BT 2007 Annual Report Download - page 127

31. SHARE BASED PAYMENTS continued
Therefore in order to comply with the Undertakings, during the 2007 financial year BT offered a cash alternative to 102 Openreach
employees holding BT share options and awards in the 2004 and 2005 ISP and the 2004 GSOP. The cash alternative is payable to
the employees at the time the options and awards would normally vest and remains subject to the employees continuing in
employment throughout the vesting period. Those employees who declined the cash alternative will continue to be entitled to
exercise their awards in accordance with the original vesting timetable. The impact of this modification did not have a significant
impact on the consolidated financial statements. New arrangements were also introduced for Openreach employees during the 2007
financial year whereby long term incentive arrangements are linked to Openreach targets and will be paid in cash instead of shares
and hence are neither equity settled or cash settled share based payment arrangements.
32. AUDIT AND NON AUDIT SERVICES
The following fees for audit and non audit services were paid or are payable to the company’s auditor, PricewaterhouseCoopers LLP,
for the three years ended 31 March 2007.
2007 2006 2005
£’000 £’000 £’000
Audit services
Fees payable to the company’s auditor for the audit of the parent company and consolidated
financial statements 3,100 1,927 1,785
Non audit services
Fees payable to the company’s auditor and its associates for other services:
– The audit of the company’s subsidiaries pursuant to legislation 3,518 3,286 2,363
– Other services pursuant to legislation 1,212 1,361 1,487
– Tax services 763 1,775 2,912
– Services relating to corporate finance transactions 748 317 989
– All other services 23 556 480
9,364 9,222 10,016
The audit fee of the company was £38,600 (2006: £37,700, 2005: £35,000).
In order to maintain the independence of the external auditors, the Board has determined policies as to what non audit services
can be provided by the company’s external auditors and the approval processes related to them. Under those policies work of a
consultancy nature will not be offered to the external auditors unless there are clear efficiencies and value added benefits to the
company. All non audit services are approved by the Audit Committee.
‘Audit services’ represents fees payable for services in relation to the audit of the parent company and the consolidated financial
statements and also includes fees for reports under section 404 of the Sarbanes-Oxley Act of 2002 which is required for the first
time for the year ended 31 March 2007.
‘Other services pursuant to legislation’ represents fees payable for services in relation to other statutory filings or engagements
that are required to be carried out by the company’s auditor. In particular, this includes fees for audit reports issued on the group’s
regulatory financial statements.
‘Tax services’ represents fees payable for tax compliance and advisory services.
‘Services relating to corporate finance transactions’ represent fees payable in relation to due diligence work completed on
acquisitions.
‘All other services’ represents fees payable for non-regulatory reporting on internal controls and other advice on accounting
matters.
33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The group adopted IAS 32, ‘Financial Instruments: Disclosure and Presentation’ and IAS 39, ‘Financial Instruments: Recognition and
Measurement’ with effect from 1 April 2005. Financial information was previously prepared under UK GAAP for the financial year
ended 31 March 2005. Where applicable, information for the comparative period has been separately disclosed below in order to
comply with the previous requirements of UK GAAP.
The group issues or holds financial instruments mainly to finance its operations; for the temporary investment of short-term
funds; and to manage the currency and interest rate risks arising from its operations and from its sources of finance. In addition,
various financial instruments, for example trade receivables and trade payables, arise directly from the group’s operations.
The group finances its operations primarily by a mixture of issued share capital, retained profits, deferred taxation, long-term
loans and short-term loans, principally by issuing commercial paper supported by committed borrowing facilities. The group borrows
in the major long-term debt markets in major currencies. Typically, but not exclusively, the bond markets provide the most cost-
effective means of long-term borrowing. The group uses derivative financial instruments primarily to manage its exposure to market
risks from changes in interest and foreign exchange rates against these borrowings. The derivatives used for this purpose are
principally interest rate swaps, cross currency swaps and forward currency contracts.
The group also uses financial instruments to hedge some of its currency exposures arising from its overseas short-term investment
funds and other non-UK assets, liabilities and forward purchase commitments. The financial instruments used comprise borrowings in
foreign currencies and forward currency contracts.
Consolidated financial statements Notes to the consolidated financial statements
126 BT Group plc Annual Report & Form 20-F