BT 2005 Annual Report Download - page 122

ix US GAAP developments continued
In September 2004, the EITF reached a consensus on EITF Issue No. 02-14 ‘Whether an Investor Should Apply the
Equity Method of Accounting to Investments Other Than Common Stock’, in which the Task Force reached the
consensus that an investor that has the ability to exercise significant influence over the operating and financial policies
of the investee should apply the equity method of accounting when it has an investment in common stock and/or an
investment that is in-substance common stock. The consensus of this EITF is to be applied in reporting periods
beginning after September 15, 2004. We do not believe the adoption of this standard will have a material impact on
our financial position, results of operations or cash flows.
In October 2004, the EITF reached a consensus on Issue No. 04-1 ‘Accounting for Pre-existing Relationships
between the Parties to a Business Combination’ (EITF 04-1). EITF 04-1 addresses the accounting treatment of
pre-existing relationships between the parties of a business combination. The consensus of EITF 04-1 should be applied
to business combinations consummated and goodwill impairment tests performed in reporting periods beginning after
the FASB ratified the consensus at its October 13, 2004 meeting. The group will adopt the provisions of EITF 04-1 as
of April 1, 2005. If it is determined that assets of an acquired entity are related to a pre-existing contractual
relationship, thus requiring accounting separate from the business combination, BT will evaluate whether the acquiring
entity of the group should recognise contractual relationships as assets separate from goodwill in that business
combination.
In March 2004, the EITF reached a consensus on EITF Issue No. 03-1, ‘The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments’ (EITF 03-1). The guidance prescribed a three-step model for
determining whether an investment is other-than-temporarily impaired and requires disclosure for unrealized losses on
investments. In September 2004, the FASB issued FASB Staff Position EITF 03-1-1 ‘Effective Date of Paragraphs 10-20
of EITF Issue No. 03-1’ (FSP EITF 03-1-1). FSP EITF 03-1-1 delays the effective date for the measurement and
recognition guidance contained in paragraphs 10-20 of EITF 03-1. The disclosure requirements of EITF 03-1 remain
effective for fiscal years ending after June 15, 2004. No effective date for the measurement and recognition guidance
has been established in FSP EITF 03-1-1. During the period of delay, FSP EITF 03-1-1 states that companies should
continue to apply current guidance to determine if an impairment is other-than-temporary. The adoption of EITF 03-1,
excluding paragraphs 10-20, did not impact the group’s consolidated position, results of operations or cash flows. The
group will assess the impact of paragraphs 10-20 of EITF 03-1 once the guidance has been finalised.
x Supplemental unaudited pro forma information relating to businesses acquired during the year ended
31 March 2005
The following US GAAP pro forma information summarises the results of operations for the years indicated as if the
Infonet and Albacom acquisitions had been completed as of the beginning of the years presented. The pro forma
amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions had
occurred as of the beginning of the years presented or that may be obtained in the future.
2005
£m
2004
£m
Turnover 19,069 19,262
Profit for the financial year 1,187 698
Earnings per share 13.9p 8.1p
United States Generally Accepted Accounting Principles BT Group plc Annual Report and Form 20-F 2005 121