THE UNIVERSITY OF BRITISH COLUMBIA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 1999
1
AUTHORITY AND PURPOSE
The University of British Columbia (UBC) operates under the authority of the University Act of
British Columbia. UBC is a comprehensive research university offering a full range of
undergraduate, graduate and continuing studies programs; the academic governance of the
University is vested in the Senate. A not-for-profit entity, UBC is governed by a Board of
Governors, the majority of whom is appointed by the provincial government of British Columbia.
UBC is also a registered charity and therefore exempt from income taxes under section 149 of
the Income Tax Act.
2
SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally accepted
accounting principles for not-for-profit organizations.
(a) Consolidated Statements
These financial statements include the accounts of three wholly owned subsidiaries of the
University:

UBC Properties Inc. incorporated to develop real property owned by the University.

BR Centre Ltd., whose purpose is the utilization of biology for the discovery or
development of potential medicinal agents.

UBC Research Enterprises Inc., which promotes the creation, testing, development,
production and commercialization of intellectual property owned by the University.
These financial statements also include the accounts of the following related not-for-profit
organizations:

American Foundation for UBC, an American charitable foundation which encourages
financial support of the University.

Hong Kong Foundation for UBC, which is incorporated in Hong Kong as a not-for-profit
organization, to promote and advance all matters concerning education in Hong Kong
and elsewhere.

San Rafael Research Foundation which operates as a fund-raising vehicle for the
University.

Legal Information Systems and Technologies Foundation, which is incorporated as a
not-for-profit organization, to develop and establish computer technology applications of
benefit to the legal profession, universities, government, industries and the public.
11

UBC Society for Young Children which maintains and operates an educational program
for young children.
These financial statements do not include the assets, liabilities and results of operations for
entities and organizations in which UBC holds an equity interest but does not exercise
control. These organizations include the UBC Foundation, which was formed to develop
public awareness and encourage financial support for the University (see Note 15a).
(b) Revenue Recognition
i)
Restricted Revenues
Some contributions, such as grants and donations for research or capital purposes, are
restricted in use by the external contributor. These restricted contributions are
considered “unearned” and are deferred until the related expense is incurred. In the
case of revenues received for the purchase of capital assets having a limited life, an
amount equivalent to the depreciation expense is reported as revenue each year. Note 7
provides a summary of changes in unearned revenues over the course of the year.
Some restricted contributions must be retained in perpetuity and only the investment
income expended. These contributions are recorded as an increase in endowment
equity. Investment income earned on these restricted endowments is recognized when
the related expenditure occurs.
ii) Unrestricted Revenues
Revenues received without restrictions include the operating grant from the Province of
British Columbia, tuition fees and sales of services and products. Monies received from
these sources are reported as revenue at the time the product is delivered or the
services are substantially provided.
(c) Investments
Investments are recorded at cost or, where donated, at fair market value on the date of
donation. Investment value is written down when there has been a significant and
permanent impairment in value.
(d) Inventory
Inventories of merchandise held for resale are recorded at the lower of cost and net
realizable value. Supplies inventories are recorded at cost.
(e) Capital Assets
Capital asset acquisitions are recorded on the balance sheet at cost, except donated assets,
which are recorded at market value at the date of acquisition. Land granted to the University
is recorded at nominal value.
Funds invested in hospitals represents capital additions to hospitals funded by the Province
of BC through the University. The University has no legal ownership of these buildings.
Library books and periodicals are recorded at cost.
Collections are recorded at a nominal value.
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The following assets are depreciated on a straight-line basis over their estimated useful life.
Site improvements
Buildings
Building renovations
Furnishings, equipment
and systems
Library books
Funds invested in hospitals
25-80 years
10-50 years
5-10 years
3-10 years
10 years
40 years
(f) Gifts-in-Kind
Gifts-in-kind include securities, furnishings and equipment, books and manuscripts and
artwork and artifacts. For the fiscal year 1998/99, gifts-in-kind with a market value of $25.7
million were received (1998 - $5.4 million), of which $3.6 million (1998 - $300,000) of artwork
and artifacts is not recorded in the financial statements.
(g) Contributed Services
The University acknowledges the substantial services provided by volunteers in assisting the
institution in carrying out its activities. Due to the difficulty in determining their value, these
services are not reported in the financial statements.
(h) Financial Instruments
i)
Current assets
The fair value of cash and short term investments, accounts receivable, accounts
payable and accruals approximate their carrying values because of the short term
maturity of these instruments.
ii) Investments
Market risk on the University’s investments is mitigated through diversification of
investments by asset class and issuer.
iii) Long Term Debt
Borrowings are denominated in Canadian dollars only and are at fixed rates of interest.
13
3
CHANGES IN ACCOUNTING POLICY AND PRIOR PERIOD ADJUSTMENTS
During the year, the University changed its capital asset capitalization and depreciation policies
in order to more accurately reflect these assets and expenses in the accounts.
a) Capital infrastructure costs are depreciated over their estimated useful life. Previously, costs
such as repairs and replacements of existing infrastructure were expensed. Funding
received for these assets are added to deferred capital contributions and amortized over the
assets’ estimated useful life. Previously, they were taken into income and added to Equity in
capital assets.
This change has the effect of increasing revenue over expenses for the year by $833,000
(1998 $1.1 million) and decreasing equity in capital assets by $34.7 million (1998 $33.9
million).
b) Capital asset values have been adjusted and depreciation policies have been modified to
more accurately reflect the cost and depreciation of University assets. This change has the
effect of decreasing revenues over expenses by $806,000 (1998 $1.1 million) and
decreasing equity by $1.5 million (1998 $2.3 million).
These changes have been applied retroactively.
4
CAPITAL ASSETS
Cost
1999
Less
Accumulated
Depreciation
1998
Net
Book
Value
Net
Book
Value
(thousands of dollars)
Land and site improvements
49,503
$ 28,116
827,063
235,793
591,270
580,743
and systems
155,970
62,883
93,087
96,434
Library books
94,403
37,436
56,967
54,043
Funds invested in hospitals
20,623
6,702
13,921
14,436
$ 1,147,562
$ 370,930
$ 776,632
$ 765,803
Buildings and renovations
$
$
21,387
$
20,147
Furnishings, equipment,
Total capital assets
5
LONG TERM EMPLOYEE BENEFITS & PENSION PLANS
Long term employee benefit liabilities consist of a long-term disability plan and a supplemental
arrangement for excess pension contributions. The most recent comparison of the Long Term
Disability Plan between the commitment as determined by the University's actuaries and the
plan assets on hand was made at March 31, 1998. At that date the assets exceeded
commitments by $2.8 million (March 31, 1997 – commitments exceeded assets by $953,000).
The elimination of the shortfall and creation of the surplus results from return-to-work initiatives
and better than expected investment returns.
14
The University has two pension plans which are administered by separate trustees/directors.
The Faculty Pension Plan is a defined contribution plan, which provides benefits on a money
purchase basis. The University contribution for this plan is 10% less a fixed offsetting amount
relating to Canada Pension Plan contributory earnings.
The Staff Pension Plan provides benefits based on 2% of the average best three years' basic
salary multiplied by the number of years of contributory service, less an adjustment for Canada
Pension Plan contributory earnings. The University contribution for the Staff Pension Plan is
limited to 10% of salary, less a fixed offsetting amount relating to Canada Pension Plan
contributory earnings. The latest actuarial valuation of the Staff Pension Plan at January 1, 1996
showed a surplus of plan assets over liabilities of $23.2 million.
The University expenses plan contributions in the year in which they are made.
6
LONG TERM DEBT
Debt funded by the Province of BC
British Columbia Educational Institutions
Capital Financing Authority
Debenture
Sinking funds
Unamortized discounts
Maturity Date
Interest Rate
1999 to
2024
5.4% to
17.51%
Net outstanding
Certificates of approval
Total payable by the Province of BC
Debt funded by the University
Canada Mortgage and Housing
Corporation mortgages
Province of BC
Debenture
Sinking funds
Unamortized discounts
Net outstanding
Other
Total payable by the University
Total Long Term Debt
-
-
2012 to
2023
5.125% to
7.875%
2006 to
2013
8.5% to
10.04%
Amount Outstanding
1999
1998
(thousands of dollars)
$
-
$ 398,534
(114,975)
(303)
-
283,256
-
18,844
302,100
16,629
17,030
61,700
(18,859)
(583)
61,700
(15,532)
(622)
42,258
45,546
10,868
69, 755
13,124
75,700
$ 69,755
$ 377,800
As of the financial statement date, the fair market value of long term debt funded by the
University was $87.2 million (1998 $90.9 million).
Pursuant to the Capital Financing Authority Repeal and Debt Restructuring Act, (S.B.C. 1998,
c.6) the debt obligations to the British Columbia Educational Institutions Capital Financing
Authority, together with the associated sinking funds, were assumed by the government of
British Columbia, effective April 1, 1998. As of April 1, 1998 the University is deemed to have
received contributions of $302.1 million. These contributions are now shown as deferred capital
contributions and amortized at the same rate as the associated capital assets.
15
Requirements to meet the principal portion of long-term debt repayments over the next five
years are as follows:
Debt funded by
the University
(thousands of dollars)
2000
2001
2002
2003
2004
7
$ 4,233
4,411
4,576
4,751
1,892
DEFERRED CONTRIBUTIONS
Capital contributions received to purchase capital assets are deferred and recognized as
revenue when related assets are depreciated.
Deferred Sponsored Research, Specific Purpose and Other contributions represent grant,
contract and donation revenue which has a designated purpose. They are considered
“unearned” until the related expense occurs.
Capital
Sponsored
Research
Specific
Purpose
1999
Total
1998
Total
$ 1,512
$ 259,643
$ 253,495
5,805
27,474
18,389
Other
(thousands of dollars)
Balance, beginning of
year, as previously
reported
Retroactive
adjustments
Balance, beginning
of year
Grants, contributions,
& donations
received
Deemed capital
contributions
(Note 6)
Transferred to
revenue
Balance, end of year
8
$ 150,908
$ 53,679
$ 53,544
17,752
3,917
$ 168,660
$ 57,596
$ 53,544
$ 7,317
$ 287,117
$ 271,884
26,188
140,461
59,738
28,030
254,417
295,187
302,100
-
-
-
302,100
-
(29,602)
(238,257)
(279,954)
5,745
$ 605,377
$ 287,117
(16,503)
(134,032)
(58,120)
$ 480,445
$ 64,025
$ 55,162
$
GRANTS TO OTHER AGENCIES
During the year the University distributed research and other funds to other agencies totalling
$10.3 million (1998 - $10.1 million). These funds were distributed under agreements with
granting agencies, whereby the University is the administrative head and a portion of the
research is undertaken at other agencies.
9
EQUITY
The University classifies equity into the following categories:
16
a)
Operating equity is unrestricted as to use.
b)
Reserves represent amounts set aside by the University for specific uses, such as
employee benefit programs and vacation pay, as well as operational surpluses accumulated
by continuing studies, ancillary, and fee for service operations.
c)
Equity in capital assets represents the portion of capital assets funded by the University,
net of outstanding debt. It excludes those assets funded through capital contributions.
d)
Endowment principal is described in Note 11.
e)
Equity in related organizations results from the consolidation of those entities outlined in
Note 2(a).
Operating
Equity in
Capital
Assets
Reserves
Endowment
Related
Principal Organizations
1999
Total
1998
Total
26,002
-
$ 637,406
(36,195)
$ 578,449
(30,998)
(Note 10)
(thousands of dollars)
Balance, beginning of year,
as previously reported
Retroactive adjustments
Restated balance, beginning
of year
Excess of revenues
over expenses
Transfer to UBC Foundation
Endowment donations
Balance, end of year
$
(4,460)
-
$ 18,448
(340)
(4,460)
18,108
121
$
(4,339)
$
(5,097)
$ 13,011
$
202,522
(35,855)
$ 394,894
-
$
166,667
394,894
26,002
601,211
547,451
7,780
-
9,079
37,050
(917)
(17,000)
-
10,966
(17,000)
37,050
30,712
23,048
174,447
$ 441,023
8,085
$ 632,227
$ 601,211
$
10 EQUITY IN CAPITAL ASSETS
Equity in Capital Assets is made up of the following:
1999
1998
(thousands of dollars)
Total capital assets (Note 4)
Long term debt (note 6)
Deferred capital contributions (Note 7)
Funded from cash reserves
Equity in capital assets
$776,632
$ 765,803
(69,755)
(377,800)
(480,445)
(168,660)
(51,985)
(52,676)
$ 174,447
$ 166,667
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11 ENDOWMENT PRINCIPAL
Endowment principal consists of restricted donations to the University and internal allocations by
the University, the original principal of which must be maintained in perpetuity.
The University has established the following endowment management policy:

to balance present spending needs with expected future requirements,

to protect the purchasing power of the capital base of endowments while achieving stability
in year-to-year spending, and

to attain real increases in purchasing power through capital appreciation from new gifts,
capital investment gains and the capitalization of income.
The book value of all endowments is as follows:
1999
1998
(thousands of dollars)
Balance, beginning of fiscal year
$ 394,894
$ 350,689
37,050
23,048
9,079
21,157
441,023
394,894
14,718
12,178
4,656
-
Endowment at UBC Foundation
18,958
19,645
Endowment at Vancouver Foundation
15,514
15,456
$ 494,869
$ 442,173
Donations
Capitalized income and other transfers
Balance, end of fiscal year (Note 9)
Endowment at Advanced Wood Products
Funding Society
Endowment at Advanced Papermaking Institute
Total of all endowments
The Advanced Wood Products Funding Society, the Advanced Papermaking Institute, UBC
Foundation and Vancouver Foundation endowments reported above are not recorded on the
University’s books as they are not owned by the University. Income from these endowments is
earned exclusively for the benefit of the University.
The market value of all endowments is as follows:
1999
1998
(thousands of dollars)
Endowments recorded in the financial statements
Endowments held at other organizations
Total market value, all endowments
$ 508,641
$ 490,553
63,605
60,839
$ 572,246
$ 551,392
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12 YEAR 2000 ISSUES
The Year 2000 issue arises because some date sensitive computer systems use two digits
rather than four to identify a year and therefore may not correctly recognize the Year 2000. As a
result, if all related system problems are not fully identified, the impact on operations and
financial reporting could range from minor errors to system failures and could occur before, on
or after January 1, 2000.
In addressing the Year 2000 issue, the University has invested significant resources, including
upgrading its major financial and student systems. The University is confident that Year 2000
issues will not adversely affect its operations.
13 COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 1999 outstanding commitments totalled $5.7 million (1998 - $10.5 million) for
capital projects. These commitments are payable in subsequent years, and are funded by
provincial contributions, private donations and earnings from sales and services.
The University is involved from time to time in litigation, which arises in the normal course of
operations. Liabilities on any litigation are recognized in the financial statements when the
outcome becomes reasonably determinable. In the administration’s judgment, no material
exposure exists at this time on the eventual settlement of any existing litigation.
14 DONATION PLEDGES
The estimated value of donations, which have been pledged but not received as at March 31,
1999, was approximately $34.9 million. These amounts are not reflected in the financial
statements of the University.
In October 1998, the University received a covenant of gift from Dr. S. Blusson of $50.0 million
to support research infrastructure and academic excellence. This gift is held in escrow and has
not been reflected in the financial statements.
15 RELATED ORGANIZATIONS
(a) University of British Columbia Foundation
The UBC Foundation was established to develop public awareness and encourage financial
support of the University.
During the year, the University received $22.8 million (1998 - $6.4 million) from the
Foundation which was recorded as bequest and donation revenue. At March 31, 1999, the
Foundation held $19.0 million (1998 - $19.6 million) in endowments for the benefit of the
University.
19
(b) Tri-Universities Meson Facility (TRIUMF)
The University is one of four parties to a joint venture agreement under which research is
conducted at the Tri-Universities Meson Facility on the UBC campus and elsewhere. During
the year, TRIUMF purchased services and supplies from the University during the normal
course of business. The total value of these transactions for the year was $24.9 million
(1998 - $22.1 million).
(c) Western Canadian Universities Marine Biological Station (WCUMBS)
The University is one of five university members of the Western Canadian Universities
Marine Biological Station (WCUMBS). The University’s annual operating grant to the Society
was $160,000 (1998 - $150,000) and is recorded as an expenditure of the University. The
accounts of WCUMBS are not included in these statements. There is no expectation of
monetary gain to the University from this venture.
16 UNIVERSITY TECHNOLOGY TRANSFER
The University holds equity positions in 33 companies (1998 – 31 companies) formed from the
commercialization of University research. The value of these holdings is $8.1 million (1998 $8.2 million). These amounts are not reflected in the financial statements of the University.
17 COMPARATIVES
Certain comparative figures have been restated to conform with the current year's presentation.
20