BT 2015 Annual Report Download - page 154

152 BT Group plc
Annual Report 2015
The lives assigned to principal categories of assets are as follows:
Land and buildings
– Freehold buildings 40 years
– Leasehold land and buildings Unexpired portion of lease or
40 years, whichever is the shorter
Network infrastructure
Transmission equipment
– Duct 40 years
– Cable 3 to 25 years
– Fibre 5 to 20 years
Exchange equipment 2 to 13 years
Other network equipment 2 to 20 years
Other assets
– Motor vehicles 2 to 9 years
– oputers and oce euipent  to  ears
ssets held under finance leases are depreciated over the shorter of
the lease term or their useful economic life. Residual values and
useful lives are reassessed annually and, if necessary, changes are
recognised prospectively.
Intangible assets
dentifiable intanible assets are reconised when the roup controls
the asset it is probable that future econoic benefits attributable to
the asset will ow to the roup and the cost of the asset can be reliabl
measured. All intangible assets, other than goodwill, are amortised
over their useful econoic life. he ethod of aortisation reects the
pattern in which the assets are expected to be consumed. If the pattern
cannot be determined reliably, the straight line method is used.
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Goodwill represents the excess of the cost of an acquisition over the
fair value of the roups share of the identifiable net assets includin
intangible assets) of the acquired business.
For the purpose of impairment testing, goodwill acquired in a business
cobination is allocated to each of the Us that is epected to benefit
from the business combination. Each CGU to which goodwill is allocated
represents the lowest level within the group at which the goodwill is
monitored for internal management purposes.
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Computer software comprises computer software licences purchased
from third parties, and also the cost of internally developed software.
Computer software licences purchased from third parties are initially
recorded at cost.
Costs directly associated with the production of internally developed
software, including direct and indirect labour costs of development,
are capitalised only where it is probable that the software will generate
future econoic benefits the cost of the asset can be reliabl easured
and technical feasibility can be demonstrated, in which case it is
capitalised as an intangible asset on the balance sheet. Costs which do
not meet these criteria and research costs are expensed as incurred.
The group’s development costs which give rise to internally developed
software include upgrading the network architecture or functionality
and developin service platfors aied at oerin new services to
the group’s customers.
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Licence fees paid to governments, which permit telecommunications
activities to be operated for defined periods are initiall recorded at cost
and amortised from the time the network is available for use to the end
of the licence period.
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Intangible assets such as customer relationships or brands acquired
through business combinations are recorded at fair value at the date of
acquisition. Assumptions are used in estimating the fair values of these
relationships or brands and include management’s estimates of revenue
and profits to be enerated b the.
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The estimated useful economic lives assigned to the principal categories
of intangible assets are as follows:
– Computer software 2 to 10 years
– Telecommunications licences 2 to 20 years
– Customer relationships and brands 5 to 15 years
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Programme rights are recognised on the balance sheet from the point at
which the legally enforceable licence period begins. Rights for which the
licence period has not started are disclosed as contractual commitments
in note 29. Payments made to receive commissioned or acquired
programming in advance of the legal right to broadcast the programmes
are classified as prepaents.
Programme rights are initially recognised at cost and are amortised from
the point at which they are available for use, on a straight line basis over
the programming period, or the remaining licence term, as appropriate.
The amortisation charge is recorded within operating costs in the
income statement.
Programmes produced internally are recognised within current assets at
production cost, which includes labour costs and an appropriate portion
of relevant overheads, and charged to the income statement over the
period of the related broadcast.
Programme rights are tested for impairment in accordance with
the roups polic for ipairent of non-financial assets set out on
pae153. elated cash outows are classified as operatin cash ows
in the cash ow stateent.
Provisions
Provisions are recognised when the group has a present legal or
constructive obligation as a result of past events, it is probable that
an outow of resources will be reuired to settle the obliation and
the amount can be reliably estimated. Provisions are determined by
discountin the epected future cash ows at a pre-ta rate that reects
current market assessments of the time value of money and the risks
specific to the liabilit. inancial liabilities within provisions are initiall
recognised at fair value and subsequently carried at amortised cost using
the eective interest ethod. nerous lease provisions are easured at
the lower of the cost to fulfil or to eit the contract.
Current and deferred income tax
Current income tax is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where
the company’s subsidiaries, associates and joint ventures operate and
generate taxable income. The group periodically evaluates positions
taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation, and the group establishes
provisions where appropriate on the basis of the amounts expected
to be paid to tax authorities.
Deferred tax is recognised, using the liability method, in respect of
teporar dierences between the carrin aount of the roups
assets and liabilities and their tax base. Deferred income tax assets and
liabilities are oset when there is a leall enforceable riht to oset
current tax assets against current tax liabilities and when the deferred
income tax assets and liabilities relate to income taxes levied by the
sae taation authorit on either the taable entit or dierent taable
entities where there is an intention to settle the balances on a net basis.
Any remaining deferred tax asset is recognised only when, on the basis
of all available evidence, it can be regarded as probable that there will be
suitable taable profits within the sae urisdiction in the foreseeable
future aainst which the deductible teporar dierence can be utilised.
Deferred tax is determined using tax rates that are expected to apply in
the periods in which the asset is realised or liability settled, based on tax
rates and laws that have been enacted or substantively enacted by the
balance sheet date.
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