Definition of Reserves

The accounting definition for the University’s reserves is the accumulated surpluses or deficits produced from its activities.

 Types of Reserve



 These arise from the funds which have been earned or received with no donor imposed restrictions on how they can be spent.

 We do have to spend these funds for the University’s charitable purpose which is the advancement of education.



 If the University chooses to earmark some funds these would go into a designated reserve.  They will still be part of the unrestricted reserve as the University can choose to re-designate funds and is using this device for administrative purposes.



 These come from funds which must be spent in accordance with a donor’s instructions.  Any expenditure from these funds will decrease the restricted reserve.



 These reserves have more stringent restrictions on them as some have to be held permanently and invested to produce income and others will allow the original donation to be spent over several years at the same time earning income on the residual balance. 


 Endowment Classification

 Permanent restricted:         Retain capital        use income only for specified purpose

 Permanent unrestricted:   Retain capital        unrestricted use of income only

 Expendable restricted:        Invest capital        use income and capital as specified



 The University only revalues its heritage assets.  Any movement on the value is set against this reserve.


 Incorrect use of the term reserve

 Unfortunately the term reserve is used in the University to denote budget underspends.  This clouds the understanding of the Financial Statements. 



 FRS102 forces Universities to acknowledge and report the balances on these different reserves.  This is important because we don’t have the right to spend restricted reserves as we please and we can now see the significance of each type of reserve.

 The table below is a simplified version of the 2016-17 Financial Statements.

 For illustrative purposes I have shown a revaluation movement.









Comprehensive Income Statement (COSI)   


















Surplus for year









Accumulated in previous years









Balance at end of year