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30 September 2002
1 BASIS OF PREPARATION
The accounts are prepared under the historical cost
convention, modified to include the revaluation of certain
investments, and in accordance with the applicable financial
reporting and accounting standards. The Group has
re-assessed the appropriateness of its accounting policies
as prescribed in FRS 18.
Since the previous year end FRS 19 – Deferred Taxation
has been adopted. This standard addresses the recognition,
on a full provision basis, of deferred tax assets and liabilities
arising from timing differences between the recognition
of gains and losses in the financial statements and their
recognition in tax computations. The change in accounting
policy has not given rise to any prior year adjustment.
2 CONSOLIDATION AND GOODWILL
The consolidated financial statements incorporate the
accounts of the Company’s subsidiary undertakings prepared
to 30 September 2002. The Company has taken advantage of
the exemption in Section 230(1)–(4) of the Companies Act
1985 not to present its own profit and loss account.
Goodwill arising on acquisitions is capitalised as an
intangible asset and is amortised on a straight line basis over
estimated useful economic lives ranging between 10 and 20
years. Companies acquired have been accounted for as
acquisitions. Prior to 30 September 1998 goodwill, whether
purchased or arising on consolidation, was written off against
reserves in the year it arose.
3 IMPAIRMENT
Impairment reviews are carried out to ensure that goodwill
is not carried above its recoverable amount. Any amortisation
or impairment write-downs are charged to the profit and loss
account.
Goodwill is reviewed for impairment at the completion of
the first full year after acquisition and on the occurrence of
any event or change in circumstances indicating that there has
been a decline in the carrying value or change in useful life.
4 INVESTMENTS
Associates and joint ventures are accounted for in the
Group’s accounts under the equity method of accounting,
as adjusted, where material to conform to the Group’s
accounting policies. Other fixed asset investments are stated
at cost less amounts written off in respect of any permanent
diminution in value.
Current asset investments are held at the lower of
cost or net realisable value, or where appropriate, under
the alternative accounting rules, at current cost based on
a directors’ valuation.
5 FOREIGN CURRENCIES
Foreign currency debtors and creditors covered by forward
currency contracts are translated at the contract rates of
exchange; other foreign currency denominated assets and
liabilities are translated at closing rates of exchange. Gains and
losses are taken to the profit and loss account, except that
exchange differences on foreign currency net borrowings
to finance foreign currency net investments are taken to
reserves, in accordance with SSAP20.
Trading results of overseas subsidiaries are translated at
weighted average rates of exchange. Differences resulting
from the re-translation of opening net assets and results for
the year at closing rates are taken to reserves.
6 BORROWINGS AND FINANCE LEASE CREDITORS
Borrowings are carried at their nominal value with any
premium or discount on issue, any pre-issue hedging costs,
and any other associated fees offset against the carrying value
of the borrowing. Such costs are written off to the profit and
loss account over the life of the borrowing if it is dated. The
capital element of finance lease creditors is recorded as a
liability, with lease rentals split between capital and interest
elements. The capital element is applied to reduce the
outstanding liability and the interest element is charged
against profit.
7 TURNOVER
Turnover, which excludes value added tax and sales between
Group companies, represents the value of products and
services sold. More particularly, key classes of revenue are
recognised as follows:
Advertising – on transmission.
Programme production – on delivery.
Rights – the point that the right sold is available
for exploitation.
Facilities – on provision of the service.
Product merchandising – on product delivery.
8 INTANGIBLE FIXED ASSETS
Libraries acquired are valued at fair value on acquisition on
the basis of projected cash flows and written off in equal
annual instalments over the estimated economic life of the
assets over a period of up to 40 years. The useful economic
life has been adopted in view of the classical and ongoing
appeal of the library titles. All other research, development
and marketing expenditure is written off as incurred, with the
exception of certain programme development expenditure
(see point 11 below).
9 TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at historical cost less
accumulated depreciation and any provision for impairment.
Depreciation is generally provided by equal annual instalments
at the following rates:
| Freehold property excluding land |
2% – 4% |
| Leasehold property |
period of lease |
| Plant and equipment |
10% – 33% |
Depreciation is not charged on freehold land.
10 STOCKS
Stocks and work in progress are valued at the lower of cost
and net realisable value.
11 PROGRAMME PRODUCTION AND DEVELOPMENT
Programmes in production and acquired programmes are
stated at the lower of cost and net realisable value.
Programme material is written off fully on first transmission,
except for certain film rights which are written off over a
number of transmissions.
12 LIQUID FINANCIAL INSTRUMENTS
Liquid financial instruments are stated at the lower of cost
and market value. Interest and other income is dealt with in
the period in which it arises.
13 PENSIONS
The Group maintains a number of defined benefit and defined
contribution based pension schemes in the UK. The costs of
defined benefit schemes are determined by external actuaries
and charged against profits each year under SSAP24. The
costs of defined contribution schemes are charged against
profits in the year in which they are incurred.
FRS 17 – Retirement Benefits. This standard addresses
the measurement and valuation of retirement benefit pension
schemes. The Group has continued to adopt the transitional
arrangements as prescribed in FRS 17 (see note 3c).
14 DEFERRED TAXATION
Full provision is made for deferred tax liabilities arising from
timing differences in respect of transactions or events that
result in an obligation to pay tax in the future, that have
originated but not reversed by the balance sheet date.
A deferred tax asset is not recognised to the extent that
recoverability is uncertain. Deferred tax liabilities and assets
which are recognised are not discounted.
To the extent that, at the balance sheet date, dividends
from overseas undertakings have been accrued as receivable
or an overseas undertaking has entered into a binding
agreement for the future distribution of its past earnings,
appropriate amounts are provided.
15 OPERATING LEASES
The rental costs arising from operating leases are charged
to the profit and loss account in the year in which they
are incurred.
16 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The Group uses a limited number of derivative financial
instruments to hedge its exposure to fluctations in interest
and foreign exchange rates.
The Group does not hold or issue derivative instruments
for speculative purposes.
Interest rate swap and option agreements are used to
manage the interest basis of borrowings. Interest receipts
and payments under these agreements are accrued so as
to match the net income or cost with the related finance
expense. No amounts are recognised in respect of future
periods. Gains and losses on early termination of interest
rate swaps or on repayment of the borrowing are spread
over the life of the original contract or borrowing.
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