BT 2001 Annual Report Download - page 101

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18. Intangible assets
Goodwill(a)
£m
Telecommuni-
cation
licences(b)
£m
Total
£m
Cost
At 1 April 2000 5,864 3 5,867
Additions – 4,315 4,315
Acquisitions of subsidiary undertakings 6,116 5,488 11,604
Adjustments 99 3 102
Disposals and transfers (4) – (4)
Currency movements 35 (63) (28)
Total cost at 31 March 2001 12,110 9,746 21,856
Amortisation
At 1 April 2000 89 1 90
Charge for the year – amortisation 373 13 386
– impairment (c) 3,000 – 3,000
Total amortisation at 31 March 2001 3,462 14 3,476
Net book value at 31 March 2001 8,648 9,732 18,380
Net book value at 31 March 2000 5,775 2 5,777
(a) The goodwill arising on acquisitions of subsidiary undertakings in the year ended 31 March 2001 mainly arose from the acquisition in June 2000 of the 50%
interest in Telfort which the group did not already own (£986 million) and the acquisition in January and February 2001 of the 55% interest in Viag Interkom
which the group did not already own (£4,992 million). The consideration for the acquisition of the 55% interest in Viag Interkom was negotiated in August
2000. (See note 16.)
(b) The telecommunication licences mainly comprise third generation mobile licences in the UK and Germany. In April 2000, the group won a third generation
mobile licence in the UK government’s auction. The licence, which cost £4,030 million, will be amortised over its remaining 20-year term from the date of
launch of services using the licensed radio spectrum. In August 2000, Viag Interkom won a third generation mobile licence in the German government’s
auction. This licence, which cost £5,164 million, will be similarly amortised over its remaining 20-year term from the date of launch of service.
(c) In accordance with FRS 11 (Impairment of fixed assets and goodwill), the carrying values of the group’s subsidiary undertakings in Germany, Ireland, The
Netherlands and the UK at 31 March 2001 have been compared to their recoverable amounts, represented by their value in use to the group.
The value in use has been derived from discounted cash flow projections which cover the ten years from 1 April 2001. The projections cover a ten year periodas
the directors consider that the growth in these businesses will exceed the average growth rate of the countries concerned over ten years. Also, the development
of the technology and assets required for such growth means ten year projections would more fairly reflect their long-term values. After the ten year period, the
projections use a long-term growth rate compatible with projections for the countries concerned. The discount rate used to arrive at this calculation was 10% on
a pre-tax basis.
The review has resulted in an exceptional charge to operating costs of £3,000 million in respect of Viag Interkom. The charge has been allocated to the goodwill
arising on the acquisition of the remaining 55% interest in the company that was purchased during the year. The remaining goodwill of £1,921 million will be
amortised over 20 years in accordance with the group’s accounting policies.
BT Annual report and Form 20-F 101