BT 1998 Annual Report Download - page 73

N O T E S T O TH E F I N A N C I A L S TAT E M E N T
29. Auditors
The auditors’ remuneration for the year ended 31 March 1998 for the group was £2,396,000 (1997 – £2,135,000,
1996 – £2,138,000), including £1,216,000 (1997 – £1,167,000, 1996 – £1,170,000) for the company.
The following fees were paid or are payable to the company’s auditors, Coopers & Lybrand, in the UK for the year ended
31 March 1998:
1998 1997 1996
£000 £000 £000
)))))))))))%!!!!!01111110051111
Audit of the company’s statutory accounts 1,216 1,167 1,170
Audits of the UK subsidiary undertakings’ statutory accounts 510 396 349
Other services, including regulatory audits and tax compliance work 4,724 4,620 4,004
00000000000511!!!11101110051111
Total 6,450 6,183 5,523
00000000000511!!!11101110051111
In addition, fees of £1,295,000 (1997 – £1,888,000, 1996 – £1,395,000) were paid or are payable to other members of
Coopers & Lybrand International for the year ended 31 March 1998 in respect of audit and other services to the company’s
overseas subsidiary undertakings and in respect of other services to the group.
30. United States Generally Accepted Accounting Principles
The group’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
UK (UK GAAP), which differ in certain significant respects from those applicable in the US (US GAAP).
Differences between United Kingdom and United States generally accepted accounting principles
The following are the main differences between UK and US GAAP which are relevant to the group’s financial statements.
(a) Pension costs
Under UK GAAP, pension costs are accounted for in accordance with UK Statement of Standard Accounting Practice No. 24,
costs being charged against profits over employees’ working lives. Under US GAAP, pension costs are determined in accordance
with the requirements of US Statements of Financial Accounting Standards (SFAS) Nos. 87 and 88. Differences between the UK
and US GAAP figures arise from the requirement to use different actuarial methods and assumptions and a different method of
amortising surpluses or deficits.
(b) Accounting for redundancies
Under UK GAAP, the group generally charges to profit and loss direct severance costs, primarily severance payments and
payments in lieu of notice, in the period in which employees leave the group. The cost of providing incremental pension benefits
in respect of workforce reductions are taken into account in determining current and future pension costs, unless the most
recent actuarial valuation under UK actuarial conventions shows a deficit. In this case, the costs of providing incremental
pension benefits are included in redundancy charges in the year in which the employees leave the group.
Under US GAAP, if employees are encouraged to leave voluntarily by the use of special termination benefits, then the termination
benefits, primarily severance payments, payments in lieu of notice and the associated cost of providing incremental pension
benefits, are charged against profits in the period in which the termination terms are agreed with the employees. If staff
terminations are likely to be enforced, then the termination benefits are charged against profits at the time when the group
is committed to the staff terminations and the associated costs can be reasonably estimated.
(c) Capitalisation of interest
Under UK GAAP, the group does not capitalise interest in its financial statements. To comply with US GAAP, the estimated amount
of interest incurred whilst constructing major capital projects is included in fixed assets, and depreciated over the lives of the
related assets. The amount of interest capitalised is determined by reference to the average interest rates on outstanding
borrowings. At 31 March 1998 under US GAAP, gross capitalised interest of £525m (1997 – £722m) with regard to the company
and its subsidiary companies was subject to depreciation generally over periods of 3 to 25 years.
(d) Goodwill
Under UK GAAP, the group writes off goodwill arising from the purchase of subsidiary and associated undertakings on acquisition
against retained earnings. The goodwill is reflected in the net income of the period of disposal, as part of the calculation of the
gain or loss on divestment, or when recognising a permanent diminution in value. Under US GAAP, such goodwill is held as an
intangible asset in the balance sheet and amortised over its useful life and only the unamortised portion is included in the gain