38
Notes to the consolidated financial statements continued
1. Basis of preparation continued
assists in providing an additional analysis of our reporting of
trading results. Specific items may not be comparable to similarly
titled measures used by other companies.
In determining whether an event or transaction is specific,
management considers quantitative as well as qualitative factors.
Examples of charges or credits meeting the above definition and
which have been presented as specific items in the current and/or
prior years include significant business restructuring programmes
such as the current group-wide cost transformation and
modernisation programme, disposals of businesses and
investments, charges or credits relating to retrospective regulatory
matters, significant out of period contract settlements, litigation
matters, impairment on remeasurement of the disposal groups to
be held for sale, asset impairment charges, impairment charges in
our Portfolio Businesses, net interest on our pension obligation,
and the impact of remeasuring deferred tax balances. In the event
that items meet the criteria, which are applied consistently from
year to year, they are treated as specific items. Any releases to
provisions originally booked as a specific item are also classified as
specific. Conversely, when a reversal occurs in relation to a prior
year item not classified as specific, the reversal is not classified as
specific in the current year.
Movements relating to the sports joint venture (Sports JV) with
Warner Bros. Discovery (WBD), such as fair value gains or losses on
the A and C preference shares or impairment charges related to
the equity-accounted investment are classified as specific. Refer
to note 23 for further detail.
Specific items for the current and prior year are disclosed in note 9.
2. Critical and key accounting estimates and
significant judgements
The preparation of financial statements in conformity with IFRS
requires the use of accounting estimates and assumptions. It also
requires management to exercise its judgement in the process of
applying our accounting policies. We continually evaluate our
estimates, assumptions and judgements based on available
information and experience. As the use of estimates is inherent in
financial reporting, actual results could differ from these estimates.
Our critical accounting estimates are those estimates that carry a
significant risk of resulting in a material adjustment to the carrying
amount of assets and liabilities within the next financial year. We
also make other key estimates when preparing the financial
statements, which, while not meeting the definition of a critical
estimate, involve a higher degree of complexity and can
reasonably be expected to be of relevance to a user of the financial
statements. Management has discussed its critical and other key
accounting estimates and associated disclosures with the BT
Group plc Audit and Risk Committee.
Significant judgements are those made by management in
applying our material accounting policies that have a material
impact on the amounts presented in the financial statements. We
may exercise significant judgement in our critical and key
accounting estimates.
Our critical and key accounting estimates and significant judgements
are described in the following notes to the financial statements.
They can be identified in the notes by the following symbol.
Note | Critical estimate | Key estimate | Significant judgement | |||
5. Estimate of customer refund liability | ò | |||||
10. Current and deferred income tax | ò | |||||
12. CGU identification for goodwill impairment | ò | |||||
12. Valuation of recoverable amount for goodwill impairment | ò | |||||
15. Reasonable certainty and determination of lease terms | ò | |||||
18. Identifying contingent liabilities | ò | |||||
18. Provisions | ò | ò | ||||
19. Valuation of pension assets and liabilities | ò | ò | ||||
19. Control assessment over co-investment vehicles | ò | |||||
22. Held for sale classification | ò | |||||
23. Valuation of BT’s equity interest in the Sports joint venture | ò | |||||
23. Valuation of investment in A preference shares in Sports joint venture | ò | |||||
3. Material accounting policies that apply to
the overall financial statements
The material accounting policies applied in the preparation of our
consolidated financial statements are set out below. Other
material accounting policies applicable to a particular area are
disclosed in the most relevant note. They can be identified in the
notes by the following symbol.
We have applied all policies consistently to all the years presented,
unless otherwise stated.
Basis of consolidation
The group financial statements consolidate the financial
statements of British Telecommunications plc and its subsidiaries,
and include its share of the results of associates and joint ventures
using the equity method of accounting. The group recognises its
direct rights to (and its share of) jointly held assets, liabilities,
revenues and expenses of joint operations under the appropriate
headings in the consolidated financial statements.
All business combinations are accounted for using the acquisition
method regardless of whether equity instruments or other assets
are acquired.
A subsidiary is an entity that is controlled by another entity, known
as the parent or investor. An investor controls an investee when the
investor is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee.
Non-controlling interests in the net assets of consolidated
subsidiaries, which consist of the amounts of those interests at the
date of the original business combination and non-controlling
share of changes in equity since the date of the combination, are
not material to the group’s financial statements.
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, accounting policies of subsidiaries have been
