Trustees report and financial statements 2020

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION THE ROYAL SOCIETY TRUSTEES’ REPORT AND FINANCIAL STATEMENTS 62 SCIENCE SHAPING THE WORLD WE LIVE IN 63 Accounting policies continued Investments held at cost are reviewed annually for impairment. Any impairment is recognised in the corresponding SOFA category in the year in which it occurs. Heritage assets are reviewed for impairment at the end of each reporting period to ensure that the carrying value reflects their carrying amounts. Foreign currency Transactions in foreign currencies are recorded at the exchange rate at the date of the transaction. Assets and liabilities in foreign currency are translated into sterling at the exchange rate at the balance sheet date. Resulting gains or losses are included in the statement of financial activities. Financial instruments The Society has financial assets and financial liabilities of a kind that qualify as basic. Basic financial instruments are initially recognised at transaction value and subsequently measured at their settlement value. Fund accounting Restricted funds can only be used for particular purposes specified by or agreed by the donor. Permanent endowment funds are funds where the capital must be retained and invested. Expendable endowment funds are funds that must be invested to produce income. Unrestricted funds may be used for any purpose in the furtherance of the general objectives of the charity. Pension costs Defined benefit pension scheme assets are measured at fair value and liabilities on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high- quality corporate bond of equivalent currency and term to the Scheme liabilities. The actuarial valuations are obtained triennially and updated under FRS 102 rules at each balance sheet date. Any surplus or deficit is shown in the balance sheet as an asset or liability. The charge to the statement of financial activities is calculated so as to spread the cost of pensions over employees’ working lives with the Society. The charge comprises the administration costs of running the scheme, the current service cost computed by the actuary under FRS 102 and gains and losses on settlements and curtailments. Past service costs or credits are recognised immediately if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The interest on the assets and liabilities for the period are shown as a net amount of other finance costs or credits charged or credited to the statement of financial activities. Actuarial gains and losses are recognised immediately under the description ‘Actuarial losses on defined benefits pension scheme’. Multi-employer schemes are accounted for as defined contribution schemes as it is not possible to identify the Society’s share of the underlying assets and liabilities on a reasonable and consistent basis. Contributions payable relating to funding of the deficit are included as a liability on the balance sheet and charged to the statement of financial activities. The amounts charged to the statement of financial activities for defined contribution pension schemes represent the employer’s contributions payable in the year. The method for allocation of pension costs between funds is to allocate on a pro-rata basis using departmental salary costs as a base. Termination benefits Termination benefits are payable when employment is terminated by the Society, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The amounts charged to the statement of financial activities represent the best estimate of the expenditure required to settle the obligation at the balance sheet date. Taxation The Society is a charity within the meaning of Paragraph 1 Schedule 6 of the Finance Act 2010. Accordingly, the Society is exempt from income and corporation taxes on income and gains to the extent that they are applied to charitable purposes. The trading subsidiaries do not generally pay UK corporation tax because their policy is to pay taxable profits to the Society as Gift Aid. Prior year comparatives In accordance with FRS 102, prior year comparative figures can be found as follows: • consolidated statement of financial activities – note 27 • analysis of net assets between funds – note 28 • movement on trust and specific funds in year – note 29. Notes to the financial statements For the year ended 31 March 2020 1 Income and endowments from donations and legacies Unrestricted funds £’000 Restricted funds £’000 Expendable endowment funds £’000 Permanent endowment funds £’000 2020 Total funds £’000 2019 Total funds £’000 Gifts and donations 251 269 – – 520 388 Legacies 26 – – – 26 209 Fellows’ contributions 259 – – – 259 235 Total 536 269 – – 805 832 2 Income from investments Unrestricted funds £’000 Restricted funds £’000 Expendable endowment funds £’000 Permanent endowment funds £’000 2020 Total funds £’000 2019 Total funds £’000 Dividends and interest 1,215 1,004 1,070 3,528 6,817 8,017 Bank deposit interest 34 – – – 34 34 Total 1,249 1,004 1,070 3,528 6,851 8,051 3 Trading External income £’000 Recharged internal lettings £’000 Gross expenditure £’000 2020 Net surplus/ (deficit) £’000 2019 Net surplus/ (deficit) £’000 Trading activities through subsidiary companies Kavli Royal Society International Centre (Chicheley Hall) 1,848 296 (2,331) (187)* (113) Sponsorships 127 – (5) 122 123 1,975 296 (2,336) (65) 10 Trading in furtherance of charitable activities Publishing 7,682 – (3,265) 4,417 4,228 Lettings in furtherance of objectives – Carlton House Terrace 3,192 1,348 (3,001) 1,539 1,668 Other 669 – – 669 637 11,543 1,348 (6,266) 6,625 6,533 Total 13,518 1,644 (8,602) 6,560 6,543 The costs of the Society’s publishing operation and the costs associated with the lettings in furtherance of charitable objects are included in ‘Supporting and recognising excellence in science’ on the face of the statement of financial activities. The costs of trading through subsidiary companies are included in expenditure on raising funds. The Society was exempt from income tax, corporation tax and capital gains tax on income derived from its primary purpose trading and charitable activities.