BT 2007 Annual Report Download - page 137

35. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES continued
(i) Share-based payments
Under IFRS 2 ‘Share-Based Payment’, share options are fair valued at their grant date and the cost is charged to the income
statement over the relevant vesting periods.
The group adopted SFAS No. 123 (revised 2004) ‘Share-Based Payment’ with effect from 1 April 2005 using the modified
prospective transition method. Under FAS 123(R), share based payments to employees are required to be measured based on their
grant date fair value (with limited exceptions) and recognised over the related service period. For periods prior to 1 April 2005, the
group accounted for share-based payments under Accounting Principles Board Opinion No. 25 using the intrinsic value method. The
results for the prior periods have not been restated.
Under US GAAP the fair value of the Deferred Bonus Plan award is spread over the three year vesting period, but under IFRS the
fair value is spread over the performance period, which is four years.
For the 2007 financial year, the compensation expense for all types of share based payment arrangements was £91 million (2006:
£77 million).
At 31 March 2007 the group had approximately £106 million (2006: £121 million) of total unrecognised compensation expense
related to non vested share-based compensation arrangements, of which £51 million (2006: £86 million) relates to share option
schemes. The total expense is expected to be recognised over a weighted average period of 1.9 years (2006: 2.0 years), and 2.1
years (2006: 2.1 years) for share option schemes.
The tax benefit realised from share options exercised and share awards vested during the year was approximately £26 million
(2006: £9 million). Cash proceeds received from the exercise of share options during the year was £123 million (2006: £13 million).
(j) Goodwill
Under UK GAAP, the group wrote off goodwill arising from the purchase of subsidiary undertakings, associates and joint ventures on
acquisition prior to 1 April 1998, against retained earnings. Goodwill arising on acquisitions completed after 1 April 1998 was
capitalised and amortised on a straight line basis over its useful economic life. Following transition to IFRS, goodwill is no longer
amortised but tested annually for impairment and the amount of goodwill previously recorded at the transition date was carried
forward under IFRS.
Under US GAAP up to 31 March 2002, goodwill arising on the acquisition of subsidiaries, associates and joint ventures was
capitalised as an intangible asset and amortised over its useful life. BT adopted SFAS No. 142 ‘Goodwill and other intangible assets’
on 1 April 2002 and goodwill is no longer amortised but tested annually for impairment.
(k) Property rationalisation provision
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 ‘Accounting for costs associated with exit or disposal activities’, 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.
(l) Contingent consideration
Under IFRS contingent consideration in respect of acquisitions is recorded when the outcome of the contingency is considered more
likely than not. Under US GAAP the consideration is recorded when the contingent event has occurred.
(m) Termination benefits
Under US GAAP the fair value of termination benefits for employees who are to be retained beyond their minimum contractual
retention period is recognised on a straight line basis over the future service period. Under IFRS these costs are recognised when the
employees agree to leave the group.
Consolidated financial statements Notes to the consolidated financial statements
136 BT Group plc Annual Report & Form 20-F