Page 111 - DUT Annual Report 2020

DURBAN UNIVERSITY OF TECHNOLOGY
BAN UNIVERSITY OF TECHNOLOGY
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
1. ACCOUNTING POLICIES (continued)
1.5 Significant accounting judgements, estimates and assumptions (continued)
Retirement benefit obligations
The University’s future obligations in respect of its defined benefit pension plan and its post-retirement medical aid benefit plan are determined using actuarial valuations on the projected unit credit method. An actuarial valuation involves making various assumptions. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of these assumptions are provided in Note 9. The defined benefit pension plan and post-retirement medical aid benefit plan are actuarially valued annually.
Student fees receivable
The total debt receivable is split between debt handed over to the debt collecting agencies and debt not handed over which is deemed to be collectable by the University. Debt that is handed over, comprises student fees receivable from the self – paying and sponsor students who are no longer registered at the University. The handover of the debt usually takes place after the University’s graduation ceremony following the year of study. Debt that is not handed over to the collecting agents represents fees receivable from National Student Financial Aid Scheme (“NSFAS”) and students who have completed instalment agreements to pay their debt in the following year of their continued study period.
A provision for expected losses is based on these estimates. A detailed breakdown of the student fee receivable is provided in Note 6.
Provision for expected credit losses of trade receivables
The University uses a provision matrix to calculate the ECL for the student fee receivable. The provision matrix is initially based on the University’s historical observed default rates. The University considers qualitative and quantitative information based on the University’s historical experience as well as forward looking information. For instance, if forecast economic conditions are expected to deteriorate over the next year, which can lead to an increased number of defaults in the higher education sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed
The University’s historical credit loss experience and forecast of economic conditions may also not be representative of student’s actual default in the future. Further information on the University’s trade receivables and student fees receivables default rates is disclosed in Note 6.
Value added taxation
The University is an educational institution that provides educational services as envisaged in section 12(h) of the Value-Added Tax Act No 89 of 1991 (“the VAT Act”).
Accordingly, the fees charged by the University for teaching and incidental goods and services are exempt from Value-Added Tax (“VAT”) in terms of section 12(h) of the VAT Act, with the result that the University is not entitled to an input tax credit on its purchases of goods and services to the extent these goods or services are used or consumed in the course of rendering educational services. Where the University makes exempt supplies during its year of assessment, the provisions of section 7(1)(c) read together with section 7(2) of the VAT Act need to be considered, namely that VAT at the rate of 15% should be levied and paid on the supply of any “imported services” by the recipient of the imported services. This essentially results in what is referred to as a “reverse VAT charge” (i.e. no VAT has actually been levied by the vendor on behalf of the South African Revenue Services (“SARS”) but an amount of output tax becomes payable in addition to the charge for the service. The University applies the Variable input method for the measurement of VAT.
DURBAN UNIVERSITY OF TECHNOLOGY ANNUAL REPORT 2020
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