The accounts are prepared under the historical cost convention and in accordance with the applicable Accounting Standards in the United Kingdom.

2 CONSOLIDATION AND GOODWILL

The consolidated financial statements incorporate the accounts of the Company's subsidiary undertakings prepared to 30 September 1999. 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.

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. Following the implementation of FRS10, goodwill arising on acquisitions subsequent to 1 October 1998 is capitalised as an intangible asset and is being amortised over estimated useful economic lives ranging between 10 and 20 years.

3 FIXED ASSET 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.

4 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.

Trading results of overseas subsidiaries are translated at weighted average rates of exchange. Differences resulting from the retranslation of opening net assets and results for the year at closing rates are taken to reserves.

5 INTEREST RATE TRANSACTIONS

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.

6 BORROWINGS

Borrowings are carried at their nominal value with any premium or discount on issue, any pre-issue hedging costs, and any other associated fees dealt with in other creditors or debtors and are written off to profit and loss account over the life of the borrowing if it is dated.

7 TURNOVER

Turnover, which excludes value added tax and sales between Group companies, represents the invoiced value of products and services.

8 INTANGIBLE 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 a period of 40 years. Publishing rights are written off in equal annual instalments over periods of up to four years.

9 TANGIBLE FIXED ASSETS

Tangible fixed assets are stated at historical cost less accumulated depreciation. 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 or sale. Programme development expenditure relating to programmes which have been or are anticipated to be commissioned for production is carried forward at cost. All other development expenditure is written off.

12 OTHER DEBTORS

Where advance payments are made in respect of film processing and videocassette production contracts, they are included in other debtors and written off against income arising over the term of the contracts.

13 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.

14 PENSIONS

The Group maintains a number of defined benefit and defined contribution based pension schemes in the UK and US. The costs of defined benefit schemes are determined by external actuaries and charged against profits each year. The costs of defined contribution schemes are charged against profits in the year in which they are incurred.

15 DEVELOPMENT EXPENDITURE

All research, development and marketing expenditure is written off as incurred, with the exception of certain programme development expenditure (see above).

16 DEFERRED TAXATION

Provision is made for deferred taxation to the extent that the liability is expected to crystallise within the foreseeable future.