /18 £’000 £’000 Net cash at start of period 308, ,926 Increase/ in cash in the period 211, ,187 Net cash at end of period 519, ,739 20.

• 2018/ /18 £’000 £’000 Net cash at start of period 308, ,926 Increase/ in cash in the period 211, ,187 Net cash at end of period 519, ,739 20.
• HM Land Registry completed the building and development of a computerised register to hold the Local Land Charges data in July 2018.
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires only the general nature of the dispute to be disclosed.
• Currently, the onboarding of Local Land Charges data is at an early stage and the quantitative criteria for separate reporting under IFRS 8 have not yet been met.
• On the basis of this analysis work it is reasonably foreseeable that the value of liabilities could be about £11.2m or £84.2m .
• The leases have different non-cancellable periods with current break option points ranging from six months to eight years.

Lease payments are apportioned between the finance element, which is charged to the statement of comprehensive income as interest, and the capital element, which reduces the outstanding obligation for future instalments. These what is a cash receipts journal have been prepared in accordance with the Government Financial Reporting Manual 2018/19 and comply with the Accounts Direction given by HM Treasury in accordance with section 4 of the Government Trading Funds Act 1973. The accounting policies contained in the FReM follow International Financial Reporting Standards , as adapted or interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the accounting policy that has been judged to be the most appropriate to the particular circumstances of HM Land Registry for the purposes of giving a true and fair view has been selected. HM Land Registry’s accounting policies have been applied consistently in dealing with items considered material in relation to the financial statements. Birkbeck’s financial statements outline our financial situation from year to year, taking account of income from student fees, research grants and investments and expenditure on staff salaries and entitlements and estate costs. In accordance with the requirements of IAS 10 Events after the reporting period, events after the statement of financial position date are considered up to the date on which the accounts are authorised for issue.

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All other tangible non-current assets are included at historical cost less accumulated depreciation and impairment losses. HM Land Registry is required by the FReM to disclose non-current assets in the statement of financial position at fair value. For assets in use the FReM requires valuation at existing use as an asset’s fair value, rather than market value required by IFRS 13. Details of FReM adaptations which continue to apply for 2018/19 can be found on GOV.UK (search ‘Financial QuickBooks Reporting Manual 2018/19’). Certain services require receipt of payment upon application, resulting in payments being received for services not yet delivered within the financial year being reported. These amounts are reported as contract liabilities and disclosed within current liabilities. Income is recognised once the contract performance obligation under IFRS 15 has been fulfilled, i.e. once the register has been fully updated following receipt of an application.

The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows. If you look at any income statement and/or balance sheet for an entity, you will find that they are generally accompanied by a set of notes to the financial statements which provide further information, explanation or analyses, which are more conveniently shown separately from the main statements. That information, along with other information in the notes, assists users of financial statements in predicting the entity’s future cash flows and, in particular, their timing and certainty. Where HM Land Registry retains all the risks and rewards of ownership of an asset subject to a lease, the lease is treated as a finance lease. Future instalments payable under finance leases, net of finance charges, are included in liabilities with the corresponding asset values recorded in non-current assets and depreciated over the shorter of their estimated useful lives or their lease terms.

An allowance has been made for estimated irrecoverable amounts from the provision of services and this allowance has been determined by reference to past default experience. As a result of IFRS 15, the basis for calculating contract assets has changed, resulting in a reduction in the asset value. HM Land Registry has applied the cumulative catch-up method in the statement of changes in reserves, as allowed by the Standard, to reflect the change in accounting policy. The 2018/19 I&E Reserve opening balance has been restated to show the effect of the reduction of £825,000. 2018/ /18 £’000 £’000 Work-in-progress 5,670 6,648 5,670 6,648 Contract assets relate to internal costs of staff and directly attributable overheads in preparing completion of registration for the customer.

More details about digital mortgage can be found on GOV. UK (search ‘HM Land Registry Digital Mortgage Service Contingent Liability’). Note 2018/ /18 £’000 £’000 Total operating surplus reported for operating segments 2 28,074 59,762 Reconciling items Miscellaneous income 2,967 – Total operating surplus per Statement of Comprehensive Income SoCI 31,041 59,762 Miscellaneous income was netted off expenditure prior to 2018/19. It includes rental income, refunds and other small value receipts that do not relate to the core business activities of HM Land Registry, and which are therefore not included within note 2. Currently, the onboarding of Local Land Charges data is at an early stage and the quantitative criteria for separate reporting under IFRS 8 have not yet been met. As soon as any of the standard’s criteria are met, this will be reported as a separate operating segment. Where appropriate, liabilities that have only a possible chance of crystallising and do not meet the provisions criteria have been classified as contingent liabilities.

Short-term provisions 16.1 4,945 5,426 72,559 90,903 Indemnity Fund 16.2 95,400 91,000 Total current liabilities 167, ,903 Non-current assets plus net current assets 458, ,027 Non-current liabilities Obligations under finance leases 14.2, 15.1 4,282 4,523 Long-term provisions 16. ,124 Total non-current liabilities 5,209 6,647 Net assets 452, ,380 Capital and reserves Public Dividend Capital 61,545 61,545 Revaluation reserve 20,308 18,096 Income and expenditure reserve 371, , , ,380 The notes to the financial statements are an integral part of these accounts. These benefits conform to the rules of the Principal Civil Service Pension Scheme . HM Land Registry bears the cost of these benefits until the normal retirement age of the employees retired under the scheme. Total payments in the year amounted to £2.3m in 2018/19, of which £2.3m had been provided for within the ERP provision in the 2018/19 accounts. The total pension liability up to normal retiring age in respect of each employee is charged to the statement of comprehensive income in the year in which the employee takes early retirement and a provision for future pension payments is created. Pension and related benefit payments to the retired employee until normal retiring age are then charged annually against the provision.

HM Land Registry provides for legal and constructive obligations that are of uncertain timing or amount at the statement of financial position date, on the basis of management’s best estimate at that date of the expenditure required to settle the obligation. Provisions are discounted to the expected present value of their future cash flows using a risk-free discount rate. As the effect of discounting is immaterial, it is included as part of the revaluation to that provision in year, rather than disclosed on a separate line. Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for irrecoverable amounts. These impairment provisions are recorded in administrative expenses within the statement of comprehensive income.

for which the entity does not have the right at the end of the reporting period to defer settlement beyond 12 months. The Land Registration Act 2002 places a legal liability on HM Land Registry to indemnify for losses resulting from errors or omissions on the register of title. As a statutory insurer of titles in England and Wales, indemnity payments are not confined to mistakes made by HM Land Registry. HM Land Registry provides for these claims under its Indemnity Fund both for known claims and claims incurred but not reported (see note 16.2) based upon the assumed likelihood that claims will be successful.

The carrying amount of trade receivables is deemed to be an approximation of fair value. For short-life non-property assets, historical cost is used as an approximation to the fair value of the asset. Freehold land and buildings and leasehold buildings are included at revaluation less accumulated depreciation and impairment losses.

Freehold and leasehold land and buildings are professionally valued by external, independent property valuers having appropriate recognised professional qualifications and recent experience in the location and category of the properties being valued. Cushman & Wakefield, RICS registered valuers, carried out a full valuation in March 2019. HM Land Registry employees are civil servants who are entitled to be members of the Principal Civil Service Pension Scheme or the Civil Servant and Other Pension Scheme – known as ‘alpha’. These are unfunded multi-employer defined benefit schemes, but HM Land Registry is unable to identify its share of the underlying assets and liabilities on a reasonable and consistent basis. HM Land Registry has therefore accounted for contributions and payments to these schemes under International Accounting Standards 19 as if they were defined contribution schemes. Liability for the payment of future benefits is a charge on the PCSPS or alpha scheme.

A flexible budget is a financial plan with scope for change in the value of its key parameters. It is according to the level of activities undertaken by the organization over a defined period.

Differences may occur in fixed expenses, but they are not related to changes in activity within the relevant range. The flexible budget uses the same selling price and cost assumptions as the original budget. The variable amounts are recalculated using the actual level of activity, which in the case of the income statement is sales units. A flexible budget is designed to change based on revenue or production levels. Unlike a static budget, which can be prepared in anticipation of performance, a flexible budget allows you to adjust the original master budget using actual sales and/or production volume.

Flexible Budgets Can Adjust Costs And Margins

In addition to recurring expenses, there also are periodic expenses. At these junctures, it is important to evaluate flexible budgeting example your financial condition. Is a new bike needed or can the current bike be repaired at a much lower cost?

The biggest advantage to a flexible budget is that it more accurately reflects the state of your finances. The alternative, static budgeting, can’t account for unexpected expenses or changing income.

Some hospitals may have to set aside as much as 10% of total capital for unplanned spending or as little as 2%, depending on each situation, she says. A flex methodology also makes it easier to keep various hospital executives accountable for their budget estimates. “Every organization spends a lot of time and effort budgeting,” recording transactions Berger says. “The question really is why do they do if they’re not going to hold their managers and executives accountable?” he says. McGuire describes a scenario in which the hospital performed a knee replacement procedure estimated to cost $4,000 but actually cost $7,000 when a different implant was used.

Examples Of A Flexible Budget

This is because not all costs a company may incur are variable and must be input into the budget as a fixed cost. Calculating each category and determining the type of cost it requires can be difficult and take time.

Instead, they have a massive amount of fixed overhead that does not vary in response to any type of activity. In this situation, there is no point in constructing a flexible budget, since it will not vary from a static budget. Enter actual activity measures into the model after an accounting period has been completed.

And all these factors are beyond the control of the organization. Hence, forecasts of the management can go wrong and lead to variances in the budget. A company may face significant deviations from its budgeted figures because of poor planning and control of its key activities. Sales and other activities that affect cost-drivers may not work the same as originally planned. Flexible budget variance can result into a positive or a negative figure. When actual figures are superior over the budgeted ones, it is a positive or favorable budget variance. On the other hand, if the real numbers fall short of the budgeted or estimated numbers, it will signify a negative or unfavorable budget variance.

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Therefore, many Industries and companies can’t use this budget despite its enormous advantages. A definition of contingency budget with an overview of common calculation methods.

For example, if the company sees that it can sell off more of its products by expending more in advertisement costs, a flexible budget would help execute that. That’s why a flexible budget is very effective for companies who go through a lot of changes during a particular period. The first step in creating a flexible budget is to create a static overhead budget. This allows you to assume standard production levels and all associated expenses. The static budget also serves as a base for adjusting budget variances on the flexible budget. While variances are noted in static budgets, a flexible budget allows you to enter the revenues and expenses relevant to that particular budget period, adapting flexible costs using real-time data.

• It is a set of alternative budgets to different expected levels of activity.
• Welsch has listed three specific uses of the flexible budget.
• A flexible personal budget is the individual equivalent of this process.
• Therefore it helps the management to accurately know about their productivity and output, for example, jute factories, handloom industries, etc.
• This additional cost driver may affect utilities, as if we need to have the heat at a certain temperature for classes, this cost may not depend on how many students take classes.

For control purposes, the accountant then compares the budget to actual data. It may be tricky to analyze the variances of cost, as the nature of all the expenses may not be the same. It helps in assessing the performance of the management and key production personnel.

Create flexible budgets at the beginning of an accounting period to predict what your company will earn if particular changes occur. For example, if you wish to start a new marketing campaign during that period, use the flexible budgets to show what you’ll earn if you sell 500, 1,000 and 10,000 more products. Then you’ll have a better idea of how strong an investment the advertising campaign would be, and how much to invest. To create the budgets, you must make educated guesses about how much you’ll need to spend in each scenario on supplies like packaging, employee wages and other factors like shipping costs. With a flexible budget, you’ll prepare the company to adapt to changes more easily.

What Is A Flexible Budget?

This is more time than is available to staff in the middle of the budget process. If the factory has to use more machine hours one month, its budget should logically increase.

Expenditures may only vary within certain ranges of revenue or other activities; outside of those ranges, a different proportion of expenditures may apply. A sophisticated flexible budget will change the proportions for these expenditures if the measurements they are based on exceed their target ranges. Determine the extent to which all variable costs change as activity measures change. Just make sure that you are actually using it to build good financial responsiveness, not using it to break good financial habits. The biggest disadvantage to a flexible budget is that it does let you think of your finances as flexible. While this is more realistic, many of us benefit from rigidity when it comes to daily, healthy routines. A flexible budget also can help you to keep your budgeting lifestyle-friendly.

If you manufacture products, see how a flexible budget can help your business. Unlike a static, traditional budget, a flex budget can be designed to quickly identify where such variations occur and create a better picture of current finances as well as a more realistic outlook. In the above example, a fixed budget would produce a $3,000 cost overrun in each case where the cost was higher-and the accompanying budgetary hit-when in fact, the outcome will vary depending on the payer. Add up all of those situations across the hospital over a given year, and the revenue and cost estimates made in one month can vary widely from the actual numbers. Some expenditures vary with other activity measures than revenue. For example, telephone expenses may vary with changes in headcount.

Entertainment costs can usually be broken down further into categories such as a cable television subscription, music downloads, dinners at restaurants, and vacations. Note that the shipping department’s total static budget variance is $8,000 unfavorable since the actual expenses of $508,000 were more than the static QuickBooks budget of $500,000. When one is working on a budget, he/she should have a thorough knowledge of the differences between fixed budget and flexible budget, to give desired results. Under this method, a budget is prepared for the expected normal level of activity and variable cost per unit of activity is ascertained.

Other expenses will be tied not to a given revenue figure, but to a cost-per-unit calculation based on production levels. With the fixed expenses taken care of, next management should turn to the variable expenses.

The department’s total flexible budget variance is $4,000 favorable since the actual expenses of $508,000 were less than the flexible budget of $512,000. This budget is defined as a budget which is prepared for period less than a year and is very useful to lower levels of management for control purposes. Such budgets are prepared for those activities, the trend in which is difficult to foresee over longer periods. Cash budget and material budget are examples of short-term budgets. With flexible budget, it is possible to establish budgeted cost for any range of activity. Those kinds of expenses are fixed, so it doesn’t matter how many shoes we sell or classes are taken, they remain the same.

Author: Maggie Kate Fitzgerald