BT 2000 Annual Report Download - page 60

Accounting policies
Annual report and Form 20-F 59
I Basis of preparation of the ®nancial statements
The ¢nancial statements are prepared under the historical
cost convention and in accordance with applicable
accounting standards and the provisions of the Companies
Act 1985. The group ¢nancial statements consolidate those
of the company and all of its subsidiary undertakings.
Where the ¢nancial statements of subsidiary undertakings,
associates and joint ventures do not conform with the
group's accounting policies, appropriate adjustments are
made on consolidation in order to present the group
¢nancial statements on a consistent basis. The principal
subsidiary undertakings' ¢nancial years are all
coterminous with those of the company, with the exception
of one newly acquired group at 31 March 2000. References
to the ``company'' are to British Telecommunications public
limited company, and references to ``BT'' or the ``group''
are to the company and its subsidiaries, or any of them as
the context may require.
The preparation of ¢nancial statements requires
management to make estimates and assumptions that a¡ect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the ¢nancial statements and the reported amounts of
income and expenditure during the reporting period.
Actual results could di¡er from those estimates. Estimates
are used principally when accounting for income, provision
for doubtful debts, payments to telecommunication
operators, depreciation, employee pension schemes and
taxes. Certain comparative ¢gures have been restated to
conform with revised presentation and reclassi¢cation of
¢gures in the year ended 31 March 2000.
II Turnover
Group turnover, which excludes value added tax and other
sales taxes, comprises the value of services provided and
equipment sales by group undertakings, excluding those
between them.
Total turnover is group turnover together with the
group's share of its associates' and joint ventures' turnover,
excluding the group's share of transactions between the
group and its principal joint venture, Concert BV.
III Research and development
Expenditure on research and development is written o¡
as incurred.
IV Interest
Interest payable, including that related to ¢nancing the
construction of tangible ¢xed assets, is written o¡ as
incurred. Discounts or premiums and expenses on the issue
of debt securities are amortised over the term of the related
security and included within interest payable. Premiums
payable on early redemptions of debt securities, in lieu of
future interest costs, are written o¡ when paid.
V Foreign currencies
On consolidation, assets and liabilities of foreign
undertakings are translated into sterling at year-end exchange
rates. The results of foreign undertakings are translated into
sterling at average rates of exchange for the year.
Exchange di¡erences arising from the retranslation at
year-end exchange rates of the net investment in foreign
undertakings, less exchange di¡erences on borrowings
which ¢nance or provide a hedge against those
undertakings, are taken to reserves and are reported in
the statement of total recognised gains and losses.
All other exchange gains or losses are dealt with
through the pro¢t and loss account.
Vl Intangibles
(a) Goodwill
Goodwill, arising from the purchase of subsidiary
undertakings and interests in associates and joint ventures,
represents the excess of the fair value of the purchase
consideration over the fair value of the net assets acquired.
For acquisitions completed on or after 1 April 1998,
the goodwill arising is capitalised as an intangible asset or,
if arising in respect of an associate or joint venture,
recorded as part of the related investment. In most cases,
the goodwill is amortised on a straight line basis from the
time of acquisition over its useful economic life. Where
special circumstances exist such that amortising goodwill
over a ¢nite period would not give a true and fair view,
that goodwill is not amortised. The economic life is
normally presumed to be a maximum of 20 years.
For acquisitions on or before 31 March 1998,
the goodwill is written o¡ on acquisition against
group reserves.
If an undertaking is subsequently divested, the
appropriate unamortised goodwill or goodwill written o¡ to
reserves is dealt with through the pro¢t and loss account
in the period of disposal as part of the gain or loss
on divestment.
(b) Other intangibles
Licence fees paid to governments, which permit
telecommunication activities to be operated for de¢ned
periods, are amortised from the later of the start of the
licence period or launch of service to the end of the licence
period on a straight-line basis.