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35. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES continued
Under US GAAP up to 31 March 2002, goodwill arising on the acquisition of subsidiaries, associates and joint ventures was
capitalised as an intangible asset and amortised over its useful life. BT adopted SFAS No. 142 on 1 April 2002 and goodwill is no
longer amortised but tested annually for impairment. There was no goodwill impairment charge in the year ended 31 March 2006
(2005: nil).
(k) Property rationalisation provision
In the 2003 financial year, a provision in connection with the rationalisation of the group’s London office property portfolio was
recorded. Under US GAAP, in accordance with SFAS No 146, these costs are not recognised until the group fully exits and
therefore ceases to use the affected properties. All these properties were exited by 31 December 2004.
(l) Contingent consideration
Under IFRS contingent consideration in respect of acquisitions is recorded when the outcome of the contingency is considered
more likely than not. Under US GAAP the consideration is recorded when the contingent event has occurred.
(m) Termination benefits
Under US GAAP the fair value of termination benefits for employees who are to be retained beyond their minimum contractual
retention period is recognised on a straight line basis over the future service period. Under IFRS these costs are recognised when
the employees agree to leave the group.
(II) NET INCOME AND SHAREHOLDERS’ EQUITY RECONCILIATION STATEMENTS
The following statements summarise the material estimated adjustments, gross of their tax effect, which reconcile net income and
shareholders’ equity from that reported under IFRS to that which would have been reported had US GAAP been applied.
Net income
Years ended 31 March Note
2006
£m
2005
£m
Profit attributable to equity shareholders of the parent under IFRS 1,547 1,830
Adjustment for:
Sale and leaseback of properties a (18) 21
Pension costs b (220) (333)
Capitalisation of interest c (16) (13)
Financial instruments d (436) (415)
Foreign exchange e 39 –
Impairment of property, plant and equipment g (38) (24)
Share based payment i (1) 13
Property rationalisation provision k –(5)
Termination benefits m –(20)
Deferred taxation f 33
860 1,057
Tax effect of US GAAP adjustments 203 240
Net income as adjusted for US GAAP 1,063 1,297
Basic earnings per American Depositary Share as adjusted for US GAAP
a
£1.26 £1.52
Diluted earnings per American Depositary Share as adjusted for US GAAP
a
£1.25 £1.51
aEach American Depositary Share is equivalent to ten ordinary shares.
Shareholders’ equity
At 31 March Note
2006
£m
2005
£m
Total parent shareholders’ equity under IFRS 1,555 45
Adjustment for:
Sale and leaseback of properties a (1,067) (1,049)
Pension costs b (1,228) 636
Capitalisation of interest c 164 178
Goodwill j 107 113
Financial instruments d 3(371)
Impairment of property, plant and equipment g 40 77
Current liabilities c 7–
Deferred taxation f (53) (56)
(472) (427)
Tax effect of US GAAP adjustments 314 (157)
Shareholders’ equity as adjusted for US GAAP (158) (584)
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 117