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Annual Review 2006/07


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 UK Generally Accepted Accounting Principles. The requirements and responsibilities for the preparation of the financial statements are set out here.

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, furniture and fittings.

Grant-in-Aid is recognised when received from the Foreign and Commonwealth Office. It is intended to meet estimated expenditure in the year but unexpended receipts for the year, within predetermined limits, are not liable to surrender.

Foreign currency translation
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the date of the transactions. Monetary 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, or career average, 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 the scheme is managed centrally across the BBC Group and 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 amounts charged as expenditure for the defined contribution scheme represent 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.

Finance leases
Assets acquired under finance leases are included within fixed assets at the total of the lease payments due over the life of the lease discounted at the rate of interest inherent in the lease. The same amount is included in creditors. Rental payments are apportioned between the finance element, which is charged in the statement of income and expenditure, and the capital element, which reduces the lease creditor.

Tangible fixed assets
Expenditure on fixed assets is capitalised together with incremental and internal direct labour costs incurred on capital projects.

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.

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  
Computer equipment - three to five years
Other - three to 25 years
Furniture and fittings - three to ten years

Work in progress
Work in progress, including programmes commissioned from independent producers, is stated at the lower of cost and net realisable value. The full stock value is written off on first transmission.

Acquired programmes
The costs of acquired programmes are written off on first transmission.

Other stocks
Raw materials are stated at the lower of cost and net realisable value.

A provision is recognised in the balance sheet when BBC World Service has a present legal or constructive obligation arising from past events and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions that are payable over a number of years are discounted to net present value at the balance sheet date using a discount rate appropriate to the particular provision concerned.

Grant-in-Aid is used to fund both capital and revenue expenditure and a transfer is made each year to or from the capital reserve equal to the movement in the historic cost net book value of tangible fixed assets during the year.

The value of the capital reserve is equal to the net book value of fixed assets at historic cost less the dilapidations provision that has been charged against the capital reserve. The revaluation reserve reflects the difference between fixed assets at historic cost and their revalued amount. The operating reserve is the accumulated surplus of the income and expenditure account to the balance sheet date.

Statement of accounting policies
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