BT 2001 Annual Report Download - page 74

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Accounting policies
74 BT Annual report and Form 20-F
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.
Vll Tangible fixed assets
Tangible ¢xed assets are stated at historical cost less depreciation.
(a) Cost
Cost in the case of network services includes contractors’ charges
and payments on account, materials, direct labour and directly
attributable overheads.
(b) Depreciation
Depreciation is provided on tangible ¢xed assets on a straight line
basis from the time they are available for use, so as to write o¡
their costs over their estimated useful lives taking into account
any expected residual values. No depreciation is provided on
freehold land.
The lives assigned to other signi¢cant tangible ¢xed assets are:
Freehold buildings – 40 years
Leasehold land and buildings – Unexpired portion of
lease or 40 years,
whichever is the
shorter
Transmission equipment:
duct – 25 years
cable – 3 to 25 years
radio and repeater equipment – 2 to 25 years
Exchange equipment – 2 to 13 years
Computers and office equipment – 2 to 6 years
Payphones, other network equipment,
motor vehicles and cableships – 2 to 20 years
VIII Fixed asset investments
Investments in subsidiary undertakings, associates and joint
ventures are stated in the balance sheet of the company at cost
less amounts written o¡. Amounts denominated in foreign
currency are translated into sterling at year-end exchange rates.
Investments in associates and joint ventures are stated in
the group balance sheet at the group’s share of their net assets,
together with any attributable unamortised goodwill on
acquisitions arising on or after 1 April 1998.
The group’s share of pro¢ts less losses of associates and
joint ventures is included in the group pro¢t and loss account.
Investments in other participating interests and other
investments are stated at cost less amounts written o¡.
IX Asset impairment
Intangible and tangible ¢xed assets are tested for impairment
when an event that might a¡ect asset values has occurred.
An impairment loss is recognised to the extent that the
carrying amount cannot be recovered either by selling the
asset or by the discounted future earnings from operating the
assets.
X Stocks
Stocks mainly comprise items of equipment, held for sale or
rental, consumable items and work in progress on long-term
contracts.
Equipment held and consumable items are stated at the
lower of cost and estimated net realisable value, after
provisions for obsolescence.
Work in progress on long-term contracts is stated at cost,
after deducting payments on account, less provisions for any
foreseeable losses.
XI Debtors
Debtors are stated in the balance sheet at estimated net
realisable value. Net realisable value is the invoiced amount
less provisions for bad and doubtful debtors. Provisions are
made speci¢cally against debtors where there is evidence of a
dispute or an inability to pay. An additional provision is made
based on an analysis of balances by age, previous losses
experienced and general economic conditions.
XII Redundancy costs
Redundancy costs arising from periodic reviews of sta¡ levels
are charged against pro¢t in the year in which employees agree
to leave the group.
If the most recent actuarial valuation of the group’s
pension scheme shows a de¢cit, which exceeds the amount of
provision for pension liabilities in the balance sheet, the
estimated cost of providing incremental pension bene¢ts in
respect of employees leaving the group is charged against
pro¢t in the year in which the employees agree to leave the
group, within redundancy charges.
XIII Pension scheme
The group operates a funded de¢ned bene¢t pension scheme,
which is independent of the group’s ¢nances, for the
substantial majority of its employees. Actuarial valuations of