BT 2007 Annual Report Download - page 98

4. SPECIFIC ITEMS
The group separately identifies and discloses significant one-off or unusual items (termed ‘specific items’). This is consistent with the
way that financial performance is measured by management and we believe assists in providing a meaningful analysis of the trading
results of the group. A definition of specific items is provided in the accounting policies section on page 78.
2007 2006 2005
£m £m £m
Other operating income
Net loss on sale of group undertakingsa(5) ––
Profit on sale of non current asset investmentsb2– 358
(3) – 358
Operating costs
Property rationalisation costsc(64) (68) (59)
Creation of Openreachd(30) (70) –
Write off of circuit inventory and other working capital balancese(65) ––
Costs associated with settlement of open tax yearsf(10) ––
(169) (138) (59)
Finance income
Interest on settlement of open tax yearsf139 ––
Share of results of associates and joint ventures
Impairment of assets in joint venturesg–– (25)
Profit on disposal of associates and joint venturesh22 1–
Net specific items (charge) credit before tax (11) (137) 274
Tax credit in respect of settlement of open tax yearsf938 ––
Tax credit on specific items 41 41 16
Net specific items credit (charge) after tax 968 (96) 290
aIn the current year the group disposed of some non-core businesses. The loss on disposal relates primarily to the disposal of the group’s satellite broadcast service assets (£7 million).
bIn the current year the group disposed of some non-core investments, resulting in a profit of £2 million. In the 2005 financial year the group recognised a profit on disposal of £358 million
comprising £236 million from the sale of the group’s 15.8% interest in Eutelsat SA, £46 million from sale of the 4% interest in Intelsat, £38 million from the sale of the 11.9% interest in Starhub Pte
Ltd and other gains of £38 million.
cIn the current year £64 million (2006: £68 million, 2005: £59 million) of property rationalisation charges were recognised in relation to the group’s provincial office portfolio.
dIn the current year a provision of £30 million (2006: £70 million, 2005: £nil) was recognised for the estimated incremental and directly attributable costs arising from the group’s obligation to set up
Openreach and meet the requirements of the Undertakings.
eIn the current year the group recorded a charge of £65 million as a result of a review of circuit inventory and other working capital balances arising before 31 March 2006.
fIn the current year, the group agreed settlement of substantially all open UK tax matters relating to the ten tax years up to and including 2004/05 with HM Revenue and Customs. Specific items
therefore include a net credit of £1,067 million, which represents those elements of the tax charges previously recognised that were in excess of the final agreed liability of £938 million; interest
income of £139 million on the repayment; and operating costs of £10 million, representing the costs associated with reaching the agreement.
gIn the 2005 financial year the group incurred an impairment charge of £25 million representing its share of a write down of Albacom’s assets prior to Albacom becoming a subsidiary.
hIn the current year the group disposed of 6% of its equity interest in Tech Mahindra Limited, an associated undertaking. The resulting profit on disposal was £22 million. The group’s shareholding at
31 March 2007 was 35%.
5. FINANCE INCOME AND FINANCE EXPENSE
2007 2006 2005a
£m £m £m
Finance expense
Interest on listed bonds, debentures and notesb623 831 963
Interest on finance leases 44 62 68
Interest on other borrowings 58 20 19
Unwinding of discount on provisions 333
Net charge on financial instruments in a fair value hedgec–––
Net foreign exchange on items in hedging relationshipsd–––
Fair value movements on derivatives not in a designated hedge relationship 48–
Interest on pension scheme liabilities 1,872 1,816 1,720
Total finance expense 2,604 2,740 2,773
aThe group adopted IAS 32 and IAS 39 from 1 April 2005. For the 2005 financial year the group’s previous accounting policies have therefore been applied in calculating the recognition and
measurement basis for finance expense (see accounting policies).
bIncludes a net charge of £67 million (2006: £41 million) relating to fair value movements on derivatives recycled from the cash flow reserve.
cIncludes a net credit of £70 million (2006: net charge of £71 million) relating to fair value movements arising on hedged items and a net charge of £70 million (2006: net credit of £71 million)
relating to fair value movements arising on derivatives designated as fair value hedges.
dIncludes a net credit of £420 million (2006: net charge of £330 million) relating to foreign exchange movements on hedged loans and borrowings and a net charge of £420 million (2006: net credit
of £330 million) relating to fair value movements on derivatives recycled from the cash flow reserve.
BT Group plc Annual Report & Form 20-F 97
Financial statements