BT 2002 Annual Report Download - page 74

Accounting policies
VllI Tangible ®xed 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 off 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 of®ce equipment ± 2 to 6 years
Payphones, other network equipment,
motor vehicles and cableships ± 2 to 20 years
IX 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 off. 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 off.
X Asset impairment
Intangible and tangible ®xed assets are tested for
impairment when an event that might affect asset values
has occurred. Goodwill is also reviewed for impairment at
the end of the ®rst ®nancial year after acquisition.
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 cash ¯ows from operating
the assets.
XI 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.
XII 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.
XIII Redundancy costs
Redundancy or leaver costs arising from periodic reviews of
staff levels are charged against pro®t in the year in which
the group is demonstrably committed to the employees
leaving the group.
If the estimated cost of providing incremental pension
bene®ts in respect of employees leaving the group exceeds
the total accounting surplus based on the latest actuarial
valuation of the group's pension scheme and the amount of
the provision for pension liabilities on the balance sheet,
then the excess estimated costs are charged against pro®t
in the year in which the employees agree to leave the group,
within redundancy or leaver costs.
XIV Pension schemes
The group operates funded de®ned bene®t pension
schemes, which are independent of the group's ®nances,
for the substantial majority of its employees. Actuarial
valuations of the main scheme are carried out as
determined by the trustees at intervals of not more than
three years, the rates of contribution payable and the
pension cost being determined on the advice of the
actuaries, having regard to the results of these valuations. In
any intervening years, the actuaries review the continuing
appropriateness of the contribution rates.
The cost of providing pensions is charged against
pro®ts over employees' working lives with the group using
the projected unit method. Variations from this regular cost
are allocated on a straight-line basis over the average
remaining service lives of current employees to the extent
that these variations do not relate to the estimated cost
of providing incremental pension bene®ts in the
circumstances described in XIII above.
Interest is accounted for on the provision in the balance
sheet which results from differences between amounts
recognised as pension costs and amounts funded. The
regular pension cost, variations from the regular pension
BT Group Annual Report and Form 20-F 2002 73