BT 2002 Annual Report Download - page 113

28. Reconciliation of movement in shareholders' funds continued
a
On 19 November 2001, BT Group plc became the parent company of the group. As described in note 1, this transaction has been accounted for using the
principles of merger accounting. These require the restatement of the opening capital balances to re¯ect the new parent company structure.
b
Aggregate goodwill at 31 March 2002 in respect of acquisitions completed prior to 1 April 1998 of £1,254 million (2001 ± £1,383 million,
2000 ± £1,383 million) has been written off against retained earnings in accordance with the group's accounting policy. The goodwill written off against
retained earnings will be charged in the pro®t and loss account on the subsequent disposal of the business to which it related.
c
During the year ended 31 March 2002 the company issued shares at a market value of £154 million (2001 ± £400 million) in respect of the exercise of options
awarded under its principal savings-related share option scheme. Employees paid £84 million (2001 ± £145 million) to the group for the issue of these shares
and the balance of £70 million (2001 ± £255 million) comprised contributions to the qualifying employee share ownership trust from group undertakings. The
movement relating to BT's Employee Share Ownership Trust in 2001 included the writedown of shares held in trust.
d
The cumulative foreign currency translation adjustment, which increased retained earnings at 31 March 2002, was £217 million (2001 ± £278 million increase,
2000 ± £151 million decrease).
e
The group's rights issue closed on 15 June 2001, when British Telecommunications plc was the parent company of the group. A total of 1,976 million ordinary
shares of 25p each was issued at 300p per share in a 3 for 10 rights issue. Of the total of £5,876 million raised, net of £52 million expenses, £494 million was
credited to share capital and £5,382 million to the share premium account of British Telecommunications plc. Following the introduction of BT Group plc as
the parent company of the group, the increase in consolidated share capital has been restated to re¯ect the nominal value of BT Group plc shares and the
balance has been credited to other reserves.
f
In connection with outstanding share options at the date of demerger, 57 million British Telecommunications plc ordinary shares were issued on 14 November
2001 to a special purpose trust. Of the consideration of £173 million, £159 million was credited to the share premium account of British Telecommunications
plc. Following the introduction of BT Group plc as the parent company of the group, the increase in consolidated share capital has been restated to re¯ect the
nominal value of BT Group plc shares and the balance has been credited to other reserves.
g
The demerger distribution of £19,490 million represents the net assets of mmO2, including purchased goodwill, as at the date of the demerger. See also the
note on the face of the group pro®t and loss account for the year ended 31 March 2002.
h
Following the approval of the Court, the nominal value of BT Group shares was reduced from 115p per share to 5p per share on 21 November 2001 by way of
a reduction of capital under section 135 of the Companies Act 1985. The surplus of £9,537 million arising from this reduction has been credited to group pro®t
and loss reserve.
29. Related party transactions
Under the terms of the demerger, BT Group and mmO2 have, through arm's length negotiations, entered into a number of
agreements to de®ne the continuing relationships between the groups. These agreements include trading agreements (for
IT, telecommunications, network, ®eld operation and maintenance services, PMP (point to multi-point) frequency usage and
technical services) and shared services agreements (for administrative services, site sharing and occupancy licences).
Since the demerger, BT Group has charged £235 million and has incurred charges of £245 million from mmO2 in
respect of services described above. As at 31 March 2002, BT Group owed £89 million to and was owed £126 million by
mmO2.
In the year ended 31 March 2002, the group's turnover with Concert amounted to £843 million (2001 ± £804 million)
and it purchased £574 million (2001 ± £612 million) in services and products from Concert. In addition, the group provided
certain support services to Concert, including the secondment of staff, which totalled £135 million (2001 ± £168 million) and
is shown as other operating income. Interest for the year of £24 million (2001 ± £41 million) was receivable on long-term
debt due from Concert at a rate of 5.6%. The amount of debt outstanding at 31 March 2002 was £nil (2001 ± £651 million).
The maximum debt outstanding during the year was £651 million (2001 ± £674 million). As at the latest practicable date,
30 April 2002, the balance of the loan was £nil.
In the year ended 31 March 2002, the group's turnover with its other associates and joint ventures amounted to
£15 million (2001 ± £21 million, 2000 ± £64 million) and the group purchased £99 million (2001 ± £63 million,
2000 ± £nil) in services and products from these undertakings. Interest for the year of £1 million (2001 ± £81 million) was
receivable on debt due from these undertakings. Interest was charged on debt at a rate of 5.2%. The amount of debt
outstanding with these joint ventures, at 31 March 2002, was £22 million (2001 ± £73 million). The maximum debt
outstanding during the year was £73 million (2001 ± £3,332 million). As at the latest practicable date, 30 April 2002, the
amount of debt outstanding was £22 million.
Notes to the financial statements
112 BT Group Annual Report and Form 20-F 2002