Statement of Accounting Policies
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
The activities of the other subsidiaries and associates of BBC
World Service are not material either individually or in aggregate.
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.
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.
The BBC operates both defined benefit and defined contribution
schemes for the benefit of employees.
Defined benefit scheme
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.
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 lease rentals are charged on a straight-line basis over
the term of the lease.
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.
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
||- not depreciated
|Freehold and long-leasehold buildings
||- 50 years
|Short-leasehold land and buildings
||- unexpired lease term
|Plant and machinery
||- three to five years
||- three to 25 years
||- three to ten
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
The costs of acquired programmes are written off on first transmission.
Raw materials are stated at the lower of cost and net realisable
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
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.