BT 2015 Annual Report Download - page 152

150 BT Group plc
Annual Report 2015
Pension obligations
BT has a commitment, mainly through the BTPS, to pay pension
benefits to approiatel 000 people over a period of ore than
0ears. he accountin cost of these benefits and the present value
of our pension liabilities depend on such factors as the life expectancy
of the members, the salary progression of our current employees, price
ination and the discount rate used to calculate the net present value of
the future pension payments. We use estimates for all of these factors in
deterinin the pension costs and liabilities incorporated in our financial
stateents. he assuptions reect historical eperience and our
judgement regarding future expectations.
The value of the net pension obligation at 31 March 2015, the key
financial assuptions used to easure the obliation the sensitivit
of the IAS 19 pension liability at 31 March 2015, and of the income
stateent operatin chare in 011 to chanes in these
assumptions are disclosed in note 19.
Useful lives for property, plant and equipment and software
The plant and equipment in our networks is long lived with cables and
switching equipment operating for over ten years and underground
ducts being used for decades. We also develop software for use in IT
systems and platforms that supports the products and services provided
to our customers and that is also used within the group.
The annual depreciation and amortisation charge is sensitive to the
estimated service lives allocated to each type of asset. Asset lives are
assessed annuall and chaned when necessar to reect current
thinking on the remaining lives in light of technological change, network
investent plans includin the roups fibre rollout prorae
prospective economic utilisation and physical condition of the assets
concerned. Changes to the service lives of assets implemented from
1 pril 01 had no sinificant ipact in areate on the results for
the year ended 31 March 2015.
The carrying values of software and property, plant and equipment are
disclosed in notes 12 and 13. The useful lives applied to the principal
categories of assets are disclosed on page 152.
Provisions and contingent liabilities
As disclosed in note 18, the group’s provisions principally relate
to obligations arising from property rationalisation programmes,
restructuring programmes, claims, litigation and regulatory risks.
Under our propert rationalisation proraes we have identified a
nuber of surplus properties. lthouh eorts are bein ade to
sub-let this space, this is not always possible. Estimates have been made
of the cost of vacant possession and of any shortfall arising from any
sub-lease income being lower than the lease costs. Any such shortfall
is recognised as a provision.
In respect of claims, litigation and regulatory risks, the group provides
for anticipated costs where an outow of resources is considered
probable and a reasonable estimate can be made of the likely outcome.
The prices at which certain services are charged are regulated and may
be subject to retrospective adjustment by regulators. Estimates are
used in assessing the likely value of the regulatory risk. For all risks,
the ultimate liability may vary from the amounts provided and will be
dependent upon the eventual outcome of any settlement.
Management exercise judgement in measuring the exposures to
continent liabilities see note 9 throuh assessin the lielihood
that a potential claim or liability will arise and in quantifying the
possible rane of financial outcoes.
Current and deferred income tax
he actual ta we pa on our profits is deterined accordin to cople
ta laws and reulations. here the eect of these laws and reulations
is unclear, we use estimates in determining the liability for the tax to be
paid on our past profits which we reconise in our financial stateents.
We believe the estimates, assumptions and judgements are reasonable
but this can involve complex issues which may take a number of years
to resolve. he final deterination of prior ear ta liabilities could be
dierent fro the estiates reected in the financial stateents and
may result in the recognition of an additional tax expense or tax credit
in the income statement.
Deferred tax assets and liabilities require management judgement
in determining the amounts to be recognised. The group uses
management’s expectations of future revenue growth, operating costs,
and profit arins to deterine the etent to which future taable
profits will be enerated aainst which to consue the deferred ta
assets.
The value of the group’s income tax assets and liabilities is disclosed
on the balance sheet on page 146. The carrying value of the group’s
deferred tax assets and liabilities is disclosed in note 9.
Goodwill
he recoverable aount of cash eneratin units Us has been
determined based on value-in-use calculations. These calculations
require the use of estimates, including management’s expectations of
future revenue rowth operatin costs profit arins and operatin
cash ows for each U.
The carrying value of goodwill and the key assumptions used in
performing the annual impairment assessment are disclosed in note 12.
Providing for doubtful debts
BT provides services to consumer and business customers, mainly
on credit terms. We know that certain debts due to us will not be
paid through the default of a small number of our customers.
Estimates, based on our historical experience, are used in determining
the level of debts that we believe will not be collected. These estimates
include such factors as the current state of the economy and particular
industry issues.
The value of the provision for doubtful debts is disclosed in note 16.
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he sinificant accountin policies applied in preparation of these
consolidated financial stateents are set out below. hese policies
have been consistently applied to all the years presented, unless
otherwise stated.
Revenue
Revenue represents the fair value of the consideration received or
receivable for communications services and equipment sales, net of
discounts and sales taxes. Revenue is recognised when it is probable
that the econoic benefits associated with a transaction will ow
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.
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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 on
a straight-line basis over the period to which it relates. 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 from the interconnection of
voice and data trac between other telecounications operators is
recognised at the time of transit across the group’s network.
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Revenue from the sale of equipment is recognised when all the
sinificant riss and rewards of ownership are transferred to the
customer, which is normally the date the equipment is delivered and
accepted by the customer.
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continued