BT 2003 Annual Report Download - page 131

I Differences between United Kingdom and United States generally accepted accounting principles continued
(n) Discontinued operations
Under UK GAAP, the disposal of certain lines of business and joint ventures and associates are shown as
discontinued activities. Under US GAAP, only the disposals of lines of business under SFAS No. 144 would be
reported as discontinued operations.
(o) Directories in progress
Under UK GAAP, the cost of classified advertising directories in progress deferred in stock represents direct fixed
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 difference is included in goodwill.
(p) Disposals of businesses
There are timing differences between UK GAAP and US GAAP for recognition of gains on the sale of certain
businesses. Foreign exchange movements taken to reserves under UK GAAP are reported in the income
statement under US GAAP. Historical GAAP differences on disposed businesses are also shown under this
line item.
(q) Property rationalisation provision
Under UK GAAP in the 2003 financial year, a provision in connection with the rationalisation of the Group’s
London office property portfolio was recognised. Under US GAAP, in accordance with SFAS No 146, these costs
are not recognised until the group fully exits and therefore ceases to use the affected properties.
II Net income and shareholders’ equity reconciliation statements
The following statements summarise the material estimated adjustments, gross of their tax effect, which reconcile
net income and shareholders’ equity from that reported under UK GAAP to that which would have been reported
had US GAAP been applied.
Net income
Years ended 31 March
2003
£m
2002
£m
2001
£m
Net income (loss) applicable to shareholders under UK GAAP 2,686 995 (1,870)
Restatement for deferred tax under FRS 19 ––60
Net income (loss) applicable to shareholders under UK GAAP as previously reported 2,686 995 (1,810)
Adjustment for:
Sale and leaseback of properties (114) (1,178) –
Pension costs (177) (106) (42)
Redundancy charges –(140) (453)
Capitalisation of interest, net of related depreciation (17) 398 348
Goodwill (35) 11 (55)
Mobile licences, software and other intangible asset capitalisation and
amortisation, net (26) (32) (32)
Financial instruments 731 23 (133)
Deferred gain –313 (71)
Impairment (24) 147 –
Employee share plans (11) (8) (38)
Property rationalisation provision 147 ––
Directories in progress –– (82)
Disposals of businesses 130 254 –
Deferred taxation 976 (1,320) (64)
4,266 (643) (2,432)
Tax effect of US GAAP adjustments (132) (89) 75
Net income (loss) as adjusted for US GAAP 4,134 (732) (2,357)
Basic earnings (loss) per American Depositary Share as adjusted for US GAAP
a
£4.80 £(0.88) £(3.24)
Diluted earnings (loss) per American Depositary Share as adjusted for US GAAP
a
£4.77 £(0.88) £(3.24)
a
Each American Depositary Share is equivalent to ten ordinary shares.
In the 2003 financial year all the adjustments relate to continuing operations (2002 – £2,009 million
reduction, 2001 – £823 million reduction). Net income from continuing operations was £4,134 million
(2002 – £1,680 million loss, 2001 – £809 million).
The adjustments to net income relating to discontinued operations are £nil (2002 – £282 million,
2001 – £276 million).
United States Generally Accepted Accounting Principles
130 BT Annual Report and Form 20-F 2003