Financial statements 2021

Income and expenditure account for the year ended 31 December 2020

		2020	2019
	Notes	£'000	£'000
Regulatory income
Regulatory fee income	4	15,866	14,428
Registry fee income	5	6,130	4,429
Total regulatory income		21,996	18,857
Other income	6	738	447
Interest income		24	60
Total income		22,758	19,364
Expenses
Staff costs	7	(13,343)	(12,811)
Computer Systems		(1,530)	(1,498)
Premises costs		(895)	(869)
Professional services		(1,701)	(937)
Investigation & Litigation		(54)	(215)
Other operating costs		(1,000)	(822)
Depreciation, amortisation and impairments		(1,617)	(1,356)
Staff learning and development		(182)	(275)
Travel costs		(33)	(243)
Total expenses		(20,355)	(19,026)
Surplus for the year	8	2,403	338

All the items dealt with in arriving at the net surplus relate to continuing operations.

There are no recognised gains and losses in the current and preceding year other than those included in the net surplus above, therefore no separate statement of other comprehensive income and expenditure has been presented.

Statement of financial position as at 31 December 2020

		2020	2020	2019	2019
	Notes	£'000	£'000	£'000	£'000
Fixed Assets
Intangible assets	9	7,770		6,086
Tangible fixed assets	10	689		844
			8,459		6,930
Current Assets
Trade receivables		614		417
Sundry debtors		165		52
Prepayments		1,097		1,128
Cash and bank balances	11	12,136		11,404
			14,012		13,001
Total Assets			22,471		19,931
Creditors - Amounts falling due within one year
Fee income received in advance		6,943		6,583
Creditors	12	3,745		6,133
Provisions	13	48		157
			10,736		12,873
Total assets less current liabilities			11,735		7,058
Creditors - Amounts falling due after one year
Fee income received in advance		188
Creditors	12	2,004
Provisions	13	448		366
			2,640		366
Net assets			9,095		6,692
Represented by
Accumulated reserves			9,095		6,692

Statement of changes in accumulated reserves

	Accumulated reserves
	£'000
Balance at 1 January 2019	6,354
Surplus for the year	338
Balance at 31 December 2019	6,692
Balance at 1 January 2020	6,692
Surplus for the year	2,403
Balance at 31 December 2020	9,095

Statement of cash flows for the year ended 31 December 2020

		2020	2019
	Notes	£'000	£'000
Cash flows from operating activities
Net surplus for the year		2,403	338
Interest receivable		(24)	(60)
Depreciation, amortisation and impairment charges	9,10	1,617	1,356
Utilisation of provision		(110)	(62)
Movements in provisions		83	75
Deferred rental incentive		(26)	(26)
(Increase)/decrease in debtors and prepayments		(279)	(7)
Increase in income received in advance		548	680
Increase in creditors		(358)	2,503
Net cash generated from operating activities		3,854	4,797
Cash flows from investing activities
Interest received		24	60
Purchases of tangible and intangible fixed assets	9,10	(3,146)	(2,968)
Net cash used in investing activities		(3,112)	(2,908)
Net increase in cash and cash equivalents		732	1,889
Cash and cash equivalents at 1 January		11,404	9,515
Cash and cash equivalents at 31 December	11	12,136	11,404
Cash and cash equivalents consists of:
Cash at bank and in hand		132	297
Short term deposits		12,004	11,107
Cash and cash equivalents	11	12,136	11,404

Notes to the financial statements for the year ended 31 December 2020

01 Significant accounting policies

Basis of preparation

The financial statements have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.

The financial statements are prepared on a going concern basis, under the historical cost convention.

The significant accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to both accounting years presented.

The JFSC is a statutory body established under Article 2 of the Financial Services Commission (Jersey) Law 1998. The JFSC’s registered address is Jersey Financial Services Commission, PO Box 267, 14-18 Castle Street, JE4 8TP.

The financial statements contain information about the JFSC as an individual entity, and do not include consolidated financial information as the parent of a group. The JFSC is exempt from the requirement to prepare consolidated financial statements because the inclusion of its subsidiary is not material for the purpose of giving a true and fair view.

Income

Income is accounted for on an accruals basis.

Regulatory and Registry annual fees received are recognised as income on a straight-line basis over the relevant period. Annual registry fees and revenue from the operation of the Island’s registers include only the share of that income attributable to the JFSC.

Annual return fees are deferred in the first instance and released to income in the period in which the related costs are incurred.

Amounts received from the Government of Jersey in the form of grants and other financial assistance are recognised when the Commission has satisfied all of the conditions necessary for the funds to be released. Amounts received are recognised as income in the period in which the related costs are incurred or in the periods in which any related fixed asset is depreciated or impaired.

Civil penalties are recognised when the penalty has been agreed with the regulated entity and where it has the ability to settle the amount involved. Income from civil penalties is deferred and is released to income in the year in which the amount of fees to be paid by industry is reduced due to the penalty having been received.

Recoveries of enforcement costs are accounted for only when they have been agreed with the regulated entity or awarded by the Royal Court and it has become virtually certain that they will be received.

Interest received on bank deposits is accrued on a time basis by reference to the principal outstanding and the effective interest rate applicable. Sundry income is recognised on receipt.

Expenses

All expenses are accounted for on an accruals basis

Foreign currency

Foreign currency balances are translated to Sterling at the rate of exchange ruling on the last business day in the financial period. Foreign currency transactions are translated into Sterling at the rate of exchange ruling on the date of the transaction. Profits and losses on foreign exchange are included in the income and expenditure account.

Investigation and litigation costs

Investigation and litigation costs are recognised as incurred. No provision is made for the cost of completing current work unless a present obligation exists at the balance sheet date.

Cash and bank balances

Cash and bank balances comprise cash in hand, deposits and other short-term liquid investments that are readily convertible to a known amount of cash, are subject to an insignificant risk of changes in value, controlled by the organisation and to which the organisation attaches equitable ownership.

Government registers

An intangible asset is recognised in relation to the cost of design, development and operation of Government registers on an accruals basis, provided such costs are contractually recoverable.

Tangible fixed assets

Fixed assets are stated at historical cost less accumulated depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Repairs and maintenance costs are charged to the income and expenditure account during the period in which they are incurred.

Depreciation of fixed assets is calculated so as to write off their cost less estimated residual value on a straight-line basis over their expected useful lives.

The estimated useful lives used for this purpose are:

Motor vehicles	3 years
Office furniture, fittings and equipment	3 to 5 years
Computer equipment	3 to 5 years
Leasehold improvements	Over the lease period

Intangible assets

Intangible assets are stated at historical cost less accumulated amortisation and any impairment losses. Historical cost includes expenditure that is directly attributable to the development of the intangible asset. Subsequent maintenance and support costs are charged to the income and expenditure account during the period in which they are incurred.

Amortisation of intangible assets is calculated so as to write off their cost on a straight-line basis over their expected useful lives.

The estimated useful lives used for this purpose are:

Computer software

Up to 7 years

The cost of computer software in respect of major systems is capitalised within intangible assets. All other computer software costs are expensed as incurred. Computer systems under development are not amortised until the system has been completed and is ready for use. Gains and losses on disposal of intangible assets are determined by comparing any proceeds with their carrying amount and are recognised in the income and expenditure account.

In the requirements gathering phase of an internal systems development project, it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure is recognised as an expense when incurred. Systems developments are recognised as fixed assets from the development phase of a project if, and only if, certain specific criteria are met in order to demonstrate the system will generate probable future economic benefits and that its cost can be reliably measured. If it is not possible to distinguish between the requirements gathering phase and the development phase, the expenditure is treated as if it were all incurred in the requirements gathering phase only.

Impairment

Assets that are subject to depreciation and amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired. Where there is an indication that an asset may be impaired, the carrying value of the asset is tested for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Cash flows from registry and supervisory income are separately identifiable and assets are allocated between these cash flows based on their operational application.

Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.

Leases

Rent payable under operating leases is charged to the income and expenditure account on a straight-line basis over the term of the lease.

The JFSC has taken advantage of the exemption available on transition to FRS 102, which allows lease incentives on leases entered into before the date of transition to continue to be released to the income and expenditure account on a straight-line basis over the period to the first lease break.

For leases entered into after the date of adoption of FRS 102, lease incentives received to enter into operating lease agreements are released to the income and expenditure account over the full term of the lease.

Pension costs

The costs of defined contribution pension schemes are accounted for on an accruals basis. The costs of annual contributions payable to defined benefit schemes operated by the Government of Jersey are accounted for on an accruals basis because the JFSC is unable to obtain the information necessary to apply defined benefit scheme accounting (see note 16).

Annual leave pay accrual

A liability is recognised to the extent of any untaken annual leave entitlement which has accrued at the balance sheet date and can be carried forward to future periods. The liability is measured at the undiscounted cost of untaken annual leave that has accrued up to the balance sheet date.

Provision for long leave entitlements

Provision is made for the accrued entitlements to long leave as at the balance sheet date, even when such entitlements may not yet have vested. The provision is increased each year as additional entitlements are earned. The provision is decreased when long leave entitlements are taken and when such entitlements expire.

The provision represents management’s best estimate of the amounts expected to be paid out, taking into account long leave entitlements that may be lost when an employee leaves the employment of the JFSC. The provision is discounted if the effect would be material.

Provision for premises reinstatement

Provision is made for the expected costs of reinstating office premises to their original condition upon the termination of existing lease agreements. The balance represents management’s best estimate of amounts to be paid for reinstatement. The provision is assessed each year based on changes in the expected costs of reinstatement and discount rates where applicable. The provision will be reduced when related costs are incurred in future periods. Provisions for premises reinstatement costs are discounted if the effect would be material.

02 a) Critical accounting judgements and key sources of estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Key accounting estimates and assumptions

Management is required to make estimates and assumptions concerning the future. The resulting accounting estimates may not equal the actual outcomes. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Provision for long leave entitlements

The balance of the provision for long leave has been determined based on a range of estimates regarding the probability that the related leave entitlement will vest and be taken. This represents management’s best estimate regarding the expected future cash flows related to long leave entitlements.

Provision for premises reinstatement

The balance of the provision for premises reinstatement has been determined based on the applicable square footage of leased premises and the rate per square foot for such reinstatement works published by the Royal Institute of Chartered Surveyors. The provision is adjusted annually based on movements in the published rate per square foot. This represents management’s best estimate regarding the expected future cash flows related to these costs. The balance is discounted if the effect would be material.

Useful lives and residual values

Fixed assets are depreciated over their expected useful lives, taking into account residual values where appropriate. The actual lives and residual values are assessed annually and may vary depending on a number of factors. In reassessing useful lives and residual values, a wide range of factors are taken into account. Changes in these assessments are accounted for prospectively and therefore only have a financial effect on current and future periods.

b) Going concern

Governments and corporates have been taking extraordinary measures to deal with the threat to life posed by Covid-19. Governments have found it necessary to provide finance for a wide range of businesses that have ceased trading or had their trading prospects significantly impaired. Many businesses have closed and may not be capable of being restarted, leading to impairments and write offs. The JFSC has to keep operating, subject to constraints, including staff working from home.

The Board reviews in detail plans put into place by the executive to manage current operations together with revised cash flow and net income forecasts. The Board notes that its 2021 income may be reduced due to lower levels of transaction fees from Jersey financial services business and that in the medium term it may be exposed to reduced annual fees from companies and regulated entities should such businesses be forced to close permanently. However, it believes that any such reductions will be manageable by reducing activity levels or deferring expenditure.

The Board has therefore concluded that there are no material uncertainties that may cast significant doubt on the ability of the JFSC to continue as a going concern.

03 Taxation

The JFSC is exempt from the provisions of the Income Tax (Jersey) Law 1961, as amended.

04 Regulatory fee income

	2020	2019
	£'000	£'000
Banking	2,098	1,817
Funds	6,974	6,499
Insurance business	956	863
General insurance mediation	173	149
Investment business	1,416	1,404
Trust companies	3,418	2,935
Designated non-financial businesses and professions	776	711
Recognised auditors	29	30
Money services business	26	20
	15,866	14,428

05 Registry fee income

Registry fees arise from the operation of the Companies Registry, the Business Names Registry, the Registry of Limited Partnerships, the Registry of Limited Liability Partnerships, and the Security Interests Register.

Registry fees include annual return fees. The amount of the annual return fees payable to the Registry includes amounts collected on behalf of and remitted to the Government of Jersey.

In 2020 the annual return fees increased from £200 to £225. The portion of the total annual return fee retained and recognised by the JFSC was £110, and the remaining £115 collected on behalf of the Government of Jersey. The increase in the annual return fee resulted in an increase in fees attributable to the JFSC of £0.8m in 2020.

In previous years, a portion of registry fees received was segregated and used for certain current and future enhancements to the Registry and its systems. This capital funding mechanism came to an end in 2020, resulting in a temporary increase in fees attributable to the JFSC of £1.1m in 2020.

From 1 January 2021, the annual return fee remains at £225, with the Government portion increasing to £145 following introduction of the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020. As a result, the JFSC has decided to temporarily reduce its portion of these fees to £80 of the total £225 for 2021.

	2020	2019
	£'000	£'000
Total annual return fee income	7,873	7,004
This is apportioned as follows:
Collected on behalf of the Government of Jersey	3,925	3,889
Collected by the JFSC	3,948	2,011
Segregated portion as agreed with the Government of Jersey *		1,104
	7,873	7,004
Annual return fee income collected by the JFSC	3,948	2,011
Other Registry income	2,182	2,418
Total Registry income	6,130	4,429

* See note 12 for further information.

The number of annual returns received during the year was:

	2020	2019
Annual returns received	34,130	33,818

06 Other income

	2020	2019
	£'000	£'000
Investigation and litigation recoveries *	10	240
Financial contribution income	702	195
Sundry income	26	12
	738	447

* See note 12 for further information.

​07 Staff costs

	2020	2019
	£'000	£'000
Staff salaries	10,920	10,453
Commissioners' fees	403	404
Social security contributions	550	503
Pension contributions	826	837
Permanent health and medical insurance	435	422
Other staff costs	144	152
Long leave provision	19	32
Annual leave pay accrual	46	8
	13,343	12,811

The average number of staff employed during the year was 151 (2019: 144).

08 Surplus for the year

Surplus for the year is stated after including the below:

	2020	2019
	£'000	£'000
Amortisation of intangible assets (note 9)	(1,272)	(1,083)
Depreciation of tangible fixed assets (note 10)	(345)	(272)
Research and development coasts not capitalised	(36)	-
Foreign exchange differences	(10)	15
Operating lease expenditure	(578)	(566)
Contributions to employee pension schemes (note 16)	(826)	(837)
Audit fees	(53)	(45)
Non-audit services	(3)	(4)

09 Intangible assets

	Computer systems under development	Computer systems	Total
	£'000	£'000	£'000
Cost
Balance at 1 January 2020	1,950	9,139	11,089
Additions	2,973	5	2,978
Completed computer systems	(795)	795	-
Transfer to tangible fixed assets	(22)	-	(22)
At December 2020	4,106	9,939	14,045
Amortisation
Balance at 1 January 2020	-	(5,003)	(5,003)
Charge for the year	-	(1,272)	(1,272)
At 31 December 2020	-	(6,275)	(6,275)
Net book value at 31 December 2020	4,106	3,664	7,770
Net book value at 31 December 2019	1,950	4,136	6,086

The principal expenditure during the year related to investment in our enhanced Registry systems (£1,447,400), implementing other key strategic workstreams (£1,322,720), and other operational initiatives (£208,106).

10 Tangible fixed assets

	Office furniture, fittings & equipment	Leasehold improvements	Computer equipment	Motor vehicles	Total
	£'000	£'000	£'000	£'000	£'000
Cost
Balance at 1 January 2020	640	311	1,838	13	2,802
Additions	1	-	167	-	168
Transfer from intangible assets	-	-	22	-	22
At 31 December 2020	641	311	2,027	13	2,992
Accumulated depreciation
Balance at 1 January 2020	(581)	(163)	(1,203)	(11)	(1,958)
Charge for the year	(23)	(60)	(260)	(2)	(345)
At 31 December 2020	(604)	(223)	(1,463)	(13)	(2,303)
Net book value at 31 December 2020	37	88	564	-	689
Net book value at 31 December 2019	59	148	635	2	844

11 Cash and bank balances

	2020	2019
	£'000	£'000
Current accounts	131	296
Deposit accounts	12,004	11,107
Petty cash	1	1
Cash and cash equivalents at bank	12,136	11,404

In order to mitigate the credit risk, these deposit accounts are maintained with five different banks.

12 Creditors

	2020	2019
	£'000	£'000
Trade creditors	2,024	1,640
Accruals	1,010	787
Deferred rental incentive	36	62
Deferred industry fees*	126	381
Deferred Beneficial owner contribution	-	162
Deferred industry fees**	2,283	2,823
Sundry creditors	270	278
	5,749	6,133
Falling due within one year	3,745	6,133
Falling due after more than one year	2,004	-
	5,749	6,133

* Deferred industry fees arise from civil penalties received during the year. The Law requires the amount to be credited to Industry by way of reductions in the Industry fees that would otherwise be charged in future years.

**It was agreed with the Government of Jersey that a portion of the additional registry fees charged from 2017 to 2019 be segregated and used for certain current and future enhancements to the Registry and its systems. In 2020 it was confirmed the segregated amount should be utilised for 2020 Registry projects and for start-up costs of the MONEYVAL AML inspection unit. As a result, £540,000 has been recognised as financial contribution income in 2020 as an offset to the charges associated with running the unit, and £2,282,665 is carried forward to be released over the useful life of the Registry system, in line with amortisation charges. No further unallocated segregated funds under this arrangement remain.

13 Provisions for liabilities

	Provision for long leave	Reinstatement provision	Total
	£'000	£'000	£'000
Balance at 1 January 2019	229	281	510
Amounts provided for during the year	51	44	95
Reversal of unused provision	(20)	-	(20)
Utilised during the year	(62)	-	(62)
Balance at 31 December 2019	198	325	523
Amounts provided for during the year	20	81	101
Reversal of unused provision	(18)	-	(18)
Utilised during the year	(110)	-	(110)
Balance at 31 December 2020	90	406	496
Falling due within one year	48	-	48
Falling due after one year	42	406	448
	90	406	496

Provision for long leave

The provision for long leave relates to the expected cost of long leave entitlements that have accrued up to the date of the statement of financial position. Long leave entitlements may continue to accrue up to June 2043 if all vesting conditions are satisfied up to that period.

Provision for premises reinstatement

The provision relates to the expected costs of reinstatement of office premises to their original condition on termination of premises leases. The balance at year-end has been determined based on a guideline rate of £20 per square foot (2019: £16 per square foot) as determined by the Royal Institute of Chartered Surveyors. The provision is adjusted annually based on movements in the guideline rate.

14 Commitments under operating leases

The JFSC had minimum lease payments under non-cancellable operating leases as set out below:

	2020	2019
	£'000	£'000
Not later than 1 year	601	592
Later than 1 year but not later than 5 years	248	834
	849	1,426

Rentals payable under this operating lease are subject to periodic review and are based on market rates. The most recent rent review was agreed during 2020 and the resulting rental increase was effective from May 2019. The next rent review is due to commence in 2022.

15 Financial instruments

Our financial instruments are analysed as follows:

	2020	2019
	£'000	£'000
Financial assets
Financial assets measured at amortised cost	12,915	11,873
Financial liabilities
Financial liabilities measured at amortised cost	(2,294)	(2,080)

Financial assets measured at amortised cost comprise cash and bank balances, trade receivables and sundry debtors.

Financial liabilities measured at amortised cost comprise trade creditors and sundry creditors.

16 Pension costs

JFSC 2012 Staff Pension Scheme

In 2012, the JFSC closed the JFSC’s Staff Pension Scheme and replaced it with a new defined contribution scheme, the JFSC 2012 Staff Pension Scheme. The new scheme is open to staff whose initial employment by the JFSC occurred after 1 January 1999. Members’ interests in the previous scheme were automatically transferred to the JFSC 2012 Staff Pension Scheme. All transfers of interests were completed in 2013.

The JFSC 2012 Staff Pension Scheme’s assets are held separately from those of the JFSC, under the care of an independent trustee.

Salaries and emoluments include pension contributions for staff to the schemes of £796,433 (2019: £809,501). Contribution rates have remained unchanged. Aggregate contributions decreased due to changes in membership numbers and ages.

Public Employees Contributory Retirement Scheme

Staff employed by the JFSC before 1 January 1999 are members of the Public Employees Contributory Retirement Scheme (PECRS) which is a final salary scheme. The assets are held separately from those of the Government of Jersey. Contribution rates are determined by an independent qualified actuary, so as to spread the costs of providing benefits over the members’ expected service lives.

Pension contributions for staff to this scheme amounted to £29,341 (2019: £27,054). The average contribution rate paid by the JFSC during the year was 14.0% (2019: 14.4%) of salary. The contribution rate has not been changed following the actuarial valuation because the valuation is within the funding parameters specified in the related regulations. The JFSC is unable to identify its share of the underlying assets and liabilities of PECRS in accordance with FRS 102 (Section 28) and accordingly accounts for contributions to the scheme as contributions to a defined contribution scheme.

The most recent published actuarial valuation being as at 31 December 2018, which reported a deficit of £1.1 million. No account has been taken of the JFSC’s potential share of this deficit because the scheme is accounted for as if it is a defined contribution scheme.

Copies of the latest annual accounts for the scheme, and for the Government of Jersey, may be obtained from the Treasury and Exchequer, 19-21 Broad Street, St Helier, JE2 3RR.

17 Related party transactions

Transactions and balances arising in the normal course of operations

The JFSC has been established in law as an independent financial services regulator and as such the Government of Jersey is not a related party.

Remuneration of key management personnel

Key management personnel includes the Commissioners, the Director General and Executive Directors who together have authority and responsibility for planning, directing and controlling the activities of the JFSC. Total remuneration paid to members of key management personnel during the year was £1.5 million (2019: £1.9 million).

Remuneration of Commissioners

Remuneration of the Commissioners and the Director General is set out in the governance section of this annual report. There were no other transactions with key management personnel other than reimbursement of expenses incurred for JFSC purposes.

18 Subsidiary undertakings

At 31 December 2020, the JFSC had an interest in one wholly owned subsidiary company. Further details are outlined below:

Name	JFSC Property Holdings No.1 Limited
Country of incorporation	Jersey
% of shares held	100%
Principal activity	Property lease holding

JFSC Property Holdings No.1 Limited entered into an agreement on behalf of the JFSC to lease the JFSC’s office premises. All expenditure incurred by the Company is borne by the JFSC. The Company has no assets or liabilities and therefore has not been consolidated in the financial statements.