9. 2021 Annual Financial Statements

The financial statements have been prepared in accordance with the legal requirements set out in Title 9, Book 2, of the Dutch Civil Code and the authoritative statements of the Dutch Accounting Standards issued by the RvJ, the Dutch Accounting Standards Board. These provisions apply pursuant to the Annual Reporting on Education Regulations. In the financial statements, the amounts are stated in millions of euros (unless otherwise indicated).

These financial statements cover the 2021 financial year and the balance sheet date is 31 December 2021.

These annual financial statements have been prepared on a going concern basis.

The consolidation includes the financial data of the institution and its group companies. Group companies are legal entities in which the institution can directly or indirectly exercise a controlling interest by holding the majority of the voting rights, or in any other way can control the financial and operating activities. Newly acquired investees are recognised in the consolidation from the point in time when policy control can be exerted. Divested interests are included in the consolidation until the point in time where such control can no longer be exerted.

The assets and liabilities, as well as the income and expenses of group companies, are fully consolidated. The shares of third parties in the group’s equity and result are separately stated.

Pursuant to Article 2:407, paragraph 1 of the Dutch Civil Code, group companies may in some cases be excluded from the consolidated financial statements. The obligation to consolidate does not apply to data from companies to be consolidated whose combined significance is negligible on the whole. Intercompany transactions, intercompany profits and mutual receivables and payables between group companies and other consolidated legal entities are eliminated. All of these intercompany transactions were entered into at arm’s length.

Accounting policies of group companies have been adjusted where necessary to align with the accounting policies applicable in the group.

All group companies as well as the investees are classed as related parties.

The cash flow statement is prepared on the basis of the indirect method. The funds in the cash flow statement consist of the cash and cash equivalents Interest and dividends received and paid are recognised in cash flow from operating activities. Investments in group companies are measured at acquisition cost less cash present in the acquired company.

The preparation of the annual financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities, and of income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Adjusted accounting estimates are recognised in the period in which the estimate is revised and in future periods affected by the revision.

Transactions conducted in foreign currencies are translated to the relevant operational currency of the group companies at the exchange rates as applicable on the date of the transaction. As at balance sheet date, any monetary assets and liabilities denominated in foreign currencies are translated to the operational currency at the foreign exchange rate that applies at that date. Currency exchange rate differences arising on the settlement of monetary items or on translating monetary items into foreign currencies are recognised in the income statement in the period in which these arise.

Financial instruments include investments in shares and bonds, trade and other receivables, cash, loans and other financing obligations, trade payables and other payables. Financial instruments are included at fair value on initial recognition. Upon subsequent recognition, financial instruments that are not part of the trading portfolio are measured at amortised cost using the effective interest method, less impairment losses.

EUR exclusively applies primary financial instruments that serve to finance its operating activities or that arise directly from its activities, such as (non-current) receivables and payables. EUR does not use any derivatives or any other form of active hedging to mitigate financial risks.

Due to the absence of issued and withdrawn loans to third parties, the EUR is not exposed to interest rate risk. Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. There is also no cash flow risk. That is, the risk that future cash flows associated with a monetary financial instrument will fluctuate in size is absent.

Due to EUR's robust liquidity position, we consider liquidity risk to be virtually excluded. Liquidity risk is the risk that the legal entity will not be able to obtain the financial resources needed to meet its obligations.

Given the characteristics of the parties with whom EUR trades, in particular the government, public bodies and the EU, there is limited credit risk on receivables. Credit risk is the risk that one contracting party of a financial instrument will not meet its obligations, resulting in a financial loss to the legal entity.

EUR is exposed to limited currency risk because most transactions are completed in euros.

An asset is recognised in the balance sheet when it is probable that future economic benefits will flow to the educational institution and its value can be reliably measured. A liability is recognised in the balance sheet when it is probable that its settlement will be accompanied by an outflow of resources embodying economic benefits, the amount of which can be measured reliably.

Assets and liabilities (excluding group equity) are measured at the acquisition or manufacturing cost or (lower) current value. If no specific basis of measurement is stated, the item is measured at the acquisition cost or nominal value. References are included in the balance sheet, income statement and cash flow statement. For these references, please refer to the notes. Foreign currency items are measured at closing rates. Translation differences are recognised directly in the result.

A recognised asset or liability remains on the balance sheet if a transaction (involving the asset or liability) does not result in a significant change in economic reality with respect to the asset or liability.

If a transaction involves transferring all or virtually all future economic benefits and all or virtually all risks relating to an asset or liability to a third party, the asset or liability will no longer be recognised in the financial statements. Furthermore, an asset or liability will no longer be recognised in the balance sheet if it no longer fulfils the conditions of probable future economic benefits and/or reliability of determining their value.

On each balance sheet date, the group assesses if there are any indications that an asset may be subject to impairment. If such indications are present, the recoverable amount of the asset is determined. If it is not possible to determine the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. An impairment exists when the carrying amount of an asset exceeds its recoverable amount; the recoverable amount is the higher of net realisable value or value in use.

The cost of acquiring and implementing university administrative systems/software applications is capitalised as intangible fixed assets.

Intangible fixed assets are measured at acquisition or manufacturing cost. Time-proportional depreciation is applied over the expected useful life. The expected useful life depends on the type of investment and ranges from 5 to 9 years. Intangible fixed assets not yet completed are not subject to amortisation.

Buildings and land are measured at acquisition cost plus additional costs or manufacturing cost, less straight-line depreciation over the estimated useful life. Land is not subject to depreciation. The impairment expected on the balance sheet date is taken into account. Items of property, plant and equipment under construction are not subject to depreciation. Depreciation is applied as from the time of completion. Except for the EUC building, there are no restrictions on ownership of tangible fixed assets.

Investees in which significant influence can be exercised are measured using the net equity value method. When determining whether the organisation exercises significant influence over the business and financial policies of an investee, the totality of factual circumstances and contractual relationships (including any potential voting rights) are considered.

Investees in which EUR exercises joint control with other parties (joint ventures) are measured using the same method.

The net equity value is calculated in accordance with the accounting policies applicable to these financial statements; for investees for which insufficient data is available for adjustment according to these principles, the accounting policies of the respective investee are used. If the measurement of an investee is negative based on the net equity value, it is measured at nil. If and to the extent that EUR in this situation guarantees some or all of the debts of the investee, or has an actual obligation to enable the investee to pay its debts, a provision is made amounting to the investee’s estimated payment total. The provision is primarily charged to receivables from the investee and is otherwise presented in Provisions.

The initial recognition of acquired investees is based on the fair value of the identifiable assets and liabilities at the moment of acquisition. For subsequent measurements, based on the values upon the initial recognition, the accounting policies applicable to these financial statements are applied. Investees in which no significant influence is exercised are measured at acquisition cost or lower recoverable amount. If there is a definite intention to divest, measurement is based on the expected sale price if lower. The write-down is charged to the income statement.

The receivables from and loans to (non-consolidated) investees included in financial fixed assets are initially measured at the fair value of the amount provided, usually the nominal value, less any provisions deemed necessary. Subsequently, such receivables are carried at amortised cost, less any provisions deemed necessary.

The Other Securities presented in Financial fixed assets mainly concern investments in funds within the framework of knowledge valorisation. These investments, which are not part of a trading portfolio, are measured (per fund) at fair value, with value adjustments recognised directly in the income statement.

The accounting policy for inventories is on a FIFO basis at cost or lower net realisable value.

General

Current receivables are stated at the fair value of the consideration, generally at their nominal value. Provisions for bad debts are deducted from the book value of the relevant receivable. The position of the provision is determined statistically.

Receivables OCW

Current receivables also include a cash rebate on the State contribution applied by the Ministry of Education, Culture and Science. This concerns the portion of the State contribution that will not be paid until the following calendar year.

In 2009 and 2010, the Ministry of Education, Culture and Science provided compensation for the introduction of the bachelor-master structure in the period 2003-2008. This compensation will be paid in the period 2011-2021 through the state contribution. This pay-out is classified as a non-current receivable.

Projects in progress commissioned by third parties

The measurement of projects in progress concerns the amounts received less direct material and labour costs, plus a mark-up for indirect fixed and variable costs relating to the provision of services, plus a mark-up for indirect costs relating mainly to accommodation, administration and general management.

The allocation of revenues, costs and profit on projects in progress is done in proportion to the work performed ('percentage of completion' method) as at the balance sheet date, based on the project costs incurred up to the balance sheet date in relation to the estimated total project costs. Expenditures related to project costs that lead to deliverables after the balance sheet date are recognised as assets if it is probable that they will result in revenue in a subsequent period. Expected losses on projects in progress are immediately recognised as an expense in the income statement.

In the balance sheet, depending on the netted balance, a project in progress is included under ‘Measurement of projects in progress' (assets) or 'Instalments invoiced or received in advance from projects' (liabilities).

"Expected losses on projects in progress are recognised immediately in the period in which a project is found to be making a loss. In the event of EUR contributing to a project based on a State contribution (co-financing), this is not considered a loss."

Securities recognised in current assets, insofar as these relate to the trading portfolio or to equity instruments outside the trading portfolio, are measured at fair value. All other financial instruments recognised in the balance sheet are carried at (amortised) cost. Value adjustments are directly recognised in the income statement.

EUR has an approved treasury statute. In terms of public funds, this is in full compliance with the 2016 OCW Investing, Borrowing and Derivatives Regulations. Investments are made with at least a principal guarantee. EUR invests its public funds only with institutions with at least an A rating.

As part of knowledge valorisation, investments will be made in various funds (commercial and non-commercial) starting in 2021. These investments are made from the recently established investee Erasmus Enterprise BV. Despite the fact that this concerns carrying out one of the core tasks of a university, these investments are funded entirely from EUR’s available private capital.

Cash and cash equivalents consist of cash, bank balances and demand deposits with maturities of less than twelve months. These items are measured at their nominal value.

Equity consists of general reserves and earmarked reserves and/or funds. These items are segmented by public and private funds. Earmarked reserves are reserves with a more limited spending option, which has been allocated by the Board.

Earmarked funds are reserves with more limited spending options, which have been allocated by third parties.

General

Provisions include employee benefits and provisions for environmental liabilities and risks.

Provisions are created for legally enforceable or constructive obligations and losses existing at the balance sheet date, the amount of which is uncertain but can be reliably estimated and it is probable that an outflow of resources will be required to settle the obligation. Provisions are stated at the nominal value of the expected expenses required to fulfil the payment obligations and settle the losses, unless where stated otherwise.

Employee provisions

EUR complies with the annual reporting guideline with regard to creating a provision for employee benefits measured at the present value.

EUR creates provisions for obligations arising from restructuring on which the competent authority has made and communicated a decision before the balance sheet date. The liabilities consist of future redundancy costs that may arise as a result of the restructuring, as well as the costs of social plans and other arrangements aimed at preventing compulsory redundancies on the one hand and reducing benefit costs on the other, as well as costs pursuant to personnel who are exempted from performance obligations.

Obligations arising from non-restructuring are recognised in the provision for social policy, reorganisation and legal position. This provision is stated at its present value. The interest rate was determined based on participation in borrowing capacity based on treasury banking with a 0.1% mark-up.

Environmental liabilities and risks

The provision for environmental liabilities and risks is stated at nominal value.

Liabilities with a remaining term of more than one year are referred to as non-current. The current year's repayment amount is included in current liabilities.

Non-current debt is initially recognised at fair value and subsequently measured at amortised cost. Upon initial recognition, the measurement consists of the amount received, taking into account premiums or discounts and deducting transaction fees.

"The difference between the determined carrying amount and the ultimate repayment value, together with the interest payable, is determined in such a way that the effective interest rate is recognised in the income statement over the term of the debt."

Current liabilities are initially recognised at fair value and subsequently measured at amortised cost.

Income and expenses are allocated to the financial year to which they relate. Profits are only recognised to the extent that they have been realised at the balance sheet date. Losses and risks originating before the end of the reporting year are taken into account if they became known before the adoption of the financial statements.

State contributions, other government contributions and grants

The State contribution (lump sum) is recognised in income at fair value based on the annual allocation. 

Tuition and course fees

Tuition fees are recorded in income at fair value and allocated to the year to which they relate, assuming that regular education tasks are spread evenly throughout the college year.

Provision of services

Revenue from the provision of services is recognised in income at fair value and in proportion to the work completed. The amount recognised is based on the services performed up to the balance sheet date, in relation to the total services to be performed.

Project revenues and project costs

For projects in progress, the results of which can be reliably determined, project revenue is recognised at fair value as income from work performed at the instructions of third parties. Project costs are recognised in the income statement, in proportion to the work completed as at the balance sheet date (in accordance with the Percentage of Completion method, or PoC method).

The progress of the work carried out is determined on the basis of the project costs incurred up to the balance sheet date in relation to the estimated total project costs. If the result cannot (yet) be reliably estimated, revenue is recognised as income from work performed at the instructions of third parties in the income statement up to the amount of the project costs incurred that is likely to be recovered; the project costs are recognised in the income statement in the period in which they were incurred. As soon as the result can be reliably determined, revenue is recognised according to the PoC method in proportion to the work completed as at the balance sheet date.

The result is determined as the difference between the project revenues and project costs. Project revenues are the contractually agreed amounts including contract deviations and fees, to the extent that they are likely to be realised and can be reliably determined. Project costs are the direct, indirect and allocated costs related to the activities that are contractually attributable to the client.

As soon as the total construction contract costs are likely to exceed total project revenue, the expected loss is recognised immediately in the netted balance of projects in progress in the income statement.

Other income consists of income from leases, staff secondments, donations, sponsorships, participant contributions, student contributions and other income. This is recognised in Income at fair value.

Operating grants are recognised as income in the income statement in the year in which the subsidised costs were incurred or revenues were lost, or when a subsidised operating deficit was incurred. Income is recognised at fair value if it is probable that it will be received and the institution can demonstrate fulfilment of the conditions for entitlement.

Grants related to investments in tangible fixed assets are deducted from the related asset.

Intangible and tangible fixed assets are depreciated on a time-proportional and straight-line basis. Buildings in Tangible fixed assets are depreciated on a straight-line basis over the expected future useful life of the asset from the hand-over date. Land is not subject to depreciation. Tangible fixed assets are depreciated from the date of first use. If there is a change in the estimate of the useful life, then future depreciation is adjusted accordingly.

Gains and losses on the sale of tangible fixed assets are recognised in Depreciation costs.

Employee benefits

Wages, salaries and social insurance are recognised in the income statement pursuant to the employment contract to the extent these are payable to employees. Allocation is made on the basis of performance delivered. To the extent not yet paid, employee benefits are recognised as a liability on the balance sheet. If the amounts already paid exceed the benefits due, the excess is recognised as an accrued asset to the extent that the amount will be repaid by an employee or settled with future payments by EUR.

Other personnel expenses

Other personnel expenses, accrued leave time and service anniversaries, etc., are recognised or accrued from the time the obligation arises.

Pensions

"Pension premiums are recognised as personnel expenses when due. Prepaid premiums are recognised as accrued assets if it results in a refund or a reduction of future payments.

EUR has a pension plan with the ABP pension fund, which qualifies as a defined benefit plan. Pursuant to the pension administration agreement with this fund and the pension agreement with the employees, EUR has, in principle, no obligation other than the payment of the annual pension contributions due. If the funding ratio drops below a certain limit, ABP pension fund may charge a supplement on the premium, among other things. The actual funding ratio as at the balance sheet date was 110.2%. The average funding ratio for 2021 was 102.7%."

Interest received and interest payable

Interest received and interest payable is recognised proportionally over time, taking into account the effective interest rate of the assets and liabilities in question. When accounting for interest, transaction fees on loans are taken into account. In addition, interest obligations on current loans and lease obligations are recognised in financial income and expenses.

Value adjustments to financial fixed assets and securities

Movements in the value of securities in the trading portfolio are recognised directly in financial income and expenses.

The leased asset (and the related liability) is recognised in the balance sheet at the start date of the lease term at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Both values are determined at the time the lease contract is signed. The interest rate applied in the calculation of the present value is the implicit interest rate. If this interest rate is practically impossible to determine, the marginal interest rate is used. Initial direct costs are included in the initial measurement of the lease asset.

Lease payments are split between interest payable and repayment of the due lease liability. Interest expense is allocated to each period during the lease term to result in a constant periodic rate of interest on the remaining net liability relating to the finance lease. Contingent lease payments are recognised as an expense in the period in which the conditions for payment are met.

The result of investees in which significant influence is exercised on the business and financial policy is recognised as the institution's share in the result of these investees. This result is determined on the basis of the accounting policies for measurement and determination of the result applied at EUR. In the case of investees in which no significant influence is exercised on business and financial policy, the dividend is classified as income. This is recognised in financial income and expenses.

• RSM BV has provided a bank guarantee where RSM BV guarantees the costs resulting from unpaid course fees by participants in the RSM MBA programme. The total guarantee amounts to M€ 0.2.
• The 20% investee YES!Delft BV has provided a bank guarantee where YES!Delft BV is the guarantor for the costs as a result of unpaid lease charges. The total guarantee amounts to M€ 0.1.
• On 8 September 2020, Stichting Erasmus Sport foundation offered to guarantee the annual interest and repayment obligation of the loan of the Rotterdam Student Football Association Antibari to the City of Rotterdam. Signed in 2011 and 2020. Erasmus Sport guarantees a sum of € 180,000. The term of the loan (and guarantee) is 15 years, from 2020 to 2035. Erasmus Sport Foundation also provides Antibari with a guarantee subsidy of up to € 20,000 for the costs incurred in 2020 for the renovation of the club building, on the condition of demonstrating that this will cause an unforeseen shortfall in the remodeling. € 10,000 of this amount has been recognised in the 2020 result.

Other off-balance sheet commitments

• For the design of the new building, Erasmus Sport Foundation entered into an agreement with Janssen- Fritsen BV. The contract sum is € 470,000 excluding VAT.
• Erasmus Enterprise BV made a commitment of € 1 million to the Graduate Entrepreneur Fund Coöperatief U.A. This is an investment in the context of knowledge valorisation. The resources available in the fund are mainly used to help start-ups and scale-ups of Rotterdam and Delft students and alumni. At the closing date of 2021, the (remaining) investment commitment is € 0.9 million.

Tax group

EUR Holding BV, Erasmus Enterprise BV and RSM BV are in the tax group for corporate and value added tax with Erasmus University Rotterdam. Under the Collection Act, the Company is jointly and severally liable for the taxes payable by the combination.

Accounting policies for preparing the annual financial statements

The separate financial statements have been prepared in accordance with the statutory provisions of Title 9 of Book 2 of the Dutch Civil Code and the authoritative statements set out in the Dutch Accounting Standards issued by the RvJ, the Dutch Accounting Standards Board. These provisions apply pursuant to the Annual Reporting on Education Regulations. In the financial statements, the amounts are stated in millions of euros (unless otherwise indicated).

Accounting policies for measurement and determination of results

The accounting policies for measurement and determination of the result for the separate financial statements are the same as for the consolidated financial statements. Please refer to the notes to the consolidated balance sheet and income statement for the accounting policies for measurement of assets and liabilities and determination of the result. Insofar as items from the separate balance sheet and the separate income statement are not explained below, please refer to the accounting policies for the consolidated balance sheet and the consolidated income statement.

Investees

Participations in group companies and other investees in which significant influence can be exercised are measured in accordance with the net equity value method. In any case, significant influence is assumed to be applicable if 20% or more of the voting rights can be cast.

Accounting policies for the WNT

Pursuant to the WNT (Act on the Standardisation of Top Income) both the remuneration and any severance payments are subject to maximum limits.

The statutory remuneration maximum in 2021 is € 209,000. This maximum is composed of the components remuneration, taxable fixed and variable expense allowances and provisions for remuneration payable in the future. The WNT sets out that a maximum amount of € 75,000 gross may be agreed as severance pay for an executive.

• EUR has several lease agreements with related parties. The total entitlement amounts to M€ 7.5.
• EUR has concluded a credit facility of M€ 25.0 with its related party Stichting Erasmus Sportaccommodaties. Of this amount, M€ 7.6 was withdrawn as at the balance sheet date.

• The M€ 1.0 commitment that Erasmus Enterprise BV made to Graduate Entrepreneur Fund Coöperatief U.A. will be financed by EUR by means of capital contributions to Erasmus Enterprise BV (so-called informal capital contribution). This commitment is covered from EUR’s private capital. An informal capital contribution of M€ 0.1 was paid at the closing date of 2021. The remaining amount of M€ 0.9 is expected to be deposited in 2022.
• EUR agreed with its 20% investee YES! Delft BV that EUR will pay an annual shareholder contribution of k€ 150 from 2020 through 2024.
• EUR agreed with its 20% investee YES! Delft BV that EUR will pay an annual contribution of k€ 500 from 2021 through 2024 to carry out its activities.

Senior executives, whether or not on the payroll, from the 13th month of performing their position, or former senior executives.