[Page 1 of 2] Further Financial Info
Further Financial Information
ACCOUNTING POLICIES
BBC Worldwide has documented its accounting policies under UK Generally Accepted Accounting Principles (UK GAAP) to help ensure
consistent accounting practices across the Group. These policies have been reviewed and approved by the BBC Worldwide Audit Committee
and these accounts comply in all material respects with these policies. The accounting principles require BBC Worldwide to make certain
material or complex estimates and judgments with respect to the carrying value of assets and liabilities at the year-end and the disclosure
of particular contingent liabilities. These estimates are reviewed on a regular basis to ensure that they remain consistent with the best
information available at the time, including historical experience and, where appropriate, on the recommendation of independent advisors.
Actual results may differ from these estimates.
A summary of the impact that adopting International Financial Reporting Standards will have on the BBC Group financial statements will be
published with the BBC’s results for the year ended 31 March 2008.
FOREIGN CURRENCY
Transactions in foreign currency are translated at average exchange rates with balance sheet items converted into sterling at the rate prevailing on 31 March 2008. The Group generates a
surplus in most currencies in which it operates and 55.7% of its revenues, excluding joint ventures, are generated overseas (2006/07 56.4%). 48.6% of total sales, including joint ventures, were
generated overseas (2006/07 45.8%). BBC Worldwide’s policy remains to take a risk-averse approach to the management of foreign exchange exposures, including the hedging of risk by entering into
forward exchange contracts. Where appropriate, foreign currency translation risk is mitigated by the Group funding overseas investments through loans denominated in the same overseas currency.
EXCEPTIONAL ITEMS
No exceptional items were recorded in the financial year ended 31 March 2008 (2006/07 £10.5m exceptional profits). During 2006/07 the sale of
BBC Worldwide’s shareholdings in Animal Planet LLC, Woodlands Books (BBC Books) and Origin Publishing Ltd delivered an exceptional profit of £59.3m.
This was largely offset by an exceptional payment of £46.0m to Discovery Communications Inc to reduce the level of future commission
that it may earn for services provided in respect of the BBC America channel, and £2.8m on termination of the retail shops
and business learning businesses.
TAXATION
The total tax charge for the period was £34.4m (2006/07 £23.6m). The effective tax rate of 31% (2006/07 21%) is slightly higher than the statutory rate of UK corporation tax
that is provided at 30% (2006/07 30%) largely because of the increasing proportion of profit taxed under overseas jurisdictions. The lower effective
tax rate in the prior year was principally because of profits on certain business disposals utilising capital losses and being taxed at an effective
rate of only 15%.
The future tax charge will be affected by the mix of profits generated from the different tax jurisdictions in which the Group operates
(principally the UK, US and Australia) and the statutory corporation tax rates applicable in these territories. Deferred taxation is provided for at
the rates prevailing at the period end date and deferred tax assets are reviewed regularly for recoverability.
DIVIDENDS
Dividends of £49.8m were declared in the year, of which £49.4m were paid before the year-end (2006/07 £75.3m). On 6 June 2008, BBC Worldwide’s Board approved the
payment of a final dividend of £29.0m to BBC Ventures Group Ltd.
GOODWILL AND INTANGIBLE ASSETS
Total intangible assets at 31 March 2008 were £172.4m (2006/07 £108.7m), of which £85.1m (2006/07 £98.5m) related to investments in
programmes for future sale.
BBC Worldwide invested £88.2m across the year in new programmes (2006/07 £103.6m). £75.1m was invested in in-house
and independent programmes commissioned by the BBC (2006/07 £96.3m), with the remainder invested in non-BBC commissioned programming.
The reduction in investment year on year was a result of fewer opportunities to invest in major factual programmes.
Amortisation charges for the year were £101.8m (2006/07 £107.1m). Programme investments are amortised over their useful lives and their carrying
value is reviewed regularly to ensure that the recoverable amount remains in excess of the assets balance sheet value. Also within intangibles,
the net book value of goodwill at 31 March 2008 was £87.3m (2006/07 £10.2m), with the year-on-year increase arising primarily from the acquisition
of 75% of the Lonely Planet businesses.
Goodwill balances are amortised over the estimated useful life of the investment to which they relate and are reviewed annually for impairment.
LONELY PLANET ACQUISITION
On 1 October 2007, BBC Worldwide acquired a 75% shareholding in the Lonely Planet group of companies for a total cash consideration (including acquisition costs)
of £89.9m. Goodwill of £73.2m was recognised and is being written off over its estimated useful economic life of 20 years.
Under the terms of the purchase agreement the other Lonely Planet shareholders may exercise an option to sell all or part of their 25% stake to BBC Worldwide at any time up to 31
October 2009. As the minority shareholders are deemed to have retained the risks and rewards of ownership for their 25% shareholding, the put option liability has been recognised in
reserves rather than as an increase in the cost of investment.