BT 2003 Annual Report Download - page 135

VIII US GAAP developments
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143 ‘‘Accounting for Asset
Retirement Obligations’’ which is applicable to financial years commencing after 15 June 2002. SFAS No. 143
requires that the fair value of a liability for an asset retirement obligation be recognised in the period in which it is
incurred if it is possible to make a reasonable estimate of the fair value. The associated asset retirement costs are
required to be capitalised as part of the carrying value of the long lived asset. The adoption of SFAS No. 143 is
not expected to have a material impact on the consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, ‘‘Accounting for Costs Associated with Exit or Disposal
Activities’’ which is applicable to disposals initialised after 31 December 2002. The Statement requires costs
associated with exit or disposal activities to be recognised when the costs are incurred rather than at the date
of the commitment to an exit or disposal plan. Accordingly, we have reflected the impact of SFAS No. 146 in the
2003 financial year. SFAS No. 146 may apply to future activities which are not currently envisaged and
accordingly it is not possible to assess the impact of SFAS No. 146 on any such activities at this time.
In December 2002, the FASB issued SFAS No. 148, ‘‘Accounting for Stock Based Compensation – Transition
and Disclosure – an amendment of FASB Statement No. 123’’ which is applicable to financial years beginning
after 15 December 2002. The Statement permits two additional transition methods for an entity voluntarily
adopting fair value based accounting for stock based compensation. It also amends the disclosure requirements to
require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions
with respect to stock based employee compensation. This Statement does not have a significant impact on
the consolidated financial statements as SFAS No. 123 continues to be satisfied for disclosure purposes only.
In April 2003 the FASB issued SFAS No 149 ‘‘Amendment of Statement 133 on Derivative Instruments
and Hedging Activities’’. This Statement amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, ‘‘Accounting for Derivative Instruments and Hedging
Activities’’. BT is currently evaluating the impact of this change.
In November 2002, the FASB issued FASB Interpretation No. (FIN) 45, ‘‘Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others’’. FIN 45
requires that certain guarantees must be recognised at fair value. FIN 45 also requires disclosure of detailed
information about each guarantee or group of guarantees. The disclosure requirements are effective for financial
statements ending after 15 December 2002. The recognition and measurement provisions of FIN 45 are
applicable to guarantees issued or modified after 31 December 2002. FIN 45 could have an impact on the future
results of BT depending on guarantees issued; however, at this time the adoption of this statement did not have
a material impact on BT’s consolidated financial statements.
In January 2003, the FASB issued FIN 46, ‘‘Consolidation of Variable Interest Entities – an Interpretation
of Accounting Research Bulletin (ARB) No. 51’’. FIN 46 requires the primary beneficiary to consolidate a variable
interest entity (VIE) if it has a variable interest that will absorb a majority of the entity’s expected losses if they
occur, receive a majority of the entity’s expected residual returns if they occur, or both. FIN 46 applies
immediately to VIEs created after 31 January 2003, and to VIEs in which the entity obtains an interest after
that date. This statement is not expected to have a material impact on BT’s consolidated financial statements.
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on EITF 00-21, ‘‘Revenue
Arrangements with Multiple Deliverables’’. The consensus addresses how to account for arrangements that may
involve multiple revenue-generating activities, for example, the delivery or performance of multiple products,
services, and/or rights to use assets. In applying this guidance, separate contracts with the same party, entered
into at or near the same time, will be presumed to be a package, and the consideration will be measured and
allocated to the separate units based on their relative fair values. This consensus guidance will be applicable to
agreements entered into after 15 June 2003. BT is currently evaluating the impact of this new pronouncement.
In January 2003, the EITF reached a consensus on EITF 02-18, ‘‘Accounting for Subsequent Investments in
an Investee after Suspension of Equity Method Loss Recognition’’. This consensus states that if the additional
investment, in whole or in part, represents the funding of prior losses, the investor should recognise previously
suspended losses. When appropriate to recognise prior losses, the amount recognised would be limited to
the amount of the additional investment determined to represent the funding of prior losses. The consensus
is effective for additional investments made after 5 February 2003. This consensus is not expected to have
a material impact on BT’s consolidated financial statements.
United States Generally Accepted Accounting Principles
134 BT Annual Report and Form 20-F 2003