BT 1998 Annual Report Download - page 74

O T E S T O TH E F I N A N C I A L S TAT E M E N T S
30. United States Generally Accepted Accounting Principles (continued)
(d) Goodwill (continued)
or loss recognised at the time of divestment. Gross goodwill under US GAAP at 31 March 1998 of £925m (1997 – £1,986m) was
subject to amortisation over periods of 3 to 40 years. Goodwill relating to MCI has been unchanged since 31 October 1997 when
the investment ceased to have associated company status. The value of goodwill is reviewed annually and the net asset value is
written down if a permanent diminution in value has occurred.
(e) Mobile cellular telephone licences, software and other intangible assets
Certain intangible fixed assets recognised under US GAAP purchase accounting requirements are subsumed within goodwill
under UK GAAP. Under US GAAP these separately identified intangible assets are valued and amortised over their useful lives.
(f) Investments
Under UK GAAP, investments are held on the balance sheet at historical cost. Under US G A A P, trading securities and available-for-
s a l e s e c u r i t i e s a r e c a rr i e d a t m a r k e t v a l u e w i t h a p p ro p r i a t e v a l u a t i o n a d j u s t m e n t s re c o rd e d i n p ro f i t a n d l o s s and share h o l d e r’s equity,
re s p e c t i v e l y. The net unrealised holding gain on available-for-sale securities for the year ended 31 March 1998 which related primarily
to the investment in MCI was £1,315m (1997 – £nil, 1996 – £nil).
(g) Deferred taxation
Under UK GAAP, provision for deferred taxation is generally only made for timing differences which are expected to reverse.
Under US GAAP, deferred taxation is provided on a full liability basis on all temporary differences, as defined in SFAS No. 109.
At 31 March 1998, the adjustment of £2,095m (1997 – £1,942m) reconciling ordinary shareholders’ equity under UK GAAP to the
approximate amount under US GAAP included the tax effect of other USGAAP adjustments. This comprised an adjustment
decreasing non-current assets by £76m (1997 – £138m decrease); an adjustment increasing current assets by £68m
(1997 – £408m decrease); an adjustment decreasing current liabilities by £184m (1997 – £191m decrease); an adjustment
decreasing minority interests by £3m (1997 – £nil) and an adjustment increasing non-current deferred tax liabilities by £2,274m
(1997 – £1,587m increase).
(h) Dividends
Under UK GAAP, dividends are recorded in the year in respect of which they are declared (in the case of interim or any special
dividends) or proposed by the board of directors to the shareholders (in the case of final dividends). Under US GAAP, dividends
are recorded in the period in which dividends are declared.
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 UK GAAP to that which would have been reported had US GAAP been applied.
Net income
1998 1997 1996
Y E A R E N D E D 31 M A R C H £m £m £m
)))))))))))%!!!!!00005
Net income applicable to shareholders under UK GAAP 1,706 2,077 1,986
Adjustments for:
Pension costs (66) 83 18
Redundancy charges (253) 156 (152)
Capitalisation of interest, net of related depreciation (38) (23) (22)
Goodwill amortisation (71) (73) (74)
Mobile licences, software and other intangible asset capitalisation and
amortisation, net 42 77 38
Investments 5– (2)
Deferred taxation 163 (148) 14
Other items (37) – –
00000000001051!!!50000
Net income as adjusted for US GAAP 1,451 2,149 1,806
00000000001051!!!50000
Basic earnings per American Depositary Share as adjusted for US GAAP (a) £2.27 £3.39 £2.88
Diluted earnings per American Depositary Share as adjusted for US GAAP (a) £2.24 £3.36 £2.84
00000000001051!!!50000