BT 2007 Annual Report Download - page 142

35. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES continued
(V) INCOME STATEMENT IN US GAAP FORMAT
The group income statements on page 86 comply with IFRS and the directors believe they are in the most appropriate format for
shareholders to understand the results of our business. We believe that it is important to show our results before deducting specific
items because these predominantly relate to items which are significant, one-off or unusual in nature. For SEC reporting purposes
this presentation may be considered ‘non GAAP’ and therefore the group has also prepared the following income statement. The
numbers disclosed in the following income statement are prepared under IFRS.
2007
£m
2006
£m
2005
£m
Revenue 20,223 19,514 18,429
Operating expenses:
Payroll costs 4,505 4,066 3,832
Depreciation and amortisation 2,920 2,884 2,844
Payments to telecommunication operators 4,162 4,045 3,725
Other operating expenses 6,328 6,251 5,587
Total operating expenses 17,915 17,246 15,988
Net operating income 2,308 2,268 2,441
Other income, net 255 228 551
Net interest expense (94) (472) (599)
Income taxes 368 (492) (525)
Equity in earnings (losses) of investees 15 16 (39)
Minority interests (2) (1) 1
Net income 2,850 1,547 1,830
Earnings per share – basic 34.4p 18.4p 21.5p
Earnings per share – diluted 33.6p 18.1p 21.3p
(VI) ADDITIONAL US GAAP INFORMATION
Intangible asset amortisation
The total amortisation charge expected under US GAAP in 2008 is £589 million. As a consequence of the pattern of amortisation
applied this annual charge will decrease in each of the following four years to be approximately £53 million for the year ended
31 March 2012.
US GAAP Developments
In February 2006, the FASB issued SFAS No 155, ‘Accounting for Certain Hybrid Instruments – an amendment to FASB statements
No 133 and 140’ (‘‘FAS 155’’), that amends SFAS No 133 ‘Accounting for derivative Instruments and hedging activities’ (‘‘FAS 133’’)
and SFAS 140, ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities’ (‘‘FAS 140’’). This
statement resolves issues addressed in FAS 133 Implementation Issue No. D1, ‘Application of Statement 133 to Beneficial Interests
in Securitised Financial Assets’. The statement permits fair value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation. Additionally it clarifies which interest-only strips and principal-only
strips are not subject to the requirements of FAS 133. FAS 155 also establishes a requirement to evaluate interests in securitised
financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an
embedded derivative requiring bifurcation. It clarifies that concentrations of credit risk in the form of subordination are not
embedded derivatives. Also FAS 155 amends FAS 140 to eliminate the prohibition on a qualifying special purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.
FAS 155 is effective for BT for all financial instruments acquired or issued after 31 March 2007. The group does not expect this to
have a material impact on the financial statements.
In March 2006 the FASB issued SFAS No 156, ‘Accounting for Servicing of Financial Assets: an amendment of FASB No 140’
(‘‘FAS 156’’) that amends SFAS No 140 ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities’
with respect to the accounting for separately recognised servicing assets and servicing liabilities. FAS 156 is effective for BT from 1
April 2007. The group does not anticipate that the adoption of this new statement at the required effective date will have a
significant effect on its results of operations, financial position or cash flows.
BT Group plc Annual Report & Form 20-F 141
Financial statements