BT 2006 Annual Report Download - page 126

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BT Group plc Annual Report and Form 20-F 2006 Financial Statements of BT Group PLC124
BT GROUP PLC ACCOUNTING POLICIES
(I) ACCOUNTING BASIS
The financial statements are prepared under the historical cost
convention as modified by the revaluation of certain financial
instruments in accordance with the Companies Act 1985 and
applicable United Kingdom accounting standards (UK GAAP).
As permitted by Section 230(3) of the Companies Act 1985,
the company’s profit and loss account has not been presented.
The BT Group plc consolidated financial statements for the
year ended 31 March 2006 contain a consolidated statement of
cash flows. Consequently, the company has taken advantage of
the exemption in FRS 1, (Revised 1996) ‘Cash Flow
Statements’ not to present its own cash flow statement.
The company has taken advantage of the exemption in
FRS 8, ‘Related Party Disclosures’ not to disclose transactions
with other members of the BT Group.
The BT Group plc consolidated financial statements for the
year ended 31 March 2006 contain financial instrument
disclosures which comply with FRS 25, ‘Financial Instruments:
Disclosure and Presentation’. Consequently, the company has
taken advantage of the exemption in FRS 25 not to present
separate financial instrument disclosures for the company.
(II) CHANGES IN ACCOUNTING POLICIES
The company has adopted FRS 17, ‘Retirement benefits’,
FRS 20, ‘Share based payment’, FRS 21 ‘Events after the
balance sheet date’, FRS 23, ‘The effects of changes in foreign
exchange rates’, FRS 25, ‘Financial instruments: Disclosure and
Presentation’, FRS 26, ‘Financial instruments: Measurement’,
and FRS 28, ‘Corresponding amounts’ in these financial
statements. The adoption of each of these standards represents
a change in accounting policy and the comparative figures have
been restated accordingly, except where the exemption to
restate comparatives have been taken.
As a result of adopting FRS 21, the company’s profit for the
year ended 31 March 2005 increased by £454 million to
£1,024 million. Accrued dividend income of £454 million for
the 2004 financial year was reversed and recognised in the
2005 financial year. In addition, the final dividends for the
2005 and 2004 financial years of £551 million and £454
million respectively have been reversed, as the associated
dividends had not been approved at those dates. None of the
other new accounting standards had any effect on the
company’s profit or net assets.
(III) INVESTMENTS
Fixed asset investments, which comprises investments in
subsidiary undertakings, are stated at cost and reviewed for
impairment if there are indicators that the carrying value may
not be recoverable.
(IV) TAXATION
Full provision is made for deferred taxation on all timing
differences which have arisen but not reversed at the balance
sheet date. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that there will be
sufficient taxable profits from which the underlying timing
differences can be deducted. The deferred tax balances are not
discounted.
(V) DIVIDENDS
Dividend distributions are recognised as a liability in the year in
which the dividends are approved by the company’s
shareholders. Interim dividends are recognised when they are
paid; final dividends when authorised in general meetings by
shareholders.
(VI) SHARE CAPITAL
Ordinary shares are classified as equity. Repurchased shares of
the company are recorded in the balance sheet as treasury
shares and presented as a deduction from shareholders’ equity
at cost.
(VII) CASH
Cash includes cash in hand, bank deposits repayable on
demand and bank overdrafts.