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Annual Review 2002/2003
 
 
Statement of accounting policies
BBC World Service, funded principally by parliamentary Grant-in-Aid, is a division of the British Broadcasting Corporation, a body incorporated by Royal Charter.
 
The financial statements have been prepared in accordance with the provisions of the BBC’s Charter and Agreement. Although not mandatory, BBC World Service has chosen to follow the accounting and disclosure provisions of the Companies Act 1985 and applicable UK accounting standards to ensure that its financial statements are prepared on a basis consistent with that of UK companies.
 
BBC World Service does not produce consolidated financial statements. Although BBC World Service is technically the parent of the BBC World Service Trust, the Trust is exempt from consolidation. This is because the Trustees have a fiduciary duty to act in the best interests of the Trust’s beneficiaries and substantially all of the Trust’s income is made up of grants which are classified as restricted funds because their use is specified by donors, such that BBC World Service has no direct control over, or financial interest in, the assets of the Trust.
 
The activities of the other subsidiaries and associates of BBC World Service are not material either individually or in aggregate.
 
Basis of accounting
The financial statements are presented under the historical cost accounting convention as modified by the revaluation of certain plant, machinery and furniture and fittings.
 
Income
Grant-in-Aid from the Foreign and Commonwealth Office is intended to meet estimated expenditure in the year but unexpended receipts for the year, within predetermined limits, are not liable to surrender.
 
Other income received by BBC World Service, principally BBC Monitoring subscriptions, is set out in note 1a of the financial statements.
 
Foreign currency translation
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the date of the transactions.
 
Assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at 31 March. Surpluses and deficits arising from the translation of assets and liabilities at these rates of exchange, together with exchange differences arising from trading, are included in the statement of income and expenditure.
 
Pension costs
The BBC operates both defined benefit and defined contribution schemes for the benefit of employees.
 
Defined benefit scheme
The defined benefit scheme, the BBC Pension Scheme, provides benefits based on final pensionable pay. The assets of the scheme are held separately from those of the BBC group.
 
BBC World Service, following the provisions within FRS 17: Retirement Benefits, accounts for the scheme as if it were a defined contribution scheme. This is because it is not possible to identify the share of the underlying assets and liabilities of the scheme relating to BBC World Service on a reliable and consistent basis. The expenditure charge therefore represents the contributions payable in the year.
 
Defined contribution scheme
The amount charged as expenditure for the defined contribution scheme represents the contributions payable by BBC World Service for the accounting period in respect of this scheme.
 
Operating leases
Operating lease rentals are charged on a straight-line basis over the term of the lease.
 
Tangible fixed assets
Expenditure on fixed assets is capitalised together with incremental and internal direct labour costs incurred on capital projects.
 
Depreciation is calculated so as to write off the cost or valuation, less estimated residual value, of fixed assets on a straight-line basis over their expected useful lives. Depreciation commences from the date an asset is brought into service.
 
The useful lives for depreciation purposes for the principal categories of assets are:
 
Land and buildings
Freehold land – not depreciated
Freehold and long-leasehold buildings – 50 years
Short-leasehold land and buildings – unexpired lease term
Plant and machinery – three to 25 years
Computer equipment – three to five years
Furniture and fittings – three to ten years
Plant and machinery and furniture and fittings are stated at the estimated current replacement cost of the assets, as adjusted for remaining service potential, as at 1 April 1996, or cost if acquired subsequently, less accumulated depreciation.
 
Originated programme stocks and work in progress
Originated programme stocks and work in progress, including those commissioned from independent producers, are stated at cost. The full stock value is written off on first transmission.
 
Acquired programmes
The costs of acquired programmes are written off on first transmission.
 
Reserves
The value of the capital reserve is equal to the net book value of fixed assets at historic cost. The revaluation reserve reflects the difference between this sum and fixed assets at their revalued amount. The operating reserve is the accumulated surplus of the income and expenditure account to the balance sheet date.
 
Grant-in-Aid is used to fund both capital and revenue expenditure and a transfer is made to or from the capital reserve equal to the movement in the historic cost net book value of tangible fixed assets during the year.
 
Statement of accounting policies
 
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