BT 2005 Annual Report Download - page 116

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i Differences between United Kingdom and United States generally accepted accounting principles continued
The following is a reconciliation from UK to US GAAP of BT’s deferred tax assets and liabilities net of related
valuation allowance.
2005 2004
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
£m £m £m £m
UK GAAP 106 2,280 113 2,304
Tax effect of US GAAP Adjustments:
Pension 1,566 – 1,714 –
Property 438 326 413 337
Financial instruments 111 – –14
Capitalised interest –53 –59
Other –––7
Rollover relief in respect of re-invested gains –56 –59
Deferred tax balances under US GAAP net of related valuation allowance 2,221 2,715 2,240 2,780
(k) Dividends
Under UK GAAP, dividends are recorded in the year in respect of which they are declared (in the case of interim or any
special dividends) or proposed by the board of directors to the shareholders (in the case of final dividends). Under
US GAAP, dividends are recorded in the period in which dividends are declared.
(l) Impairment
Under UK GAAP, if there is an indication of impairment the assets should be tested for impairment and, if necessary
written down to the value in use, calculated based on discounted future pre-tax cash flows related to the asset or the
income generating unit to which the asset belongs.
US GAAP requires that an entity assess whether impairment has occurred based on the undiscounted future cash
flows. An impairment loss exists if the sum of these cash flows is less than the carrying amount of the asset. The
impairment loss recognised in the income statement is based on the asset’s fair value, being either market value or the
sum of discounted future cash flows. Tangible assets that were not impaired under US GAAP are depreciated over their
remaining useful lives.
(m) 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.
(n) 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 recorded. 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. All these properties were
exited by 31 December 2004.
(o) Revenue
Under UK GAAP long-term contracts to design, build and operate software solutions are accounted for under SSAP 9
‘‘Stocks and long-term contracts’’ and FRS 5 ‘‘Reporting the substance of transactions’’, under which turnover is
recognised as earned over the contract period.
Under US GAAP revenue of £162 million under these contracts is deferred in the 2005 financial year under SOP 97-
2‘‘Software revenue recognition’’ and SAB 104, as vendor specific objective evidence to support the fair value of the
separate elements to be delivered is unavailable. There was no impact on net income. Total deferred revenue and costs
not recorded in UK GAAP at 31 March 2005 was £239 million (2004 – £77 million).
United States Generally Accepted Accounting Principles BT Group plc Annual Report and Form 20-F 2005 115