BT 2001 Annual Report Download - page 125

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These ¢nancial instruments, under US GAAP, are carried at market value with valuation adjustments recorded in pro¢t and loss.
Own shares held in trust are treated as a reduction to shareholders’ equity until they are reissued to employees. The reassessment
and purchase of derivatives in the year ended 31 March 2001 gave rise to an adjustment reducing net income by »93 million
(2000 ^ »95 million). The net unrealised holding gain on available-for-sale securities for the year ended 31 March 2001 was
»8 million (2000 --- »311 million, 1999 --- »76 million).
(g) Deferred gain
Under UK GAAP, assets contributed to a joint venture by the group’s partners are measured at their net replacement cost. Any
di¡erence between the group’s share of the joint venture’s resulting net assets and the net book value of assets contributed by the
group to the joint venture, including certain accrued start up costs, is immediately re£ected by adjusting the group’s investment
in the joint venture and recording a deferred di¡erence in shareholders’ equity. Under US GAAP, the assets contributed by all
joint venture partners are carried at their historical net book value and any di¡erence between the group’s share of the joint
venture’s resulting net assets and the net book value of assets contributed by the group to the joint venture is amortised over the
life of the items giving rise to the di¡erence.
(h) Employee share plans
Certain share options have been granted under BT save-as-you-earn plans at a 20% discount. Under UK GAAP, the share issues
are recorded at their discounted price when the options are exercised. Under US GAAP, a plan is considered compensatory when
the discount to market price is in excess of 15%. Compensation cost is recognised for the di¡erence between the exercise price of
the share options granted and the quoted market price of the shares at the date of grant or measurement date and accrued over
the vesting period of the options.
(i) Directories in progress
Under UK GAAP, the cost of classi¢ed advertising directories in progress deferred in stock represents direct ¢xed and variable
costs as well as directly attributable overhead costs. Under US GAAP, the deferred costs associated with directories in progress
comprise only the incremental direct costs associated with selling and creating the directories. Directories in progress acquired in
a business purchase are valued at replacement value under UK GAAP and at retail value under US GAAP. Under UK GAAP, this
di¡erence is included in goodwill.
(j) Revenue recognition
During the year ended 31 March 2001 the group adopted Securities and Exchange Commission Sta¡ Accounting Bulletin No. 101,
‘‘Revenue Recognition in Financial Statements’’. The adoption did not have a material impact on the results of operations or
¢nancial condition.
(k) Investments in associates
Under UK GAAP, the group records the share of operating pro¢t and loss of ventures based upon the total interest in the venture
based upon the consolidation structure. The group records the equity in the operations of the venture on the basis of its
consolidated results excluding the holdings of any of the group’s other ventures for the purpose of determining the economic
interest. The share of the operations of the ventures is reduced to the economic interest through an increase to minority interests
at the group level. Under US GAAP, the share of the operating results of the venture is recorded at the amount of the group’s
economic interest.
(l) Deferred taxation
Under UK GAAP, provision for deferred taxation is generally only made for timing di¡erences which are expected to reverse.
Under US GAAP, deferred taxation is provided on a full liability basis on all temporary di¡erences as de¢ned in SFAS No. 109.
At 31 March 2001, the adjustment of »1,296 million (2000 --- »1,377 million) reconciling ordinary shareholders’ equity under
UK GAAP to the amount under US GAAP included the tax e¡ect of other US GAAP adjustments. This comprised an adjustment
increasing non-current assets by »26 million (2000 --- »25 million increase); an adjustment increasing current assets by »92 million
(2000 --- »63 million increase); an adjustment decreasing minority interests by »14 million (2000 --- »35 million decrease) and an
adjustment increasing long-term liabilities by »1,428 million (2000 --- »1,500 million increase).
BT Annual report and Form 20-F 125