BT 2003 Annual Report Download - page 132

II Net income and shareholders’ equity reconciliation statements continued
Shareholders’ equity
At 31 March
2003
£m
2002
£m
Shareholders’ equity under UK GAAP 2,642 (358)
Adjustment for:
Sale and leaseback of properties (1,292) (1,178)
Pension costs (6,371) (3,003)
Capitalisation of interest, net of related depreciation 225 250
Goodwill 113 186
Mobile licences, software and other intangible asset capitalisation and amortisation –482
Financial instruments 86 (592)
Impairment 124 147
Disposals of businesses –120
Property rationalisation provision 147 –
Deferred taxation (63) (1,375)
Dividend declared after the financial year end 366 173
(4,023) (5,148)
Tax effect of US GAAP adjustments 1,765 901
Shareholders’ equity as adjusted for US GAAP (2,258) (4,247)
III Minority interests
Under US GAAP, the income to minority interests would have been reduced by £27 million (2002 – £26 million,
2001 – £122 million) after adjusting for goodwill amortisation and accounting for associates and joint ventures.
Net assets attributable to minority interests would have been unchanged (2002 – £26 million higher) after
adjusting for financial instruments.
IV Accounting for share options
Under UK GAAP, the company does not recognise compensation expense for the fair value, at the date of grant,
of share options granted under the employee share option schemes. Under US GAAP, the company adopted
the disclosure-only provisions in SFAS No. 123 ‘‘Accounting for Stock-Based Compensation’’. Accordingly,
the company accounts for share options in accordance with APB Opinion No. 25 ‘‘Accounting for Stock Issued
to Employees’’, under which no compensation expense is recognised. Had the group expensed recognised
compensation cost for options granted in accordance with SFAS No. 123, the group’s pro forma net income
(loss), basic earnings (loss) per share and diluted earnings (loss) per share under US GAAP would have been
£4,127 million (2002 – £792 million loss, 2001 – £2,419 million loss), 47.9p (2002 – 9.5p loss, 2001 – 33.2p
loss) and 47.6p (2002 – 9.5p loss, 2001 – 33.2p loss), respectively. The SFAS No. 123 method of accounting
does not apply to share options granted before 1 January 1995, and accordingly, the resulting pro forma
compensation costs may not be representative of that to be expected in future years. See note 34 for the SFAS
No. 123 disclosures of the fair value of options granted under employee schemes at date of grant.
V Consolidated statements of cash flows
Under UK GAAP, the Consolidated Statements of Cash Flows are presented in accordance with UK Financial
Reporting Standard No. 1 (FRS 1). The statements prepared under FRS 1 present substantially the same
information as that required under SFAS No. 95.
Under SFAS No. 95 cash and cash equivalents include cash and short-term investments with maturities
of three months or less at the date of purchase. Under FRS 1 cash comprises cash in hand and at bank and
overnight deposits, net of bank overdrafts.
Under FRS 1, cash flows are presented for operating activities; returns on investments and servicing
of finance; taxation; capital expenditure and financial investments; acquisitions and disposals; dividends paid to
the company’s shareholders; management of liquid resources and financing. SFAS No. 95 requires a classification
of cash flows as resulting from operating, investing and financing activities.
Cash flows under FRS 1 in respect of interest received, interest paid (net of that capitalised under US GAAP)
and taxation would be included within operating activities under SFAS No. 95. Cash flows from purchases, sales
and maturities of trading securities, while not separately identified under UK GAAP, would be included within
operating activities under US GAAP. Capitalised interest, while not recognised under UK GAAP, is included in
investing activities under US GAAP. Dividends paid are included within financing activities under US GAAP.
United States Generally Accepted Accounting Principles
BT Annual Report and Form 20-F 2003 131