BT 2010 Annual Report Download - page 89

87BT GROUP PLC ANNUAL REPORT & FORM 20-F
ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS REVIEW OF THE YEAR OVERVIEW
Accounting policies
(i) Basis of preparation and presentation of the
financial statements
Compliance with applicable law and IFRS
These consolidated financial statements have been prepared in
accordance with the Companies Act 2006, Article 4 of the IAS
Regulation and International Accounting Standards (IAS) and
International Financial Reporting Standards (IFRS) and related
interpretations, as adopted by the European Union. The
consolidated financial statements are also in compliance with IFRS
as issued by the International Accounting Standards Board.
Accounting convention
The consolidated financial statements have been prepared under
the historical cost convention, modified for the revaluation of
certain financial assets and liabilities at fair value.
Presentation of specific items
The group’s income statement and segmental analysis separately
identify trading results before significant one-off or unusual items
(termed ‘specific items’). This is consistent with the way that
financial performance is measured by management and reported
to the Board and the
Operating Committee and assists in
providing a meaningful analysis of the trading results of the group.
The directors believe that presentation of the group’s results in this
way is relevant to an understanding of the group’s financial
performance as specific items are significant one-off or unusual in
nature and have little predictive value. Furthermore, the group
considers a columnar presentation to be appropriate, as it improves
the clarity of the presentation and is consistent with the way that
financial performance is measured by management and reported to
the Board and the
Operating Committee . Specific items may not be
comparable to similarly titled measures used by other companies.
Items which have been considered to be significant one-off or
unusual in nature include disposals of businesses and investments,
business restructuring programmes, asset impairment charges,
property rationalisation programmes and the settlement of multiple
tax years in a single settlement. Specific items for the current and
prior years are disclosed in note 5.
Critical accounting estimates and key judgements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed on pages 93 and 94 in ‘Critical
accounting estimates and key judgements’.
Implementation of new accounting standards
With effect from 1 April 2009, the group adopted the amendment
to IFRS 2 ‘Share-based payment – Vesting Conditions and
Cancellations’, IFRS 8 ‘Operating Segments’, IAS 1 (Revised)
‘Presentation of Financial Statements’, IAS 23 (Revised) ‘Borrowing
costs’, minor amendments to a number of other accounting
standards and several new interpretations. The adoption of the
amendment to IFRS 2 and IAS 1 (Revised) has resulted in the
restatement of comparative information. Further details are
provided on pages 94 and 95.
Composition of the group
The group’s principal operating subsidiaries and associate are
detailed on page 149.
(ii) Basis of consolidation
The group financial statements consolidate the financial statements
of BT Group plc (‘the company’) and its subsidiaries, and they
incorporate its share of the results of joint ventures and associates
using the equity method of accounting.
A subsidiary is an entity that is controlled by another entity,
known as the parent. Control is the power to govern the financial
and operating policies of an entity so as to obtain benefits from
its activities.
A joint venture is an entity that is jointly controlled by two or
more entities. Joint control is the contractually agreed sharing of
control over an economic activity, and exists only when the
strategic financial and operating decisions relating to the activity
require the unanimous consent of the parties sharing control.
An associate is an entity over which another entity has significant
influence and that is neither a subsidiary nor an interest in a joint
venture. Significant influence is the power to participate in the
financial and operating policy decisions of an entity but is not
control or joint control over those policies.
The results of subsidiaries acquired or disposed of during the
year are consolidated from and up to the date of change of control.
Where necessary, adjustments are made to the financial statements
of subsidiaries, associates and joint ventures to bring the
accounting policies used in line with those used by the group. All
intra group transactions, balances, income and expenses are
eliminated on consolidation.
Investments in associates and joint ventures are initially
recognised at cost. Subsequent to acquisition, the carrying value of
the group’s investment in associates and joint ventures includes the
group’s share of post acquisition reserves, less any impairment in
the value of individual assets. The income statement reflects the
group’s share of the results of operations after tax of the associate
or joint venture.
(iii) Revenue
Revenue represents the fair value of the consideration received or
receivable for communication services and equipment sales, net of
discounts and sales taxes. Revenue from the rendering of services
and sale of equipment is recognised when it is probable that the
economic benefits associated with a transaction will flow to the
group and the amount of revenue and associated costs can be
measured reliably. Where the group acts as an agent in a
transaction, it recognises revenue net of directly attributable costs.
Services
Revenue arising from separable installation and connection services
is recognised when it is earned, upon activation. Revenue from the
rental of analogue and digital lines and private circuits is recognised
evenly over the period to which the charges relate. Revenue from
calls is recognised at the time the call is made over the group’s
network.
Subscription fees, consisting primarily of monthly charges for
access to broadband and other internet access or voice services,
are recognised as revenue as the service is provided. Revenue
arising from the interconnection of voice and data traffic between
other telecommunications operators is recognised at the time of
transit across the group’s network.
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS