Page 154 - DUT Annual Report 2020

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DURBAN UNIVERSITY OF TECHNOLOGY ANNUAL REPORT 2020
DURBAN UNIVERSITY OF TECHNOLOGY
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
22. RISK MANAGEMENT (continued) 22.2 Credit risk
Credit risk is the risk of financial loss to the University if a student, employee or counter party to a financial instrument fails to meet its contractual obligations. The University is exposed to credit risk primarily from the University’s receivables from students, cash and cash equivalents as well as other receivables.
Cash and cash equivalents:
The University places cash and cash equivalents with reputable financial institutions. The University places its portfolio and unit trust investments with reputable fund managers. Multi-manager approach to the management of investments is followed in order to limit investment risk.
The maximum exposure to credit risk at the reporting date of cash and cash equivalents and receivables is the carrying amount as reflected in the statement of financial position. No collateral is held as security for financial assets.
Student fees receivable
Receivables comprise outstanding student fees. The University is exposed to credit risk arising from outstanding student fees. The risk relating to student fees 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 and the institution of debt collection action. 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.
Receivables includes outstanding student fees amounting to R582.922m (2019: R345.409m) that are past due and not impaired. The University has stringent policies with respect to not allowing students with outstanding fee balances to receive their results or to register for the new academic year. The outstanding fees balance at year-end is widely spread amongst numerous students indicating no particular concentration of credit risk.
The University provides for impairment losses in respect of student receivables to the extent that these can be reliably and conservatively determined.
Credit quality of financial assets
A loss allowance for expected credit losses on financial assets that are measured at amortised cost or at fair value through other comprehensive income. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
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.