BT 2006 Annual Report Download - page 83

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5. FINANCE INCOME AND FINANCE EXPENSE
2006 2005
a
£m £m
Finance expense
Interest on listed bonds, debentures and notes
b
831 963
Interest on finance leases 62 68
Interest on other borrowings 20 19
Unwinding of discount on provisions 33
Net charge on financial instruments in a fair value hedge
c
––
Net foreign exchange on items in hedging relationships
d
––
Fair value movements on derivatives not in a designated hedge relationship 8–
Interest on pension scheme liabilities 1,816 1,720
Total finance expense 2,740 2,773
aThe group adopted IAS 32 and IAS 39 from 1 April 2005. The comparative period has therefore applied the group’s previous accounting policies in calculating the recognition and measurement
basis for finance expense (see accounting policies).
bIncludes a net charge of £41 million relating to fair value movements on derivatives recycled from the cash flow reserve.
cIncludes a net charge of £71 million relating to fair value movements arising on hedged items and a net credit of £71 million relating to fair value movements arising on derivatives designated as
fair value hedges.
dIncludes a net charge of £330 million relating to foreign exchange movements on hedged loans and borrowings and a net credit of £330 million relating to fair value movements on derivatives
recycled from the cash flow reserve.
2006 2005
a
£m £m
Finance income
Income from listed investments
b
44 47
Other interest and similar income
c
154 209
Net foreign exchange on items in hedging relationships
d
––
Expected return on pension scheme assets 2,070 1,918
Total finance income 2,268 2,174
Net finance expense 472 599
aThe group adopted IAS 32 and IAS 39 from 1 April 2005. The comparative period has therefore applied the group’s previous accounting policies in calculating the recognition and measurement
basis for finance income (see accounting policies).
bIncome from listed investments includes £37 million relating to gains on held for trading investments.
cOn 11 August 2005, the group exercised its option to require early redemption of its US dollar convertible 2008 bond. Bondholders had the option to take redemption proceeds in the form of cash
or shares in the group’s interest in LG Telecom. The majority of bondholders exercised their option to take the redemption proceeds in the form of LG Telecom shares. Other interest includes a net
bond redemption gain of £27 million. This reflects the write off of LG Telecom shares of £121 million and the associated release from the available-for-sale reserve of £35 million; the write off of the
bond and transaction costs of £87 million and the associated option liability of £17 million; and the release from the translation reserve of £9 million credit relating to foreign exchange movements
on the investment in LG Telecom to the date of disposal.
dIncludes a net credit of £85 million relating to foreign exchange movements on hedged investments and a net charge of £85 million relating to fair value movements on derivatives recycled from the
cash flow reserve.
6. TAXATION
2006 2005
£m £m
Analysis of taxation expense for the year
United Kingdom:
Corporation tax at 30% (2005: 30%) 404 542
Adjustments in respect of prior periods (69) 4
Non-UK taxation:
Current 12 (4)
Adjustments in respect of prior periods 1(3)
Total current tax 348 539
Deferred tax:
Origination and reversal of temporary differences 155 (15)
Adjustment in respect of prior periods (11) 1
Total deferred tax 144 (14)
Total taxation expense in the income statement 492 525
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 81