BT 2007 Annual Report Download - page 86

Income tax
The actual tax we pay on our profits is determined according to
complex tax laws and regulations. Where the effect of these
laws and regulations is unclear, we use estimates in determining
the liability for the tax to be paid on our past profits which we
recognise in our financial statements. We believe the estimates,
assumptions and judgements are reasonable but this can involve
complex issues which may take a number of years to resolve.
The final determination of prior year tax liabilities could be
different from the estimates reflected in the financial
statements.
Determination of fair values
Certain financial instruments such as investments, derivative
financial instruments and certain elements of loans and
borrowings, are carried on the balance sheet at fair value, with
changes in fair value reflected in the income statement. Fair
values are estimated by reference in part to published price
quotations and in part by using valuation techniques.
ACCOUNTING STANDARDS, INTERPRETATIONS AND
AMENDMENTS TO PUBLISHED STANDARDS ADOPTED
IN THE YEAR ENDED 31 MARCH 2007
During the year the following standards which are relevant to
the group’s operations became effective and were adopted:
rAmendment to IAS 21, ‘Net Investment in a Foreign
Operation’
rAmendment to IAS 39 and IFRS 4, ‘Financial Guarantee
Contracts’
rAmendment to IAS 39, ‘Cash Flow Hedge Accounting of
Forecast Intragroup Transactions’
rAmendment to IAS 39, ‘The Fair Value Option’
rIFRIC 4, ‘Determining whether an arrangement contains
a lease’
rIFRIC 6, ‘Liabilities arising from Participating in a Specific
Market – Waste Electrical and Electronic Equipment’
The adoption of these standards has not had a significant
impact on the group’s financial statements in the year.
ACCOUNTING STANDARDS, INTERPRETATION AND
AMENDMENTS TO PUBLISHED STANDARDS NOT YET
EFFECTIVE
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for
the group’s accounting periods beginning on or after 1 April
2007 or later periods, but which the group has not early
adopted. The new standards which are relevant to the group’s
operations are as follows:
IFRS 7, ‘Financial Instruments: Disclosures’ (effective
from 1 April 2007) and amendment to IAS 1
‘Presentation of Financial Statements – Capital
Disclosures’ (effective from 1 April 2007)
IFRS 7 introduces new disclosures of qualitative and quantitative
information about exposure to risks arising from financial
instruments including specified minimum disclosures about credit
risk, liquidity risk and market risk, including sensitivity analysis to
market risk. The amendment to IAS 1 introduces disclosures
about the level of an entity’s capital and how it manages
capital. Management is currently assessing the disclosure impact
of IFRS 7 and the amendment to IAS 1 on the group’s financial
statements.
IFRS 8, ‘Operating Segments’ (effective from 1 April
2009)
IFRS 8 requires the identification of operating segments based
on internal reporting to the chief operating decision maker and
extends the scope and disclosure requirements of IAS 14
‘Segmental Reporting’. The group is currently assessing the
impact of IFRS 8 on its segmental analysis disclosure.
Amendment to IAS 23, ‘Borrowing Costs’ (effective
from 1 April 2009)
The amendment to IAS 23 eliminates the option to expense
borrowing costs attributable to the acquisition, construction or
production of a qualifying asset as incurred. As a result, the
group will be required to capitalise such borrowing costs as part
of the cost of that asset. The group is currently assessing the
impact of the amendment upon the results and net assets of the
group.
IFRIC 8, ‘Scope of IFRS 2’ (effective from 1 April
2007)
IFRIC 8 clarifies that transactions within the scope of IFRS 2
‘Share Based Payment’ include those in which the entity cannot
specifically identify some or all of the goods and services
received. The group has assessed the impact of this
interpretation and has concluded it is not likely to have a
significant impact on the group’s financial statements.
IFRIC 9, ‘Reassessment of embedded derivatives’
(effective from 1 April 2007)
IFRIC 9 clarifies that an entity should assess whether an
embedded derivative is required to be separated from the host
contract and accounted for as a derivative when the entity first
becomes a party to the contract. Subsequent reassessment is
prohibited unless there is a change in the contract terms, in
which case it is required. The group has assessed the impact of
this interpretation and has concluded it is not likely to have a
significant impact on the group’s financial statements.
IFRIC 10, ‘Financial Reporting and Impairment’
(effective from 1 April 2007)
IFRIC 10 states that impairment losses recognised in interim
financial statements should not be reversed in subsequent
interim or full year financial statements. The group has assessed
the impact of this interpretation and has concluded it is not
likely to have a significant impact on the group’s financial
statements.
IFRIC 11, ‘IFRS 2 – Group and Treasury Share
Transactions’ (effective from 1 April 2007)
IFRIC 11 provides guidance on whether share based payment
arrangements involving group entities should be accounted for
as cash settled or equity settled. The group has assessed the
impact of this interpretation and has concluded it is not likely to
have a significant impact on the group’s financial statements.
IFRIC 12, ‘Service Concession Arrangements’ (effective
from 1 April 2008)
IFRIC 12 addresses the accounting by operators of public-private
service concession arrangements. The group has assessed the
impact of this interpretation and has concluded it is not likely to
have a significant impact on the group’s financial statements.
BT Group plc Annual Report & Form 20-F 85
Financial statements