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34. EXPLANATION OF TRANSITION TO IFRS
These are the group’s first consolidated financial statements prepared in accordance with EU-adopted IFRS.
The accounting policies set out on pages 65 to 72 have been applied in preparing the financial statements for the year ended
31 March 2006, the comparative information for the year ended 31 March 2005 and the preparation of an opening balance sheet
at 1 April 2004, the group’s date of transition. IAS 39, ‘Financial Instruments: Recognition and Measurement’ and IAS 32,
‘Financial Instruments: Disclosure and Presentation’ have not been applied to the comparative periods because the group has
taken a transitional exemption and adopted these standards prospectively from 1 April 2005.
In preparing its opening IFRS balance sheet, the group has made adjustments to amounts previously reported in its financial
statements under UK GAAP. IFRS and UK GAAP are not directly comparable. An explanation of how the transition from previous
UK GAAP to IFRS has affected the group’s financial position is set out below.
31 March 2005 1 April 2004
Notes £m £m
Total equity under UK GAAP 3,901 3,112
Adjustments to equity to conform with IFRS (net of deferred tax):
Employee benefits a (4,092) (4,390)
Share based payments b7–
Goodwill and other intangibles c16 –
Dividends d 551 454
Leases e (288) (215)
Total reduction in equity (3,806) (4,151)
Total equity (deficit) under IFRS 95 (1,039)
2005
Notes £m
Profit for the year under UK GAAP 1,821
Adjustments to profit to conform with IFRS (net of deferred tax):
Employee benefits a86
Share based payments b (21)
Goodwill and other intangibles c16
Leases e (73)
Total adjustment to profit for the year 8
Profit for the year under IFRS 1,829
Under IAS 7 ‘Cash Flow Statements’ movements in cash and cash equivalents are reconciled. Under UK GAAP movements in cash
balances only are reconciled. The change in the presentation of the cash flow statement under IAS 7 has no impact on the cash
flow generated by the group.
Effect of IAS 32 and IAS 39 transitional adjustment (note f)
31 March
2005
Transition
adjustment
1 April
2005
£m £m £m
Non current assets
Derivative financial instruments 18 5 23
Current assets
Trade and other receivables 4,269 (275) 3,994
Derivative financial instruments 143 31 174
Loans and receivables 2,003 45 2,048
Available-for-sale investments 1,149 2 1,151
Current liabilities
Trade and other payables (6,763) 861 (5,902)
Derivative financial instruments (375) (321) (696)
Loans and other borrowings (4,261) (111) (4,372)
Non current liabilities
Loans and other borrowings (7,744) (194) (7,938)
Deferred tax liabilities (1,715) 272 (1,443)
Derivative financial instruments (472) (524) (996)
Reserves (387) (209) (596)
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 111