Full Financial and GovernanceStatements 2008/09

F01 / Financial overview/
F07 /	financial highlights/
F09 /	Independent auditor’s report/
F10 /	Full Financial Statements and notes/
F72 / Governance/

Financial overview/“LICENCE FEE PAYERS RIGHTLY EXPECT TO RECEIVE
EXCELLENT VALUE FOR MONEY ACROSS ALL OURSERVICES.TO SUCCEED IN DELIVERING MORE FOR
LESS WE CONTINUE TO SIMPLIFY AND INNOVATE
IN EVERY ASPECT OF OUR BUSINESS.”
zarin patel, CHIEF FINANCIAL OFFICER

F01

Financial overview/

The BBC offers a uniquely diverse and distinctive
range of services; it is also funded in a distinctive way.
We have commercial operations, including BBC
Worldwide, but most of our funding comesfrom the licence fee, paid for by households acrossthe UK. We also receive funding from theForeign & Commonwealth Office to support
the World Service.
Our funding gives us exceptional privileges andwe have a responsibility to spend this money well.
The first part of this financial review focuses on
how we do this, especially in the face of the current
economic downturn.

Our bottom line is value –for all our stakeholders

Another consequence of our unique status is that
we do not have a ‘bottom line’ in the way that profitmaking organisations do, but show a surplus or deficit
each year.
Our group accounts show a surplus before interestand tax this year of £178.1million (2008: deficit(£4.7million)), arising principally as a result of the way
we have been funded. We have higher settlements inthe early years which will help to fund our significant
Charter commitments through to 2012/13, including
the digital build and Help Scheme, the move toSalford and our network supply strategy.
Rather than a bottom line, what we do have is a veryclear understanding of the value we can and shouldbe creating for our stakeholders, and this translates
into five key financial objectives:

Maximising our income by collecting the licence
fee as efficiently as we canThere are two aspects to this: developing more costeffective ways to collect and pay the licence fee, which
also meet our customers’ needs, and keeping evasion
as low as possible.
We saw a 12% increase in the number of people
paying through the cash plans last year, which enables
people to pay in smaller instalments over a longer
period, and we’ve also provided more outlets where
people can pay at their convenience. We havecontinued to promote online payments, which arecheaper to process, and more convenient for manyof our licence fee payers. More licences were sold
both this way and through the self-service phone line
in 2008/09. Self-serve now represents 35% of totaltransactions, up from 26% in the previous year.
The number of people paying through direct debit
increased again this year from 66% to 67%. We are,as expected, reaching the maximum potential forthis particular scheme, so we are now focusing on
investing in other flexible payment methods. Our
total collection costs (net of interest) went down
again this year, to £119million or 3.4% of income.
Evasion rose slightly, from 5.1% to 5.3%, reflecting
current economic conditions, but as this was offset bymore efficient collection, the combined cost of bothcollection and evasion remained stable at 8.7% of
our licence fee income. However, we expect to face

Chart 1/ Licence fee collection/evasion %
06/07
9.2
8.7
07/08
8.7
08/09

further challenges in the next 12 months as lower
levels of consumer confidence slow the growth in
new households.
The BBC Trust recently carried out an independent
review of our Licence Fee Collection, which consulted
with licence fee payers before making a number of
specific recommendations on how our approachshould change. We have taken these on board, andwill particularly be looking at how we communicate
with licence fee payers, simplifying how people pay for
their licence fee, and ways to target our enforcement
measures more effectively.

Making the BBC as efficient as possible,
and providing good value for money

The success of our efficiency programme is more
important now than it has ever been. Under our new
Continuous Improvement programme, which started
in April 2008, we have been set a stretching target toachieve 3% cumulative efficiency savings each year or
15% of our cost base to 2012/13, which equates toabout £1.9billion. Over this time we also plan to reduce
headcount by 10% (1,800 posts), on top of the 10%
achieved between 2005 and 2008 (1,900 posts).
We estimate that the Continuous Improvement
programme will cost about £160million to implement
over six years, and we have saved £237million since
the programme started (£192million net of costs).
This is not a one-off programme of savings. From
2000-2005 we delivered over £2billion throughefficiencies and other initiatives, and then achieved
a further £347million of recurring annual savings,
through the Value for Money programme, which
ran from 2005 to 2008.These efficiency programmes
principally targeted our fixed cost base; this meansthat the savings in our latest programme, asa proportion of our variable costs, are actuallyeven higher.
The savings come from a number of initiatives,
including changing the way we commission and makein-house programmes, centralising news production
and introducing end-to-end digital tapeless production.
Chart 2/ Gross efficiency savings £mProjected

2,000

530

1.9bn

08/09 09/10 10/11 11/12 12/13

Total

1,500

470
1,000

390
500

0

300
237

F02

Financial overview/

So far, as a result of the changes made to the way
we make our programmes, we have been able toinvest more in technology, improving the capabilitiesof iPlayer and enhancing our on-demand capabilities,
to make our Sport, News and Radio content available
wherever and whenever our audience wants it.
We have also invested in multiplatform programmingand new services such as HD – this has already beena great success both for the 2008 Olympics, and forlandmark programmes like Nature’s Great Events.
The final points to mention here are the Value forMoney reviews.The National Audit Office completed
two reviews in 2008/09, one on radio production, andthe other on our management of strategic contracts.
The first recognised that the aim of achieving nearly£70million of cumulative cash releasing savings inradio by 2012/13 is a challenging one.The report
made a number of recommendations, which wewere either already implementing, or will address
now. Most of these relate to sharing good practiceand insight, both inside and outside the BBC.The
second review analysed 17 different contracts witha combined annual value of around £715million.The
report recognised that the BBC has an above-average
track record in managing major contracts and thesavings we have secured have exceeded original
expectations. Again, we are addressing the report’s
recommendations, and focusing in particular on
how we manage our supply chain more effectively.

A more efficient BBC: streamlining scripts

Drama development and production is an
expensive business, and we are constantly looking
for ways to achieve the same high-quality resultat a lower cost – to make Little Dorrit for as
little as Doctors. One way we are doing this isby bringing together our financial and creative
teams more often and in new ways, to improvetheir understanding of each others’ priorities andconstraints. Giving better programme budgeting
training to script editors is a good example ofthis working well in practice. In this case wehave been able to avoid unnecessary costs andstreamline decision-making in the crucial earlystages of a production schedule. We have seenknock-on benefits for the whole production
team and process.

Maximising the returns we make on
programmes paid for by the licence fee

This is, in essence, what the main commercial armof the BBC exists to do. BBC Worldwide sells the
programmes we make across the world, so thatlicence fee payers get the highest possible return on
the money they pay.
We are always looking for new opportunities tosell our output, formats and other merchandise in
the UK and overseas. In 2008/09 BBC Worldwide’s
total revenues were just over £1billion, including
intra-group income and its share of joint venture
income, up 9.5% on the previous year and the first

Chart 3/ BBC Worldwide statutory
profit before interest and tax £m
06/07
07/08
86
08/09

111
118

time that revenues have passed this milestone.This ispartly down to new investment this year, in channels,
online and production, and partly the result of growthfrom our existing business. Particular highlights from
our Global Brands business include Top Gear, andDoctor Who. We have also launched 18 new channels
worldwide this year, which brings our total to 44,
contributing to growth in Channels revenue of 23%.
The magazines division has had a more difficult year,with both advertising and circulation suffering fromthe general decline in marketing spend that is now
affecting the whole magazine market. Lonely Planet
has delivered its first full year of revenues, but is also
being impacted by the current economic downturn,which is slowing the travel and holiday market;
however we are encouraged that the business still
managed to grow its market share in the USA.

A more efficient BBC: multimedia news

We now have a multimedia newsroom whichbrings together journalists and production teams
from television, radio, and online.This saves
money, speeds up decision-making, and allows us
to make the most of the content we create, by
re-using and repackaging it for more channels andplatforms. It has also given new skills to our own
news teams, as well as the freelancers who workfor us, who can then take what they have learnedout into the wider marketplace.
We had been hoping to build on the huge successof iPlayer with our proposal to develop a newvideo-on-demand service in partnership with ITV
and Channel 4. Unfortunately the Competition
Commission has ruled that this would be too muchof a threat to other competitors in the emerging
video-on-demand market. As a result we have had
to write-down £9million of costs incurred, but weare still hopeful that we can find another way togenerate the same returns for licence fee payers
over the long-term.
Our partner in the joint venture 2entertain,
Woolworths Group plc, entered administration at
the end of 2008, so we have had to write-off bothcosts and unrecoverable debt, although 2entertain
itself continues to trade well. Since then we have been
exploring how best to resolve this issue in a waythat protects the interests of licence fee payers.
BBC Worldwide’s statutory profits fell from£118million in 2007/08 to £86million this year.This isprincipally due to charges in relation to Woolworths(estimated at £15million including our share of thepension liability of 2entertain), Kangaroo (£9million),and our ongoing strategy of investment.
Our global news business, BBC World News, hasbeen impacted by the downturn in advertising
activity in the year. Despite an increase in revenuesof 12%, it has incurred a statutory loss of £3million
this year.
F03

Financial overview/

A more efficient BBC: longer-term
production deals

In a business like ours commissions and schedules
will always change year on year, as audience
preferences and priorities change.This makes
achieving significant budget savings even morechallenging, but there are some long-term
decisions we can still make that can help to keep
our costs down. For example, we can negotiate
longer-term deals with independent producers
on those formats that we feel are likely to remain
popular, or could adapt to different audiencetastes. Masterchef and Eggheads are both good
examples of this.The benefits are two-fold – itgives the independent production company
more certainty about their cashflow, whileallowing us to plan more efficiently, which has
an immediate impact on our cost per hour.
We announced the sale of the Outside Broadcasts
division of BBC Resources Limited, anothercommercial venture, at the start of 2008/09. We
retained the Studios and Post Production operations,and restructured them into a new business called
BBC Studios and Post Production Limited. It has beena challenging year throughout the broadcast facilities
market, with widespread reductions in turnover andrevenues, as productions cut costs and looked forsavings. At year end, the business made a statutory
loss before interest and tax of £18million, mainly due
to our restructure.
For more information see its service review, or see
www.bbcstudiosandpostproduction.com
Whilst the statutory results of the individualcommercial businesses show a profit of £86million
in BBC Worldwide, losses of £19million in Studios
and Post Production and £3million in BBC World
News, when consolidated into the group accounts,
the group profit before interest and tax is reduced to£31million.This reflects the recognition of non-cash
losses on foreign exchange financial instruments; theseadjustments were not significant in 2007/08.
In general, our commercial operations are in good
shape at the start of the new financial year. We await
the outcome of the Digital Britain review, which may
have longer-term implications for BBC Worldwide.
The priority now is to make real improvements insome under-performing areas, while remaining agile
enough to move quickly to seize new opportunities.

Spreading the benefit of the licence fee
across the whole of the UK

The BBC is for the whole of the UK, from Belfast
to Truro, Aberdeen to Brighton, Swansea to
Middlesbrough. We are all passionately committed tonurturing the very best creative and production talent,right across the country. One way we are doing thisis by aiming to have 50% of our Network Television
production made outside London by 2016.Themove to Salford is central to this strategy. We will also

Managing risk in a recession

We recognise that the certainty of licence fee income does shield the BBCfrom the worst of the economic downturn; however we are not entirely
immune from the impact of the recession. Unlike many of our competitors,
we do not rely directly on advertising revenues, but we face similar challenges
to the majority of UK businesses as a result of the economic uncertainty
and subsequent volatility in financial markets.There is pressure on both ourcommercial and licence fee revenues, particularly as reduced household
growth takes effect. Our commercial businesses have suffered with reduced
retail and advertising activity and increased competition in our Studios
business; that said, BBC Worldwide has shown resilience so far, due to thediversified nature of its business.
When there is more uncertainty over future income streams, it is importantthat we live within our means. We have put a number of measures in place
this year as a result, including no discretionary public service bonuses for
2008/09, and no pay increases for senior management. We are also looking
carefully at what we pay our talent, in light of both the economic environment
and the Trust’s review of talent in 2008.
In addition, although we continue to invest in areas such as online, with acommitment to source at least 25% of our qualifying online spend externally,
we will be slowing the rate of our new investment this year. It is crucial that
we continue to deliver distinctive content at the best possible value for money,
whilst also keeping pace with the level of investment in the market as a whole.
We have a particular risk where the financial stability of key suppliers is affected,
and where we depend on any single supplier for a critical broadcast service.We
have put contingency plans in place both to deal with any further deteriorationin the economy or the failure of a supplier, while recognising that we have a
responsibility towards our suppliers as well as to the wider creative industry.
With the crisis in liquidity across the financial economy, we have also had
to keep a careful eye on our borrowing limits. We are focusing even more
rigorously on conserving our cash in the short-term, and managing ourlonger-term funding arrangements. Notwithstanding the fact that the BBC’s
borrowing facilities of £200million for public services and £350million forcommercial businesses may appear relatively low in comparison to our total
annual cash outflow, we are able to re-phase significant items of expenditure
at relatively short notice.The facilities we put in place in 2007/08 to make sure
we are fully funded to 2012/13 for both the public service and commercial
businesses are with a select group of counterparties with strong credit ratings.
We are also thinking ahead to identify risks and trends, and to take actions
to pre-empt them. This is particularly important in relation to our pension
scheme, which has inevitably been impacted by the volatility in the equity
markets. Where possible we have tried to diversify risk in the portfolio,
whilst looking for new ways to invest. There is further detail on this laterin the review.
In line with normal practice, we have reviewed the carrying value of our assets
including investments and goodwill. We have assessed future cash flows frombusiness plans, using an appropriate discount rate and believe this supports
the carrying values of our assets. In particular for Lonely Planet we usedbusiness plans consistent with the strategy to transform Lonely Planet from a
travel book publisher to a diversified travel information provider.This strategy
is expected to generate significant growth particularly for the digital businessfollowing the successful re-launch of the Lonely Planet website.These value in
use calculations support the carrying value of the business.
This recession is likely to be more far-reaching than we could have predicted
a year ago. We believe we have responded quickly and decisively to the issues
we face and are confident that we have the resources we need to continue
our operations for the foreseeable future.
F04

Financial overview/

allocate 12% of our Network Television investment
to the Nations by 2012, rising to 17% by 2016.
We are reviewing what targets should be in place forour radio output in the coming year.
In 2008, total spend outside of London, expressed asa percentage of eligible spend (as defined by Ofcom)
increased from 33% to 35%. In absolute terms, total
spend including online, decreased from £984million
in 2007/08, to £948million this year, reflecting thelevel of efficiencies made this year across all spend.
We expect this number to increase as production
moves out of London in line with our long-term
network supply strategy.

Ensuring the licence fee supports the wider
creative economy

Research has proved that the creative economy canbe a significant engine for growth for the UK as awhole. According to the National Endowment for
Science,Technology and the Arts (NESTA), industries
like television, film, music and entertainment havegrown twice as fast as the economy as a whole inrecent years, and are a vital source of innovation andnew ideas.The sector also contributes £60billion
a year to UK plc.
The BBC is – and should be – a vital part of this.
In calendar year 2008 we commissioned 37% of
our television content from external production
companies. Our total investment in the creative
industries during the year was £1.1billion, or 33%
of our annual licence fee income, which includes
payments to artists and contributors. We are alreadyexceeding the targets set for us by Ofcom onspend in the independent sector, and we are actively
redefining the relationship between the BBC andthe rest of UK media, and shifting the balance awayfrom competition towards improved collaboration,
by developing new and sustainable partnerships.
You can see evidence of this already, whether it’s in
our new memorandum of understanding with ITV toshare regional news infrastructure and resources tosupport provision beyond the BBC, or our proposal
to share digital production technology and expertise
which could help small independent producers
make the transition to a fully digital future.The latteris particularly important. As NESTA point out, theUK creative economy is characterised by many small
firms, few of which ever reach a significant size, andnone that could hope to rival the big global players.
Working with the BBC can make all the difference
here, and we want to make our expertise and knowhow go much further. This is especially important in
the current downturn, when we can provide a morestable programme of investment than many of ourcommercial competitors.

Chart 4/ Licence fee spend innations/regions £m
06/07
07/08
08/09

884
984
948

Current and future challenges
Service licences

We are operating under the umbrella of a relatively
new regulatory regime. In the last year both BBC
ALBA and BBC HD have spent less than forecast,due to timing differences against their original budgets,and as a result both service licences were technicallybreached. Some other licences are operating close to
their thresholds, and these are under ongoing review.
The control framework that oversees all our service
licences is operating effectively, and we have improved
our early warning reporting so that we can takeaction quickly if any are at risk of breaching their limits.
A new service licence budget was approved
during the year for BBC Online, and the new BBC
ALBA service was licensed for the first time. From
2009/10, we will be making changes to the terms of
the Children’s service licence, which will see spendtransferring to CBBC and CBeebies from BBC
One and BBC Two.The changes are being made tostrengthen controls over editorial decision-making.

Digital switchover

One of our responsibilities under the BBC Charter isto help deliver digital switchover across the UK, andensure that those most in need of support are awareof what this means, and get the assistance they need.
Funds are set aside in the licence fee to allow theBBC to fulfil these obligations.
By the end of 2008/09, the Whitehaven and Selkirk
transmitters in the ITV Border region had switched
over, which covered 73,000 households, and 25,000
individuals eligible for the Switchover Help Scheme.
The Help Scheme also supported a further half amillion people in the Border and West Country ITV
regions last year, in preparation for their switchover in2009. Four more of the 14 ITV regions are also due
to switch this year, which represents 5.4 million morehouseholds, or 20% of the UK population. Around
two million older and disabled people in those regions
will be eligible for the Switchover Help Scheme.
£603million of the current licence fee settlement
has been ring-fenced to cover the Switchover Help
Scheme for the period to 2012/13, and spend lastyear amounted to £24million. So far, only 1% of the
population has fully switched to digital; although takeup of the scheme has been lower than expected sofar, there is a real increase in activity from now until
2011. We will not be able to fully assess how much it
will take to convert everyone until we have rolled out
the scheme across a larger, urban region.
Digital UK is responsible for raising public awarenessof digital switchover and has a total budget set aside
from the licence fee of £201million to 2012/13.This
body is administered jointly by the BBC and otherbroadcasters, and in 2008/09 it spent £26million.

Pensions

The BBC operates a defined benefit scheme forall staff, with a mix of final salary and career average
benefits.The scheme is administered by a groupof trustees who manage the pension scheme

F05

Financial overview/

investment strategy, supported by a number of
independent advisors.
During the past two years, we have looked for ways
to secure the long-term affordability of the scheme,
such as introducing career average benefits andincreasing employee contributions.
This year, we have also introduced a ‘salary sacrifice’scheme, which delivers savings to both employees andto the BBC; as you can see from Note 8, it changes
the way we account for pension contributions,increasing the proportion of employer contributions
disclosed.The effective BBC and employee
contribution rates for 2008/09 were 19.35% and6.0% respectively, making a total contribution rate of
25.35%. As of April 2009, employees have been asked
to increase their contributions to 6.75%, and there will
be a further increase to 7.5% from April 2010.
The FRS 17 valuation shows a scheme deficit thisyear of £139million compared to a surplus last yearof £528million. It has been a difficult year for thosemanaging pension schemes, as equities, real estate,
corporate bonds and alternative assets have all fallen
in value. We look at our scheme performance overboth short and long-term, where the outlook remains
uncertain as the equity markets struggle to recover.
The liability in this year’s accounts reflects the year’s
market turbulence, though we hope to see signsof recovery in the medium-term. Full details of ourpension costs and liabilities are included in Note 8of the full financial statements, which can be foundonline at www.bbc.co.uk/annualreport
The last formal actuarial valuation of the scheme
was as at April 2007, and this reported a surplus of£275million. An interim actuarial report in April 2008
indicated that the scheme had moved into a deficit of£470million, largely as the result of lower assumptions
about the level of future investment returns. We
expect the next formal actuarial valuation to beundertaken as at April 2010.
We remain committed to the defined benefit
scheme and constantly review our approach topension provision to effectively manage both cost andrisk; however we also recognise that it must remain
affordable to the licence fee in the long-term.

Key financial policies
and standards

Chart 5/ Spend in creative economy £bn
06/07
07/08
08/09

1.1
1.1
1.1

Critical accounting policies

The areas which require the greatest degree ofjudgement are as follows:• our valuation of the pension scheme for FRS17
accounting purposes includes assumptions on life
expectancy, future investment returns, inflation, andsalary growth, as stated in Note 8. We consult withthe scheme actuaries to ensure that they fall within
an acceptable range based on market practice, butdifferent assumptions would result in a change tothe level of surplus or deficit.
• provisions represent our best estimate of future
liabilities and may involve assumptions to calculate
redundancy costs, for example number of people
and their level of remuneration.
• we operate a significant number of property andtechnology leases. As you can see from Notes
23 and 24, the decision to treat such contracts asfinance or operating leases has a significant impact
on our balance sheet.
• as we operate across a number of different
countries and a number of different currencies,
we are exposed to exchange rate fluctuations.
The translation of foreign currency transactions,exchange rates used and treatment of foreign
operations all impact on our financial statements.
• a number of indicators are assessed in deciding
whether to impair or write-down an asset.These
include reduced market value or a deteriorationin economic performance. In many cases when
conducting impairment reviews, we need to assess
the future cashflows of an operation to decide
whether it may be impaired, which involves making
a number of assumptions about future performance.

International Financial Reporting Standards

We will be adopting IFRS from the year ending
31 March 2010.This is in line with the HM Treasury
decision to do the same from 2009/10 onwards.
In the meantime, the accounts continue to beprepared under UK Generally Accepted Accounting
Principles (UK GAAP), although a reconciliation to
IFRS is provided for information.
The main impact on preparing our accounts under
IFRS will be in relation to leases, goodwill andemployee benefits.

Treasury policies

Our treasury department manages and monitors
all our financial risks, making sure that we havesufficient liquid funds to meet our obligations as theyfall due, and that we comply with our borrowing
limits, particularly those set out in our Charter andexternal loan covenants. It also manages our foreignexchange and interest rate risk exposures. All the
department’s activities are governed by policies
and procedures approved by the BBC’s FinanceCommittee, and overseen on a day-to-day basis by
the Group Treasurer, with monthly reporting to senior
management. Note 23 includes more informationon this.

Zarin Patel
Chief Financial Officer
18 June 2009F06

Financial HIGHLIGHTS/

Financial highlights/
The BBC’s income continues to grow, driven by thelicence fee.The level of the licence fee is set by theGovernment, but the growth in the BBC’s income isalso affected by household growth and the BBC’s
ability to effectively collect licence fee income.
IncomeThe BBC’s income continues to grow, driven by thelicence fee.The level of the licence fee is set by theGovernment, but the growth in the BBC’s income
is also affected by household growth and the BBC’s
ability to effectively collect licence fee income.
Although growth in commercial income may appear
modest, this headline figure does not fully reflect
the success of the BBC’s commercial strategy overrecent years, in particular the expansion through BBC
Worldwide’s involvement in ventures with otherparties; the BBC’s share of the income in these joint
ventures is not reflected above.The cash returnfrom BBC Worldwide to the BBC was up to£171million.

Operating expenditure

As the BBC must break even over a Charter period,
total expenditure broadly follows the same trend as
income. Note 2 gives more details of expenditure,
particularly on the BBC’s public services. However,this year the BBC’s Continuous Improvement
Programme has started to deliver efficiency savings
that contribute to reduced expenditure on public
service broadcasting when compared to 2007/08;
expenditure reduced by 3.4%.

Chart 6/ Income £m
06/07
07/08
08/09
Licence fee
Commercial income

4,177
4,415
4,606
World Service and BBC Monitoring grants
Other

Chart 7/ Operating expenditure £m
06/07
07/08
08/09
Public Services Broadcasting Group
Commercial businesses

4,353
4,477
4,492
World Service and BBC Monitoring
Non-cash pension costs

Interest cost

Net interest payable has increased from £4.6million
to £17.2million reflecting changes in borrowings,
particularly in the Commercial Businesses, to financeinvestment. However, the Group has not been able
to take full advantage of the current low interest
rates as a result of its cash management strategy touse interest rate swaps, collars and caps to reduce its
exposure to variable interest rates.The recognitionof the swaps, caps and collars at fair value has
increased the interest payable expense for the yearby £5.1million, but as these swaps mature they will be
replaced by ones based on current market conditions,which should reduce the cost of capital in future years.

F07

Financial HIGHLIGHTS/

Tax

The BBC’s public service activities are not generally
liable to corporation tax, but tax is payable on capitalgains and other income.The BBC’s commercial
subsidiaries are liable to corporation tax on taxable
profits for the year. As a result the effective tax rate,
which this year is 8.6% (2008: 26.7%), is different
from the standard rate of Corporation tax of 28%. A
significant factor in the variability of the effective rateyear-on-year is the extent to which licence fee income
exceeds public service expenditure in the year.

Foreign currencies

During the course of any year the BBC enters into
a number of transactions in currencies other thansterling, which must be recorded in the BBC’s financial
statements in sterling. If exchange rates change
significantly during the period between a transaction
being agreed and the cash payment or receipt
occurring this can have an impact on the BBC’s results.
The BBC, however, generally enters into forward
currency contracts to manage, or hedge, this currency
risk, which allows it to settle transactions at known
exchange rates, reducing uncertainty relating to cash
flow. However, there is still an accounting impact.
During the year foreign exchange rates have been
subject to more volatility and devaluation/appreciation
than often seen.Therefore the fair value changes inopen foreign currency forwards taken out by the
BBC have been much more significant this year thanthey have been in the past, as have gains and losses
on settled transactions.This year the BBC recognised
a net gain of £10.3million on settled transactions, a
net loss of £18.4million on open foreign currency
forwards and foreign currency embedded derivatives,and a gain of £22.9million on the translation of theresults and assets of overseas subsidiaries.

Net assets

As at 31 March 2009 the net assets of the BBCGroup were £990.1million (2008: £1,519.2million),
which is a decrease of £529.1million during the year.
The overall net assets of the BBC are significantly
influenced by the accounting valuation of the BBC
Pension Schemes (the pension scheme is discussed
in more detail in the Financial Review), which thisyear shows a net loss for the year of £666.6million.
Otherwise the underlying net assets remain
relatively constant; however as noted above there
has been an increase in borrowing to finance capitalspend and investment for the future, including ourtransformational projects in London and Salford, as
well as investment in digital production technology
to enhance our content and services.

Cash flows

The BBC manages cash and borrowings carefully
and remains within its borrowing ceilings.The extent
to which cash flows and net debt move in tandem
depends on the Charter cycle, with the BBC aiming
to break even over a Charter period this can result insignificant cash inflows in some years offset by future
anticipated outflows, for example in relation to digital
switchover.This year there was a net cash inflow of£43.8million.

F08

Independent Auditor’s report to the Trustees of the British Broadcasting
Corporation (BBC)We have audited the group and UK Public Service Broadcasting financial statements (the ‘financial statements’) of the BBC for theyear ended 31 March 2009, which comprise the Consolidated Statement of Income and Expenditure, the Consolidated and UK
Public Service Broadcasting Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Total Recognised
Gains and Losses, the Reconciliations of Movements in BBC Reserves and the related notes as set out in this report.These financial
statements have been prepared under the accounting policies set out therein.
In addition to our audit of the financial statements, the Trustees have engaged us to audit the information in the Trustees’ and Executive
Board Remuneration Reports (together ‘the Remuneration Reports’) that are described as having been audited, which have been prepared
as if the BBC were a quoted company and hence required to comply with part 3 of Schedule 7A to the Companies Act 1985.
This report is made solely to the BBC’s Trustees, as a body, in accordance with the Royal Charter for the continuance of the BBC whichcame into force on 1 January 2007 (‘the Charter’) and in respect of the separate opinion in relation to the Remuneration Reports andreporting on Corporate Governance on terms that have been agreed. Our audit work has been undertaken so that we might state
to the BBC’s Trustees those matters we are required to state to them in an auditor’s report and, in respect of the separate opinion in
relation to the Remuneration Reports and reporting on Corporate Governance, those matters that we have agreed to state to themin our report, and for no other purpose.To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the BBC and the BBC’s Trustees as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Trustees and Executive Board and Auditors

The Trustees’ and Executive Board’s responsibilities for preparing the Annual Report, the Remuneration Reports and the financial
statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in their respective statements of responsibilities.
Our responsibility, in accordance with the terms of our appointment and the Charter, is to audit the financial statements and the partsof the Remuneration Reports to be audited in accordance with relevant legal and regulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements
and the parts of the Remuneration Reports to be audited have been properly prepared in accordance with the Companies Act 1985
as if that Act had been applied to these financial statements and the Remuneration Reports. We also report to you if, in our opinion, theBBC has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if
information specified by law regarding Trustees and Executive Board remuneration and other transactions is not disclosed.
In addition to our audit of the financial statements, the Trustees have engaged us to review the Corporate Governance statement as
if the BBC were required to comply with the Listing Rules of the Financial Services Authority in relation to these matters. We review
whether the Corporate Governance statement reflects the BBC’s compliance with the nine provisions of the 2006 Combined Codespecified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required toconsider whether the statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the BBC’s
corporate governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report and Accounts, and consider whether it is consistent with the audited
financial statements.This information includes the Chairman’s Foreword and the Trustees’ performance review in Part One of theAnnual Report and Accounts, the Director-General’s Foreword, the Executive Board’s performance review and financial overview andhighlights, the Corporate Governance Statement and the unaudited parts of the Remuneration Reports. We consider the implications
for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements andthe parts of the Remuneration Reports to be audited. It also includes an assessment of the significant estimates and judgements madeby the Executive Board in the preparation of the financial statements, and of whether the accounting policies are appropriate to theGroup’s and UK Public Service Broadcasting’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in orderto provide us with sufficient evidence to give reasonable assurance that the financial statements and the parts of the Remuneration
Reports to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the parts of theRemuneration Reports to be audited.

OpinionIn our opinion:• the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, ofthe state of the Group’s and UK Public Service Broadcasting’s affairs as at 31 March 2009 and of the Group’s surplus for the year
then ended• the financial statements have been properly prepared in accordance with the provisions of the Charter and the Companies Act 1985
as if that Act had applied to these financial statements• the parts of the Remuneration Reports which we were engaged to audit have been properly prepared in accordance with part 3of Schedule 7A to the Companies Act 1985, as if those requirements were to apply to the BBC

KPMG LLP
Chartered Accountants
Registered Auditor, London
18 June 2009

F09

FINANCIAL STATEMENTS/

CONSOLIDATED STATEMENT OF INCOME AND EXPENDITURE
FOR THE YEAR ENDED 31 MARCH 2009

Note

Income (including share of joint ventures)
Less: share of joint ventures
Group income
Operating expenditure excluding exceptional costs
Exceptional restructuring costs
Total operating expenditure
Group operating surplus/(deficit)
Share of operating surplus of associates and joint ventures before exceptional items
Share of joint ventures’ operating exceptional items
Share of operating surplus of associates and joint ventures
Operating surplus/(deficit): group and share of associates and joint ventures
Loss on sale and termination of operations
Profit on disposal of fixed assets
Surplus/(deficit) before interest and taxation
Interest receivable and similar items
Interest payable and similar items
Other net finance income (from defined benefit pension scheme)
Surplus before taxation and minority interest
Taxation
Surplus after taxation and before minority interest
Minority interest
Surplus for the financial year

13b
1a
4c
2a
13b
13b
13b
3a
5
6
7a
7b
8bii
1a
9a

18

2009
£m

2008
£m

4,906.2(300.5)
4,605.7(4,461.8)(29.9)(4,491.7)
114.0
56.8
(7.5)
49.3
163.3
(1.1)
15.9
178.1
9.1
(26.3)
117.3
278.2(24.0)
254.2
(0.5)
253.7

4,689.4(274.6)
4,414.8(4,359.3)(117.7)(4,477.0)(62.2)
60.3
–
60.3
(1.9)
(4.8)
2.0
(4.7)
13.7
(18.3)
148.8
139.5(37.3)
102.2
(0.5)
101.7

All results arise from continuing operations.
There is no significant difference between the results as disclosed above and the results on an historical cost basis.
The surplus/(deficit) for the financial year is the amount found by deducting all items of expenditure recognised in the year fromall income receivable for the year. For the BBC group, as a public benefit entity, any surplus arising does not represent a ‘profit’
that can be returned to an entity’s funders, but a timing difference relating to past or future expenditure.

F10

FINANCIAL STATEMENTS/

BALANCE SHEETSAT 31 MARCH 2009

Fixed assets
Intangible assets
Tangible assets
Investment in programmes for future saleInterests in trade investments
Investment in subsidiaries
Interests in joint ventures– share of gross assets and goodwill– share of gross liabilities
Interests in associates
Current assets
Stocks
Debtors due after more than one year
Debtors due within one year
Total debtors
Cash at bank and in hand
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors – amounts falling due after morethan one year
Provisions for liabilities
Net assets excluding pension (liability)/asset
Pension asset
Pension liability
Net assets
Represented byOperating reserve excluding pension reserve
Pension reserve
Total operating reserve
Capital reserve
Other reserve
Revaluation reserve
BBC reserves
Minority interest

Note

Group
2009
£m

Group
2008
£m

UK Public
Service
Broadcasting
2009
£m

10
11
12
13a
13f

95.7
728.0
99.7
–
–

87.3
747.9
85.1
2.7
–

–
510.1
–
–
296.4

–
523.4
–
–
296.0

187.0
(118.2)68.8
11.2
1,003.4217.4(151.8)
65.6
3.8
992.4

–
–
–
–
806.5

–
–
–
–
819.4

491.0
122.2
831.3
953.5
124.3
1,568.8(952.4)616.4
1,619.8

500.1
50.1
794.9
845.0
78.0
1,423.1(1,064.7)358.4
1,350.8

450.5
77.4
681.2
758.6
32.5
1,241.6(661.8)579.8
1,386.3

470.2
21.1
655.3
676.4
6.7
1,153.3(761.6)391.7
1,211.1(314.6)(171.8)1,133.4–(143.3)990.1(172.6)(182.3)
995.9
528.4
(5.1)
1,519.2(16.6)(121.5)
1,248.2––
1,248.2(21.9)(160.0)1,029.2––
1,029.2

356.5(143.3)213.2
802.5(32.3)
0.8
984.2
5.9
990.1

206.3
523.3
729.6
812.3
(31.0)
1.6
1,512.5
6.7
1,519.2

444.9
–
444.9
802.5
–
0.8
1,248.2–
1,248.2

215.3
–
215.3
812.3
–
1.6
1,029.2–
1,029.2

13b
13b

14
15
15
21b
16b

16c
17
8bi
8bi

18
18
18
18
18
18

UK Public
Service
Broadcasting
2008£m

The financial statements were approved by the Executive Board on 18 June 2009 and signed on its behalf by:

Mark Thompson, Director-General

Zarin Patel, Chief Financial Officer

F11

FINANCIAL STATEMENTS/

CONSOLIDATED STATEMENT OF TOTAL RECOGNISEDGAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2009
Group surplus for the financial year
Exchange differences on translation of net investment in subsidiaries
Recognition of share of joint venture liabilities
Actuarial (loss)/gain on defined benefit pension schemes
Total recognised gains and losses relating to the year

Note

2009
£m

2008
£m

18
18
8b iii

253.7
22.9(19.4)(784.2)(527.0)

101.7
(1.0)
–
52.3
153.0

UK Public
Service
Broadcasting
2008£m

RECONCILIATIONS OF MOVEMENTS IN BBC RESERVESFOR THE YEAR ENDED 31 MARCH 2009
Note

Surplus/(deficit) for the financial year
Other recognised gains and losses relating
to the year (net)Other reserve
Adjustment for acquisition of UK.TV(Decrease)/increase in reserves during the year
Opening BBC reserves
Closing BBC reserves

19a

Group
2009
£m

Group
2008
£m

UK Public
Service
Broadcasting
2009
£m

253.7

101.7

219.0

(34.4)(780.7)–(1.3)(528.3)
1,512.5
984.2

51.3(28.8)–
124.2
1,388.3
1,512.5

–
–
–
219.0
1,029.2
1,248.2–––(34.4)
1,063.6
1,029.2

F12

FINANCIAL STATEMENTS/

CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2009

Net cash inflow from operating activities
Dividends received from joint ventures and associates
Return on investments and servicing of financeInterest received
Interest paid
Interest paid on finance leases
Dividends paid to minority interests
Net cash outflow from return on investments
and servicing of financeTaxation
Taxation paid
Capital expenditure and financial investments
Purchase of tangible fixed assets
Investment in programmes for future sale
Drawdown of loan to joint venture
Proceeds from the sale of tangible fixed assets
Net cash outflow from capital expenditure and financial investments
Acquisitions and disposals
Purchase of a subsidiary
Cash acquired with subsidiary
Purchase of interests in joint ventures and associates
Paid on termination of operations
Proceeds from sale of operations
Net cash outflow from acquisitions and disposals
Net cash outflow before use of liquid resources and financing
Management of liquid resources
Sale of liquid resources
Purchase of liquid resources
Net cash inflow from management of liquid resources
Financing
Increase in loans
Repayment of loans
Capital element of finance lease payments
Increase in loan notes
Repayment of loan notes
Net cash inflow from financing
Increase/(decrease) in cash in the year

Note

2009
£m

2008
£m

20
13a

215.2
37.0

158.7
45.7

7.7
(15.3)
(0.4)
(0.8)

11.3
(12.3)
(0.7)
–

(8.8)

(1.7)

(23.1)(23.5)(147.5)(100.8)(0.4)
20.5(228.2)(158.0)(88.2)(0.7)
15.1(231.8)(15.1)
1.9(15.8)(0.9)
15.1(14.8)(22.7)(90.3)
5.9(6.3)(16.4)–(107.1)(159.7)526.3(526.3)–28.7(28.7)–

218.0(144.4)
(9.7)
2.6
–
66.5
43.8

178.9
(72.1)
(9.7)
–
(4.1)
93.0
(66.7)

12

19
19

21a

21

F13

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESThis section explains the BBC’s main accounting policies, which have been applied consistently
throughout the year and in the preceding year except where stated.
The financial statements have been prepared in accordance with the provisions of the BBC’s Charter,
which requires them to be prepared in accordance with UK Generally Accepted Accounting Principles(UK GAAP).
Although not mandatory, until 2005 the BBC chose to follow the accounting and disclosure provisionsof the Companies Act 1985 and the Financial Services Authority Listing Rules to ensure that its financial
statements were prepared on a basis consistent with those of UK companies quoted on an EU regulated
market. Following changes in company law, if it had continued to report in this way, the BBC would have
prepared its consolidated financial statements in accordance with EU-adopted International Financial
Reporting Standards (IFRS) from 1 April 2005. However, reporting under IFRS would be inconsistent
with the BBC’s Charter and with Government reporting. Instead, the financial statements continue tobe prepared in full accordance with UK GAAP and applicable elements of the Listing Rules.

BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost accounting convention, as
modified by the revaluation of certain plant, machinery, furniture and fittings, financial instruments,
derivatives and the investment in BBC World Service and BBC Monitoring.

BASIS OF CONSOLIDATION
The group acquired a subsidiary during the year UK TV Pty Limited (the group previously held a 20%
interest), for which the acquisition method of accounting has been adopted – see Note 19. Under thismethod, the results of subsidiaries acquired or disposed of in the year are included in the consolidated
statement of income and expenditure from the date of acquisition or up to the date of disposal.
The group accounts include the results of all businesses controlled by the BBC (subsidiaries) together
with the BBC’s share of the results of businesses over which the BBC has influence but not control(associates) and those which the BBC jointly controls (joint ventures). See Note 29 for more information.

UK PUBLIC SERVICE BROADCASTING INCOME AND EXPENDITURE ACCOUNT
A separate statement of income and expenditure reflecting the results of UK Public Service Broadcasting
has not been presented, which is consistent with the option available to companies under Section 230
of the Companies Act 1985.

SERVICE LICENCE REPORTING
Service licences are used by the BBC Trust to regulate the BBC’s services and ensure that each aims toprovide public value and contribute to delivering the BBC’s public purposes. Note 28 provides moredetail on how costs are allocated to individual services.

An associate is anundertaking in which thegroup has a long-term
interest, usually between
20% and 50% of the equity
voting rights, and overwhich it exercises significant
influence. A joint venture
is an undertaking in which
the group has a long-term
interest and over which it
exercises joint control.

INVESTMENTS IN GROUP UNDERTAKINGS
The funding of UK Public Service Broadcasting, BBC World Service and BBC Monitoring is legally
separate and cross-subsidisation is not permissible. Accordingly, for the purposes of preparing UK PublicService Broadcasting’s balance sheet, the individual assets and liabilities attributable to BBC World Service
and BBC Monitoring must be excluded, and UK Public Service Broadcasting is considered to haveinvestments in BBC World Service and BBC Monitoring equal to the net assets of these entities.

OTHER INVESTMENTS
Other investments, being neither loans nor necessarily held for maturity, are recorded on the balance
sheet at cost less provision for any impairment in value.

F14

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDINCOME
Income, which excludes value added tax, trade discounts and sales between group companies, iscomprised of the following key classes of revenue, which are recognised as follows:• Television licences
The main income for the BBC is derived from television licences. Licence fee income is recognised infull when a licence is issued, subject to deductions for actual and expected refunds and cancellations.
• Grants from Government departments
Grants are recognised when receivable from the relevant Government department. The BBC World
Service receives Grant-in-Aid from the Foreign and Commonwealth Office and BBC Monitoring
receives a grant from the Cabinet Office. These grants are intended to meet estimated expenditurein the year but unexpended receipts for the year, within predetermined limits, are not liable tosurrender.
• Provision of equipment, facilities and services (including programme-making facilities and services)
With the exception of long-term contracts, income is recognised when the equipment, facilities
and services are provided to customers.

The distinction between
the various income sources
is important. The BBC iscareful not to crosssubsidise commercial, UKPublic Service Broadcastingor Grant-in-Aid and grant
funded activities. Moreinformation on the BBC’sfair trading requirements
and policies can be found in
the Responsibility section inPart Two of the BBC
Annual Report andAccounts 2008/09.

For long-term contracts, the amount of profit attributable to the stage of completion is recognised
when the outcome of the contract can be foreseen with reasonable certainty. Income for suchcontracts is stated at the cost appropriate to their stage of completion plus attributable profits, lessamounts recognised in prior years. Provision is made for any future losses as they are foreseen.
• Distribution and advertising income, licence fees from international television programme sales and saleof promotional merchandise and income from publishingThis income is recognised on provision of services, the start of the licence period or delivery ofmerchandise respectively. Where programme rights have not been delivered by the start of thelicence period, revenue is recognised on delivery of the rights.
Sales of merchandise are stated after deduction of the sales value of actual and estimatedreturned goods.

FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the dateof 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 thestatement of income and expenditure.

As these financial
statements are preparedin sterling, the BBC’s
foreign currencytransactions and balances
must be translated, atappropriate exchange
rates, into sterling.

The profit and loss accounts and cash flows of overseas subsidiaries are translated into sterling at average
rates for each month, which is a good approximation for the actual rate. Exchange differences arising on
consolidation from the retranslation of the opening net assets of overseas subsidiaries (including the
goodwill arising on consolidation) and any related long-term foreign currency borrowings together withthe differences arising when the profit and loss accounts are retranslated at the rates ruling at the year
end, are taken to the operating reserve through the statement of total recognised gains and losses.

F15

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDPENSION COSTS
The BBC operates both defined benefit and defined contribution pension schemes for the benefitof employees.
The amounts charged as expenditure for the defined contribution schemes represent the contributions
payable by the BBC for the accounting periods in respect of these schemes.
The defined benefit schemes, of which the majority of staff are members, provide benefits based on final,or career average, pensionable pay. The assets of the BBC’s main pension scheme are held separatelyfrom those of the group.

On retirement, members of
the BBC’s main pension
scheme are paid theirpensions from a fund whichis kept separate from thegroup. The BBC makes
cash contributions to thatfund in advance ofmembers’ retirement.

Pension scheme assets are measured using current market bid values. Pension scheme liabilities aremeasured using a projected unit credit method and discounted at the current rate of return on a highquality corporate bond of equivalent term and currency to the liability.
The difference between the value of the pension scheme assets and pension scheme liabilities is a surplus
or a deficit. A pension scheme surplus is recognised to the extent that it is recoverable and a pension
scheme deficit is recognised in full. The movement in the scheme surplus/deficit is split between
operating charges, finance items and, in the statement of total recognised gains and losses, actuarial gains
and losses. Generally, amounts are charged to operating expenditure on the basis of the current service
cost of the present employees that are members of the BBC Pension Scheme.
The BBC Pension Scheme is a group-wide scheme and UK Public Service Broadcasting and its subsidiary
undertakings are unable to identify their shares of the underlying assets and liabilities of the scheme on areasonable and consistent basis. Therefore as required by FRS 17 ‘Retirement Benefits’, UK Public Service
Broadcasting accounts for the scheme as if it were a defined contribution scheme. As a result theexpenditure charged for UK Public Service Broadcasting represents the contributions payable in the year.

RESEARCH AND DEVELOPMENT
Website and software development costs are capitalised as tangible fixed assets to the extent that thewebsite or software is expected to generate revenues at least as great as the costs of development.
All other research and development expenditure is written off as incurred.

INTANGIBLE FIXED ASSETS
Goodwill
Purchased goodwill (representing the excess of the fair value of the purchase consideration plus any
related costs of acquisition over the fair value attributable to the separable net assets acquired) arising on
acquisition of a subsidiary or business, is capitalised and amortised on a straight-line basis over its useful
economic life (usually 20 years), subject to reviews for impairment. On the subsequent disposal or
termination of a business, the surplus or deficit is calculated after charging the unamortised amount of
any related goodwill. As is permitted by FRS 10 ‘Goodwill and Intangible Assets’, goodwill arising inperiods up to 1 April 1998 remains offset against the operating reserve. On disposal, goodwill previously
written off against reserves is transferred to the statement of income and expenditure for the year.

Goodwill arises whenthe BBC pays more for abusiness than the sum of
net assets of the businessacquired, representing thefact that the group places
more value on the business
entity as a whole (usually
due to expected synergies
or earning potential of thatbusiness). This premium istreated as an asset in its
own right and held on thegroup’s balance sheet, withan economic life of up to
20 years. As with any otherasset, the profit or loss onsale or disposal (in thiscase sale/disposal of thebusiness) is calculated
after writing off the amountstill held on the group’sbalance sheet.

F16

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDTANGIBLE FIXED ASSETS
Expenditure on tangible fixed assets is capitalised together with incremental internal direct labour costs
incurred on capital projects. Other than the following exception, tangible fixed assets are stated in thebalance sheet at cost less accumulated depreciation and any provision for impairment.
BBC World Service and BBC Monitoring revalued their plant and machinery and furniture and fittings as
at 1 April 1996 on the basis of their estimated current replacement cost at that time. In accordance withthe transitional rules of FRS 15 ‘Tangible Fixed Assets’, although the BBC did not adopt a general policyof revaluation, the book values of these assets (based on their revalued amounts) were retained. The
revaluation has not been updated since, although appropriate depreciation continues to be charged.
There is no significant difference between the net book value of these tangible fixed assets and theirvalue as determined on an historical cost basis and as a result no statement of historical cost surpluses
and deficits is presented.
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 the principal categories of assets are:

In accordance withaccounting standards
applicable at the time, partsof the BBC revalued certainclasses of assets once (in1996), but have chosen not
to revalue them on an
ongoing basis. This reflects
the fact that they are usedwithin the BBC rather thanbeing held for resale or
their investment potential.
The majority of assets are
therefore included at theamount they cost whenpurchased or constructed(in either case lesssubsequent depreciation).

• Land and buildings
Freehold land – not depreciatedFreehold and long-leasehold buildings – 50 years
Short-leasehold land and buildings – unexpired lease term
• Plant and machinery
Computer equipment – 3 to 5 years
Electrical and mechanical infrastructure – 10 to 25 years
Other – 3 to 10 years• Furniture and fittings – 3 to 10 years

INVESTMENT IN PROGRAMMES FOR FUTURE SALE
The BBC’s commercial subsidiaries make investments in programmes for future sale including BBC
originated programmes. These investments represent the right to future income from the sale, licensing
or other exploitation of those programmes, and are stated at cost, after writing off the costs ofprogrammes that are considered irrecoverable, less accumulated amortisation. Amortisation of
investment in programmes for future sale is charged to the statement of income and expenditure overthe estimated average marketable life of the programme genre which is generally between two and ten
years. The cost and accumulated amortisation of investment in programmes for future sale are reduced
by programmes which are fully written off.

IMPAIRMENT OF FIXED ASSETS
The group reviews the carrying amounts of its fixed assets when there is an indication that those assets
may have suffered an impairment loss.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its
carrying amount, the resulting impairment loss is recognised in the statement of income andexpenditure immediately.

The cost of programmes
for sale is charged to thestatement of income andexpenditure to match the
expected timing of income
from future sales.

An impairment occurs
when an asset would
otherwise be recorded in
the financial statements
at an amount greater thanis recoverable from its use
or sale.

F17

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDSTOCKS
Originated programme stocks and work in progress
Originated programme stocks and work in progress, including those commissioned from independent
producers, are stated at the lower of cost and net realisable value. With the exception of the costs of
prepaid repeats of independent programmes, the full stock value is written off on first transmission.
Cost includes all direct costs, production overheads and a proportion of other attributable overheads.
Programme development costs are expensed to the statement of income and expenditure until suchtime as there is a strong indication that they will result in a commissioned programme, when any further
costs are capitalised as work in progress.
Net realisable value is based upon arm’s length contract prices negotiated between the channel
controllers and programme makers, both external and internal.

Acquired programmes and film stocks
Acquired programmes are those not initially commissioned by the BBC, usually foreign imports. The
costs of acquired programmes and film stocks are written off on first transmission except to the extent
that further showings are scheduled, in which case they are written off according to their expectedtransmission profile. Assets and liabilities relating to acquired programmes are recognised at the pointof payment or commencement of the licence period, whichever is earlier. Agreements for the futurepurchase of programmes whose licence period has not commenced and where there has been no
payment by the balance sheet date are disclosed as purchase commitments.

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

PROVISIONS
A provision is recognised in the balance sheet when the group 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, other than deferred tax, that are payable over a numberof years are discounted to net present value at the balance sheet date using a discount rate appropriate
to the particular provision concerned.

TAXATION
The tax charge represents the sum of the current tax payable and deferred tax.
In respect of the current tax payable:•

The BBC (UK Public Service Broadcasting, BBC World Service and BBC
Monitoring) is not liable to corporation tax on any surplus licence fee
income or grants received from Government departments. However, it isfully liable for corporation tax on capital gains and on all its other income.
Expenditure on capital assets is not eligible for capital allowances.

•

The BBC’s commercial subsidiaries are liable for corporation tax based on
taxable profit for the year.

Taxable profit differs from net profit as reported in the statement of income and expenditure because it
excludes items of income and expenditure that are taxable or deductible in other years and items thatare never taxable or deductible. The group’s liability for current tax is calculated using tax rates that havebeen enacted or substantively enacted by the balance sheet date.
Deferred tax is computed under the liability method. Full provision, without discounting, is made in
respect of timing differences between certain items in the financial statements and their treatment for
taxation purposes at the balance sheet date except as otherwise required by FRS 19 ‘Deferred tax’.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they
will be recovered.

Deferred tax is
corporation tax which is
not payable at a specifictime but which is expected
to become payable in
the future.

F18

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDLEASES
Operating leases
Operating lease rentals payable are recognised 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 amountis 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.
The leased assets are subject to depreciation on the same basis as owned assets.

RESERVES
Capital reserve: Each year an amount equivalent to the costs expended by UK Public Service
Broadcasting, BBC World Service and BBC Monitoring on capital assets over and above depreciation,
adjusted for disposals, is transferred to/from the capital reserve so that, at the balance sheet date, theamount of the capital reserve is equivalent to the historical cost net book value of UK Public Service
Broadcasting, BBC World Service and BBC Monitoring fixed assets.

An operating lease is alease in which the lessee
has not taken on the risks
and rewards of owning theasset, but is hiring the item,so the hire charge isincluded in the BBC’s costs.
A finance lease is a leasethat transfers substantially
all the risks and rewards ofowning an asset to thelessee. Effectively the lessee
owns the asset and has
financed it by borrowing,
so the asset and borrowing
are included separately
in the balance sheet.

Revaluation reserve: The revaluation reserve reflects the difference between the net book valueof the fixed assets of BBC World Service and BBC Monitoring at historical cost compared with theirrevalued amount.

Operating reserve: The operating reserve is the accumulated surplus of income and expenditureaccount to date.

Pension reserve: The pension reserve represents the net surplus or liability of the group's defined
benefit pension schemes.
Other reserve: This represents the value of a put option exercisable by minority shareholders after
adjusting for any movements in foreign exchange rates. Changes to the fair value of the put option otherthan in relation to changes in foreign exchange rates, are recorded in the income and expenditureaccount within interest. The associated liability is included in other creditors.
CASH AND LIQUID RESOURCES
Cash, for the purposes of the cash flow statement, comprises cash in hand and deposits repayable on
demand, less overdrafts payable on demand. Liquid resources are current asset investments which arereadily convertible into known amounts of cash at, or close to, their carrying values. They comprisemoney market deposits and liquidity funds with a notice period in excess of one working day.

F19

FINANCIAL STATEMENTS/

STATEMENT OF ACCOUNTING POLICIESCONTINUEDFINANCIAL INSTRUMENTS
The group’s loans are stated at amortised cost using the effective interest rate.

Derivative financial instruments
The group does not enter into speculative derivative contracts. However some derivative financial
instruments are used with a view to managing the BBC’s exposure to fluctuations in interest rates(interest rate swaps, caps and collars) and foreign currency exchange rates (foreign currency
forward contracts).

Financial instruments
include all contractual
arrangements todeliver or receive cash.
Therefore they include
trade debtors and creditors
and loans as well as more
complex instruments
such as derivatives.

Derivative financial instruments are initially recognised at cost and are subsequently remeasured to fairvalue at the balance sheet date with movements recorded in the statement of income and expenditure.
The fair value of interest rate swaps, caps and collars is the estimated amount that the group would
receive or pay to terminate the swap, cap or collar at the balance sheet date, taking into account current
interest rates and the current creditworthiness of swap, cap or collar counterparties.
The fair value of foreign currency forward contract rates is determined by using forward exchange
market rates at the balance sheet date.

Hedge accounting
In general the group does not apply hedge accounting but instead allows movements in fair values ofhedging contracts to flow to the statement of income and expenditure as they arise. However, wherea financial instrument is designated and effective as a net investment hedge of a foreign operation any
exchange differences arising on the retranslation of the financial instrument will be recognised directlyin the statement of total recognised gains and losses. Any ineffective portion is recognised immediately
in the income and expenditure account.

F20

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS

1 ANALYSIS OF INCOME, SURPLUS/(DEFICIT) AND NET ASSETS
1a Analysis of income, surplus/(deficit) and net assets by activity

Note

2009
Total income
Less: intra-group income
Total external income
Less: share of joint ventures
Group income
Of which:
Licence fee income
Government grants
Commercial
Other
Surplus/(deficit) before interest, taxationand non-cash pension costs
Net interest receivable/(payable)
Surplus before taxation and non-cash
pension costs
Defined benefit pension scheme– additional operating income*^– other net finance income*Surplus before taxation andminority interest

1b1c

UK Public Service
Broadcasting
Group
£m

BBC World
Service andBBC
Monitoring£m

Commercial
Businesses
£m

Total
£m

3,707.5(172.7)3,534.8(1.5)
3,533.3

297.2
(0.7)
296.5
–
296.5

1,132.9(58.0)
1,074.9(299.0)775.9

5,137.6(231.4)
4,906.2(300.5)
4,605.7

3,493.8
5.0
–
34.5

–
289.6
–
6.9

–
–
775.9
–

3,493.8
294.6
775.9
41.4

147.3
1.2

(0.6)
0.9

31.1
(19.3)

177.8(17.2)

148.5

0.3

11.8

160.6
0.3
117.3

4b
8bii

(6.6)

–

55.9

49.3

Net assets/(liabilities) (excluding pension
liability)– UK– Rest of world

949.8
17.6

71.5
99.4

(49.5)
44.6

971.8
161.6
1,133.4(143.3)
990.1

1.9

–

57.8

59.7

Of which, group share of net assets ofassociates and joint ventures

UK Public Service
Broadcasting Group
comprises the UK PublicServices (as defined in theAgreement) and thosesubsidiary companies
incorporated to act solely
on behalf of those public
service operations.
BBC World Service and
BBC Monitoring comprise
broadcasting and media
monitoring activities.
Commercial Businesses
comprise businesses which
generate external income
from exploitation of theBBC’s programmes, otherassets and skill base.

278.2

Of which, group share of operating(deficit)/surplus of associates and joint
ventures

Net pension liability*
Net assets

Note 1 provides analysis of
the different businessareas within the BBC. The
business areas have beenchosen on the basis of theservices provided and theseparation of activities
financed by different
income sources.

8bi

F21

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1 ANALYSIS OF INCOME, SURPLUS/(DEFICIT) AND NET ASSETS continued
1a Analysis of income, surplus/(deficit) and net assets by activity continued

Note

2008
Total income
Less: intra-group income
Total external income
Less: share of joint ventures
Group income
Of which:
Licence fee income
Government grants
Commercial
Other(Deficit)/surplus before interest, taxationand non-cash pension costs
Net interest receivable/(payable)(Deficit)/surplus before taxation and noncash pension costs
Defined benefit pension scheme– additional operating costs*^–other net finance income*Surplus before taxation and minority
interest

1b
1c

*
^

Commercial
Businesses
£m

Total
£m

3,628.2(217.9)3,410.3–
3,410.3

286.2
(1.3)
284.9
–
284.9

1,089.1(94.9)
994.2(274.6)719.6

5,003.5(314.1)
4,689.4(274.6)
4,414.8

3,368.8
4.0
–
37.5

–
279.6
–
5.3

–
–
719.6
–

3,368.8
283.6
719.6
42.8

(108.0)
1.7

0.5
0.7

104.7
(7.0)

(2.8)
(4.6)

(106.3)

1.2

97.7

(7.4)
(1.9)
148.8
139.5

Net assets (excluding pension asset)– UK– Rest of world

Of which, group share of net assets
of associates and joint ventures

BBC World
Service andBBC
Monitoring
£m

4b
8bii

Of which, group share of operating
surplus of associates and joint ventures

Net pension asset*
Net assets

UK Public
Service
Broadcasting
Group
£m

–

–

60.3

60.3

734.2
5.9

72.0
98.7

22.0
63.1

828.2
167.7
995.9
523.3
1,519.2

2.1

–

67.3

69.4

8bi

In accordance with FRS 17 these items are not split between business classes because they are managed centrally across thegroup and it is not possible to allocate them on a reasonable and consistent basis.
The actual employer cash contribution to the defined benefit pension scheme is included in the surplus/(deficit) before interest,
taxation and non-cash pension costs of each entity. The additional operating cost is the cost to the group over and above
these cash contributions.

F22

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1b Licence fee income
Licencefee
2009£Colour
Monochrome
Concessionary
Over 75s

139.50
47.00
7.50
–

Licencesin force
2009
Number‘000

Total
income2009£mLicencefee
2008£

21,15424
186
4,000
25,3642,940.5
1.4
1.4
532.9
3,476.2

135.50
45.50
7.50
–

Quarterly payment scheme
premium
Total licence fee income
Other income*
Total external income*

Licencesin force
2008
Number‘000

Total
income2008£m

21,081
28
186
3,953
25,2482,840.1
1.4
1.4
508.4
3,351.3

17.6
3,493.8
39.5
3,533.3

17.5
3,368.8
41.5
3,410.3

Included within other income is £1.7million (2008: £2.3million) contributed by other broadcasters towards the costs of Digital
UK Limited (see Note 2a).

During the year 3.5million (2008: 3.5million) colour licences were issued under the quarterly payment
scheme at a premium of £5 each (2008: £5). Households in which one or more persons over the ageof 75 reside, as their primary residence, are entitled to a free licence. The BBC is reimbursed for thesefree licences by the relevant Government department.

1c Analysis of Commercial Businesses’ income
From 1 April 2008 a new division, Global Brands, was established in BBC Worldwide Limited from which
key brands are managed, including Lonely Planet. The Live Events business, previously managed withinChildren’s, has been transferred to Content and Production and the prior year comparatives have also
been restated to reflect this change.

By Activity:
Television (channels, sales, content and production)
Magazines and Children’s, Home Entertainment
Global Brands including Lonely Planet
Digital Media
Provision of programme-making facilities and services
Less: intra-group income
Total income

Incomeexcludingjoint
ventures2009£m

Incomeexcludingjoint
ventures
2008
£m

442.4
238.3
43.0
34.3
75.9
(58.0)
775.9

410.3
238.0
23.1
21.9
121.2
(94.9)
719.6

120.1
178.9
–
–
–
–
299.0

112.0
162.6
–
–
–
–
274.6

697.1
60.9
17.9
775.9

641.6
51.6
26.4
719.6

299.0
–
–
299.0

274.6
–
–
274.6

Joint
venture Joint venture
incomeincome
2009
2008
£m
£m

By Company:
BBC Worldwide Limited
BBC World News Limited*
BBC Studios and Post Production Limited**
Total income* BBC World Limited changes its name to BBC World News Limited on 1 August 2008.
** BBC Resources Limited changed its name to BBC Studios and Post Production Limited on 1 April 2009.

F23

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1d Geographical analysis of Commercial Businesses’ income by destination
United Kingdom
AmericasRest of the World
Total income

2009
£m

2008
£m

303.9
212.2
259.8
775.9

310.4
187.2
222.0
719.6

2009

2008

1e Commercial businesses surplus before interest and taxation
Individual
statutoryfinancialstatements
Surplus/(deficit)
beforegroup
adjustmentsinterest andtaxation£m

BBC Worldwide Limited
BBC World News Limited
BBC Studios and Post Production Limited
Holding companies
Total

85.7
(3.2)
(18.3)(0.6)
63.6

Group adjustments

Recognition ofderivative
Other
financial
group
instruments adjustments£m£m(20.8)(13.2)––(34.0)

1.3
–
–
0.2
1.5

Surplus/
Surplus/(deficit)(deficit)
beforebeforeinterest and interest andtaxationtaxation
£m
£m

66.2
(16.4)(18.3)
(0.4)
31.1

116.1
(7.8)
(3.2)
(0.4)
104.7

The group’s subsidiaries have not adopted FRS 26 (IAS 39) ‘Financial Instruments Recognition andMeasurement’ in their own financial statements as they are not within its scope. As a result therecognition of derivative financial instruments in the group financial statements impacts on thesurplus/(deficit) before interest and taxation reported for the Commercial Businesses segment.

F24

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2 OPERATING EXPENDITURE
2a Analysis of operating expenditure by activity
UK Public Service Broadcasting Group’s activities are funded by the licence fee. The Charter andAgreement between the BBC and Department for Culture, Media and Sport (DCMS) describes theBBC’s UK public services (including television, radio and online services) and also sets certain obligations
on the BBC in relation to digital switchover; both activities are funded by the licence fee. However,part of the licence fee income has been specified as being for the purpose of digital switchover and as
a result the total UK Public Service Broadcasting Group expenditure is shown below allocated between
these categories.
Note

Expenditure on licence fee funded activities
UK public services
Digital switchover (Digital UK Limited)*
Digital switchover (DSHS Limited)**Total UK Public Service Broadcasting GroupBBC World Service and BBC Monitoring***
Commercial Businesses
Non-cash pension scheme operating income****

2b
2d

2c

2009
£m

2008
£m

3,345.6
26.0
24.4
3,396.0
296.9
799.1
(0.3)
4,491.7

3,487.1
21.2
5.9
3,514.2
285.3
675.6
1.9
4,477.0*

As set out in Note 29c the BBC controls 56% of the voting rights of the company Digital UK Limited, and therefore
consolidates its results with those of the BBC. As a result, these costs represent the full expenditure by Digital UK Limited,which is financed by contributions from the BBC and other broadcasters. The BBC contributed £24.3million (2008:£18.9million) being 100% of the communication expenditure (which is ring-fenced, see Note 2d) and 56% of all othercosts incurred by Digital UK Limited. £1.7million (2008: £2.3million) was contributed by other broadcasters.
**
The BBC contributed £23.6million (2008: £5.9million) with £0.8m (2008: £nil) being contributed by third parties.
*** BBC World Service and BBC Monitoring expenditure of £296.9million (2008: £285.3million) excludes £0.4million(2008: £0.5million) of expenditure on the provision of services to other BBC group companies.
**** In accordance with FRS 17 the non-cash operating costs are not split between the business activities as it is not possible
to do this on a reasonable and consistent basis.

F25

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2b UK Public Service Broadcasting Group expenditure
The table below sets out the total expenditure for each group of service licences within the framework
set by the BBC Trust. Details of expenditure on each individual service can be found in Note 28.
2009Services

Other
£m

Total
£m

123.6
40.5
18.5
182.6
17.2
–
199.8
–

356.1
84.5
46.5
487.1
13.7
–
500.8
–

–
–
–
–
122.8
11.0
133.8
26.0

2,335.8
587.9
177.2
3,100.9233.7
11.0
3,345.6
26.0

–

–

–

24.4

24.4

2,511.2

199.8

500.8

184.2

3,396.0

Distribution£m

2a1,856.1
462.9
112.2
2,431.2
80.0–
2,511.2
–

2d

Note

Television
Radio
OnlineRegulated spend
Other*
Exceptional restructuring costs
UK Public Services spend
Digital UK Limited
Digital switchover ring-fenced
expenditure
Total UK Public Service
Broadcasting Group spend*

Infrastructure/
support£mContent
£m

28
28
28
28
28

The BBC online service
was bbc.co.uk (including
iPlayer).

Other spend is that not specifically regulated by the individual service licences and includes costs for licence fee collection,orchestras and performing groups and business development.

2008
Services

Content£m

Distribution£m

Infrastructure/
support
£m

Other
£m

Total
£m

2a

1,834.3
459.9
113.9
2,408.1
77.5–
2,485.6
–

104.8
47.2
15.4
167.4
18.3
–
185.7
–

416.2
91.3
52.7
560.2
14.8
–
575.0
–

–
–
–
–
123.2
117.6
240.8
21.2

2,355.3
598.4
182.0
3,135.7233.8
117.6
3,487.1
21.2

2d

–

–

–

5.9

5.9

2,485.6

185.7

575.0

267.9

3,514.2

Note

2009
£m

2008
£m

373.7
221.0
96.2
87.0
21.2
799.1

351.0
179.1
40.2
101.8
3.5
675.6

Note

Television
Radio
OnlineRegulated spend
Other
Exceptional restructuring costs
UK Public Services spend
Digital UK Limited
Digital switchover ring-fenced
expenditure
Total UK Public Service BroadcastingGroup spend

28
28
28
28
28

2c Commercial Businesses’ expenditure
Cost of sales
Distribution costs
Administrative and other costs
Amortisation of programme investment
Restructuring costs
Total

12
4c

The expenditure shown
for Commercial Businesses
relates only to external
income and excludes
expenditure relating tosales within the BBC.

F26

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2d UK Public Services ring-fenced expenditure
DCMS has ring-fenced the following amounts within the new Charter and six-year licence fee settlement(2008 to 2013):

Digital switchover

Help for the elderly and disabled*
Digital UK Limited**

Amountspent prior
to 2008£m

Amountspent in2008£m

Amountspend in2009£mCumulative
total
£m

six-year ringfenced
funding
£m

–
10.1

5.9
17.5

23.6
20.4

29.5
48.0

603.0
201.0

*

The Secretary of State has agreed with the BBC that the £603million estimated cost of the Digital Switchover Help Scheme(operated by DSHS Limited) will be ring-fenced and set aside from the licence fee for the purpose of funding the Scheme
over the six-year life of the licence fee settlement. This agreement specifies that in the event that the costs of the projectexceed this limit due to higher than anticipated demand, this will not be at the expense of the BBC's programmes, services
or other resources.
** The Framework Agreement states that the BBC is committed to leading certain aspects of the digital switchover programme,
through Digital UK, and the licence fee settlement includes a ring-fenced amount of up to £201million from the inception of
Digital UK until the end of the six-year life of the licence fee settlement for communication activities. The ring-fenced amountis only part of the BBC’s annual contribution to Digital UK (see Note 2a).

As at 31 March 2009, the BBC is on target to remain within the ring-fenced amounts at the end of thesix-year period.

F27

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
3 GROUP OPERATING SURPLUS/(DEFICIT)
3a Group operating surplus/(deficit) excluding auditors’ remuneration
The operating surplus/(deficit) before interest and taxation is stated after charging/(crediting) the
following items:

Payments under operating leases– land and buildings– plant and machinery– other
Depreciation– owned assets– leased assets
Impairment on tangible fixed assets
Profit on sale of tangible fixed assets*
Loss on disposal of tangible fixed assets*
Amortisation of goodwill in subsidiaries
Amortisation of goodwill in joint ventures and associates
Impairment of goodwill in joint ventures and associates
Amortisation of investment in programmes for future saleImpairment of trade investments
Programme development
Research and development
Fair trading auditors’ remuneration (Deloitte LLP)
Fair trading auditors’ remuneration (PricewaterhouseCoopers LLP)Net exchange differences on settled transactions
Impairment of trade debtors
Fair value losses on embedded derivatives
Fair value losses/(gains) on open forward foreign currency contracts
*

2009
£m

2008
£m

83.7
13.6
16.4

72.8
13.1
12.3

122.4
6.3
10.9
(0.5)
10.4
5.1
2.3
2.0
87.0
2.7
32.1
47.8
0.2
–
(10.3)
5.7
8.1
10.3

107.6
2.8
–
–
–
2.5
2.0
–
101.8
1.5
22.1
16.1
–
0.5
(2.8)
3.9
0.2
(6.2)

The (profit)/loss on disposal of tangible fixed assets represents adjustments to depreciation on disposals in the ordinary courseof business. Exceptional profit on disposals is disclosed separately in Notes 5 and 6.

As a result of a number of factors, including restructuring activities, market conditions and bedding downof new acquisitions, during the course of the year the group has reviewed its assets, particularly property,
equipment and investments to ensure that none are stated at more than their recoverable amount. For
individual assets, this generally involved a comparison to estimated recoverable amount, based on market
prices. For business divisions this included an assessment of the cash flows expected to be generated by
the division. As a result impairments have been recognised in relation to certain property, equipment andgoodwill and investments, totalling £15.6million.

F28

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
3b Auditors’ remuneration
The BBC has reported its auditors’ remuneration in accordance with The Companies (Disclosureof Auditor Remuneration) Regulations 2005.

Fees payable for the audit of the BBC’s annual accounts
Fees payable to the BBC’s auditor and its associates for other services– The audit of the BBC’s subsidiaries pursuant to legislation– Other services relating to taxation– Services relating to corporate finance transactions– All other services

2009
£m

2008
£m

0.5

0.6

0.7
0.2
0.1
1.1
2.6

0.6
0.3
–
0.5
2.0

4 EMPLOYEES AND REMUNERATION
4a Persons employed
The average number of persons employed in the year was:Average for the year
2009
2008
NumberNumberUK Public Service Broadcasting GroupBBC World Service and BBC Monitoring
Commercial Businesses
Group total

17,0782,379
3,417
22,874

17,677
2,219
3,205
23,101The decrease in UK Public Service Broadcasting Group headcount during 2009 is mainly due to theContinuous Improvement Programme leavers.
The increase is Commercial Businesses headcount during 2009 is mainly due to the acquisition of UK TV
into BBC Worldwide Limited and the inclusion of Lonely Planet for a full year. This is partially offset by areduction in BBC Studios and Post Production Limited following the sale of Outside Broadcast business.
Within the averages above, 2,806 (2008: 2,845) part-time employees have been included at their fulltime equivalent of 1,584 (2008: 1,595).
In addition to the above, the group employed an average full-time equivalent of 789 (2008: 851) persons
on a casual basis and the BBC Orchestra and BBC Singers, employed on programme contracts, totalled
375 (2008: 379) full-time equivalents.

F29

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4b Staff costs
Note

Salaries and wages*
Social security costs
Pension costs*– main scheme (defined benefit)– other schemes
Redundancy costs

8b ii
8b ii
4c

Comprising:
UK Public Service Broadcasting GroupBBC World Service and BBC Monitoring
Commercial Businesses
Main pension scheme additional operating (income)/cost (defined
benefit)**
*

1a

2009
£m

2008
£m

1,005.4
86.9

1,006.0
89.5

158.9
2.7
40.3
1,294.2

173.2
1.2
111.7
1,381.6

975.3
99.2
220.0

1,097.8
93.7
188.2

(0.3)
1,294.2

1.9
1,381.6

A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefit pension scheme members. The
contributions paid via the salary sacrifice arrangement have been treated as employer contributions, and a corresponding
reduction in salary. The total salary sacrificed in accordance with this arrangement was £38.3million.

** The actual employer cash contributions to the defined benefit pension scheme are borne by each business. The additional
operating cost is the cost to the group over and above these contributions. It is not possible to allocate this to each businesson a reasonable and consistent basis.

4c Restructuring costs

Exceptional restructuringcosts:*– UK Public Service
Broadcasting Group– BBC World Service
and BBC Monitoring– Commercial Businesses
Non-exceptional restructuringcosts:**– UK Public Service
Broadcasting Group– BBC World Service
and BBC Monitoring– Commercial Businesses

Staff costs
2009
£m

Other
2009
£m

Total
2009
£m

Staff costs
2008
£m

Other
2008
£m

Total
2008
£m

11.0

–

11.0

99.7

17.9

117.6

–
18.9
29.9

–
–
–

–
18.9
29.9

0.1
–
99.8

–
–
17.9

0.1
–
117.7

3.3

–

3.3

2.9

–

2.9

4.8
2.3
10.4
40.3

–
–
–
–

4.8
2.3
10.4
40.3

5.5
3.5
11.9
111.7

–
–
–
17.9

5.5
3.5
11.9
129.6

*

Exceptional restructuring costs relate to the Continuous Improvement Programme occurring within UK Public Service
Broadcasting Group and a process review in order to achieve more efficient operations within Commercial Businesses.
The scale of these initiatives will have a material effect on the operations of the group.
** Non-exceptional restructuring costs are outside these initiatives and are not expected to have a material effect on theoverall business of the group.

£54.2million (2008: £57million) of exceptional restructuring costs were paid in the year.

F30

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4d Remuneration of the BBC Trust members and the Executive Board
The total emoluments of the members of the Executive Board and the BBC Trust are disclosed in the
Executive Board Remuneration Report. The details of emoluments of the members of the BBC Trust
are disclosed in Part One of the Annual Report and Accounts.

5 PROFIT/(LOSS) ON SALE OR TERMINATION OF OPERATIONSSale of Outside Broadcast division
Project Kangaroo closure
BBC jam closure
Loss on sale or termination of operations

2009
£m

2008
£m

7.7
(9.1)
0.3
(1.1)

(1.3)
–
(3.5)
(4.8)

On the 1 April 2008, BBC Studios and Post Production Limited sold its Outside Broadcast businessfor £19.3million consideration to SIS Outside Broadcast Limited, part of the Satellite Information
Services Group. Outside Broadcast provides a range of mobile production units, communications andspecial camera solutions, based in Langley, Berkshire. A profit on sale has arisen in respect of the saleof the Outside Broadcasts business. All provisions relating to the closure have been recognised in thefinancial statements.
In the year ended 31 March 2008, an independent joint venture was created by BBC Worldwide, ITV
and Channel 4 to develop a new UK on-demand service known to the industry as Project Kangaroo. On
4 February 2009, the Competition Commission reported that it believed the proposed venture would
create a lessening of competition in the emerging video on demand industry in the UK, and blocked thejoint venture from continuing. As a result the group has terminated its investment and during the year
ended 31 March 2009 exceptional costs totalling £9.1million have been charged to the income andexpenditure account. The exceptional costs comprise the write down of the group’s investment in
the Kangaroo venture, termination costs incurred to 31 March 2009, the write-down of capitalised
development expenditure relating to software and provision for the group’s remaining obligations
after this date.
On 20 March 2007 the Executive Board, following a decision by the BBC Trust, suspended BBC jam, theBBC’s online interactive learning service for 5–16 year olds. The Trust’s decision followed extensive
discussions with Government and the European Commission about how to address allegations fromsome in the industry that BBC jam was damaging their interests. A provision of £0.3million (2008:£1.5million) for the costs of redundancy and terminating contracts with content suppliers remains at
the end of the current year.

F31

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
6 PROFIT ON DISPOSAL OF FIXED ASSETS
Disposal of properties

2009
£m

2008
£m

15.9

2.0

The profit of £15.9million in 2009 relates to the disposal of Queen Margaret Drive in Glasgow.
Profits or losses on the disposal of tangible fixed assets in the ordinary course of business, that represent
an adjustment to depreciation, are recognised within operating surplus/(deficit) and disclosed in aggregate
in Note 3a.

7 INTEREST
7a Interest receivable and similar items
Interest receivable
Share of joint venture and associate interest receivable
Fair value gains on interest rate swaps, caps and collars
Interest receivable and similar items

2009
£m

2008
£m

7.9
1.2
–
9.1

11.6
2.0
0.1
13.7

2009
£m

2008
£m

(15.7)
(2.4)
(0.4)
(5.1)
(2.7)
(26.3)(12.4)
(1.6)
(0.7)
(3.6)
–
(18.3)

7b Interest payable and similar items
Interest payable on bank and other loans
Share of joint venture and associate interest payable
Interest payable on finance leases
Fair value losses on interest rate swaps, caps and collars
Unwinding of discounts in provisions
Interest payable and similar items

17

F32

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8 PENSIONS
8a Group pension schemes
The group operates several pension schemes. The BBC Pension Scheme, to which most employees
belong, and a small unfunded scheme (which is closed to new members) are defined benefit schemes.
Additionally the Group Personal Pension Scheme and several small schemes are defined contribution
schemes.
Note 8b sets out the assets and liabilities and charges for each scheme. Note 8c provides further
details on the BBC Pension Scheme.

8b Pension charges and balances within the financial statements
8b i Pension (liability)/asset included in the balance sheet

Fair value of scheme assets
Actuarial value ofscheme liabilities
Closing net pension(liability)/asset

BBC
PensionScheme2009£mUnfundedscheme2009£m6,454.0–(6,592.6)(138.6)

Total
2009
£m

BBC
PensionScheme2008£mUnfundedscheme
2008
£m

Total
2008
£m

6,454.0

8,042.0–

8,042.0(4.7) (6,597.3)(7,513.6)(5.1)(7,518.7)

528.4

(5.1)

523.3

(4.7)

(143.3)8b ii Pension (charges)/income in statement of income and expenditure
Defined benefit schemes

2009
Current service cost
Past service cost
Gain on curtailment
Total operating charge*
Expected return on pension scheme assets
Interest on pension scheme liabilities
Net finance income/(cost)
Net cost in statement of income andexpenditure
2008
Current service cost
Past service cost
Total operating charge
Expected return on pension scheme assets
Interest on pension scheme liabilities
Net finance income/(cost)
Net cost in statement of income and expenditure*

BBC Pension
Scheme£m

Unfundedscheme£m

Definedcontribution
scheme£m(161.8)(24.2)
10.0(176.0)626.0(508.4)
117.6

–
–
–
–
–
(0.3)
(0.3)

(2.7)
–
–
(2.7)
–
–
–

(164.5)(24.2)
10.0(178.7)626.0(508.7)117.3(58.4)

(0.3)

(2.7)

(61.4)(164.8)(21.5)(186.3)562.7(413.6)149.1(37.2)

–
–
–
–
(0.3)
(0.3)
(0.3)

(1.2)
–
(1.2)
–
–
–
(1.2)

(166.0)(21.5)(187.5)562.7(413.9)148.8(38.7)All schemes£m

The current service
cost is the underlying costto the BBC of pension
rights earned by employees
during the year.
The past service costarises from members of
the scheme becoming
entitled to improved
defined retirement benefits,
resulting in a charge foryears of service before theaward of the improvement.
The expected returnon pension scheme
assets comprises
estimates based on
predictions of future
performance and economic
conditions.

Of the total operating charge of £176.0million for 2008/09 (2008: £186.3million), £17.1million was recognised as an expensein 2007/08 (2008: £13.1million recognised as an expense in 2006/07) as part of exceptional redundancy costs in accordancewith FRS 12. The remaining £158.9million (2008: £173.2million) was recognised in the current year.

F33

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8b iii Movement in (deficit)/surplus during the year

Surplus/(deficit) in schemeat the start of the year
Movement in the year:
Current service cost
Contributions(from employer)*
Past service costs
Gain on settlements
and curtailments
Net finance income/(cost)
Actuarial (loss)/gain recognisedin the statement of total
recognised gains and losses(Deficit)/surplus in schemeat the end of the year*

BBC
PensionScheme2009£mUnfundedscheme
2009
£m

528.4

Total
2009
£m

BBC
PensionScheme2008£mUnfundedscheme
2008
£m

Total
2008
£m

(5.1)

523.3

329.3

(5.2)

324.1

(161.8)–(161.8)(164.8)–(164.8)176.0(24.2)

0.3
–

176.3
(24.2)

184.0(21.5)

0.4
–

184.4
(21.5)

10.0
117.6

–
(0.3)

10.0
117.3

–
149.1

–
(0.3)

–
148.8

(784.6)0.4(784.2)

52.3

–

52.3

(138.6)(4.7)(143.3)

528.4

(5.1)

523.3

The defined
contribution schemes
do not give rise to balance
sheet pension assets/(liabilities) as there is no
ongoing liability for theemployer from theseschemes once thecontributions due for theyear have been settled.

The contribution shown for the unfunded scheme represents the pensions paid to members during the year.

The assumptions for pension scheme liabilities of the unfunded scheme are the same as the main
scheme. As the scheme is unfunded there are no assets and hence no expected return on assets.

8c BBC Pension Scheme
The BBC Pension Scheme is the main pension scheme of the group and covers the majority of
employees. This scheme provides salary related benefits on a defined benefit basis funded from assets
held in separate trustee-administered funds.
The pension scheme trustees manage the scheme in the short, medium and long term. They makefunding decisions based on valuations which take a longer-term view of the assets required to fundthe scheme’s liabilities.
Valuations of the scheme are performed by Watson Wyatt, consulting actuaries. Formal valuations
are undertaken at least every three years.
8c i Scheme financial position
FRS 17 valuation

2009
£m

2008
£m

2007
£m

2006
£m

2005
£m

Scheme assets*
Scheme liabilities(Deficit)/surplus

6,454.0(6,592.6)(138.6)

8,042.0(7,513.6)
528.4

8,117.9(7,788.6)
329.3

7,843.4(7,675.9)
167.5

6,341.7(6,763.8)(422.1)

98%

107%

104%

102%

94%

Percentage by which scheme assets coverliabilities*

The FRS 17 valuation
takes assets at their market
value and discounts theaccrued liabilities byreference to the discountrate of an AA rated
corporate bond.

Quoted equities included within the scheme assets have been valued using the current bid price except for 2005 which has
not been restated and is valued using the mid-market price, as allowed under the Amendment to FRS 17. The impact of therestatement was to reduce scheme assets by £2.7million and £10.4million at 31 March 2006 and 2007 respectively.

Key movements in the year are shown in Note 8b iii.
A deferred tax asset or liability will not arise for the group because most of the group’s public service
activity is not subject to taxation.

F34

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8c ii Changes in present value of scheme liabilities
The table below illustrates the movement on the scheme liabilities during the year. The key things which
affect this are the additional year of pension benefits earned (and employee contributions made), interest
charged on existing liabilities, any gains or losses relating to participants leaving the pension scheme,changes in assumptions made and benefits paid out during the year.

Opening present value of scheme liabilities
Current service cost
Past service cost
Gains on curtailments
Interest on pension scheme liabilities
Experience (gains)/losses arising on scheme liabilities
Changes in assumptions underlying scheme liabilities
Contributions by scheme participants
Benefits paid
Closing present value of scheme liabilities

2009
£m

2008
£m

7,513.6
161.8
24.2(10.0)
508.4(171.3)(1,138.1)
14.2(310.2)
6,592.6

7,788.6
164.8
21.5
–
413.6
149.1
(786.0)53.1(291.1)
7,513.68c iii Changes in the fair value of scheme assets
The table below illustrates the movement on the scheme assets during the year. The key things which
affect this are the additional year of contributions made, changes in the value of the pension scheme
assets (including the investment return) and benefits paid during the year.
A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefit members. The
contributions paid via the salary sacrifice arrangement have been treated as employer contributions.

Opening fair value of scheme assets
Expected rate of return on scheme assets
Actuarial losses on scheme assets
Contributions by employer
Contributions by scheme participants
Benefits paid
Closing fair value of scheme assets

2009
£m

2008
£m

8,042.0626.0(2,094.0)
176.0
14.2
(310.2)
6,454.0

8,117.9
562.7(584.6)184.0
53.1(291.1)
8,042.0

F35

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8c iv Scheme assets
The allocation of assets by the Trustees is governed by a need to manage risk against the desire forhigh returns and any liquidity needs. A high percentage of assets are held in equities which the Trustees
expect will produce higher returns in the long term. The target allocation, based on market values,for equities is 50% (UK equities 25% and overseas equities 25%), bonds 30%, property 10% andalternatives 10%.
Type of asset

2009
£m

Equities
Bonds
Property
Alternatives*
Cash
Total assets

3,313
1,598
796
508
239
6,454

Actual return on pension scheme assets**(1,468)

%

51
25
12
8
4

2008***
£m

4,624
1,693
1,001
455
269
8,042

%

58
21
12
6
3

(22)

* Alternatives include private equity, debt and currency.
** This constitutes realised gains from the receipt of investment income (eg dividends and rent), transactions where assets are
sold and unrealised fair value changes.
*** The new Pensions SORP requires that futures are now accounted for on a market value basis, as opposed to an economic
exposure basis. The comparatives for Equities, Bonds and Cash have been amended to reflect this change.

8c v Pension (losses)/gains in statement of total recognised gains and losses
2009
£m

2008
£m

Actual return less expected return on pension scheme assets
Experience gains/(losses) arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Net (loss)/gain recognised in statement of total recognised gains and losses(2,094.0)
171.3
1,138.1(784.6)(584.6)(149.1)
786.0
52.3

Cumulative loss recognised in statement of total recognised gains and losses(2,525.4)(1,740.8)

These gains and losses
arise from actual
performance being
different from thatpredicted – for example,
changes in economic
conditions or thedemographic profile of
BBC employees. Only
defined benefit schemes
give rise
to gains and losses in thestatement of recognised
gains and losses.

F36

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8c vi History of experience gains and losses
Experience adjustments on scheme assets:
Amount (£million)
Percentage of scheme assets
Experience adjustments on scheme
liabilities:
Amount (£million)
Percentage of scheme liabilities
Total actuarial (loss)/gain recognised instatement of recognised gains and losses:
Amount (£million)
Percentage of scheme liabilities

2009

2008

2007

2006

2005

(2,094.0)
32.4%(584.6)
7.3%(121.0)1.5%

1,246.5
15.9%

198.7
3.1%

171.3
2.6%

(149.1)2.0%(164.6)
2.1%

208.6
2.7%

(1.4)
0.0%

(784.6)
11.9%

52.3
0.7%

136.1
1.7%

658.4
8.6%

80.9
1.2%

8c vii Funding the scheme
As a result of the 2007 actuarial valuation by Watson Wyatt, it was agreed between the BBC and thepension scheme trustees that the employer contributions would increase to 19.35% from 1 July 2008.
Employee contributions rose from 6% to 6.75% from 1 April 2009 and will rise to 7.5% from 1 April
2010 and employer contributions decreased from 19.35% to 18.6% from 1 April 2009 and will decrease
to 17.85% from 1 April 2010.
A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefit members. The
contributions paid via the salary sacrifice arrangement have been treated as employer contributions.
The next formal actuarial valuation is expected to be performed as at 1 April 2010.

Contribution rates

Employer
Employee (Old and New Benefit)
Employee (Career Average Benefit)
Underlying cost of scheme to BBC as % of
pensionable salaries*

2011%

Projections
2010
%

2009
%

2008
%

2007
%

17.85
7.5
4.0

18.6
6.75
4.0

18.8/19.35
6.0
4.0

18.8
6.0
4.0

7.5
5.5/6.0
4.0**

17.85

18.6

18.8/19.35

18.8 19.3/18.8* Excludes the cost effectively paid for by the employee and the salary sacrifice element.
** The Career Average Benefit scheme started on 1 November 2006.

Contributions totalling £182.5million are expected to be paid in 2010.

F37

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8c viii Principal actuarial assumptions
The calculation of the scheme assets and liabilities, for FRS 17 purposes, requires a number ofassumptions, both financial and demographic, to be made. The principal assumptions made by
the actuaries at the balance sheet date were:Principal financial assumptions

FRS 17 valuation
Rate of increase in salaries
Rate of increase in pension payments:
Old Benefits
New Benefits
Career Average Benefits
Inflation assumption
Discount rate

2009
%

2008
%

2007
%

4.4**

5.6*

5.0

3.0
2.7
2.4
2.9
7.2

3.6
3.4
2.5
3.6
6.9

3.1
2.9
2.4
3.1
5.4

The discount rate for
the FRS 17 valuation istaken as the rate for an AA
rated corporate bond.

* This is the assumption from 1 April 2010. The assumption to 31 March 2010 is 4.6% per annum.
** This is the assumption from 1 April 2011. The assumption to 31 March 2011 is 3.9% per annum.

The average life expectancy assumptions, for members after retirement at 60 years of age, are as follows:2009
Number of
years

2008
Number of
years

2007
Number ofyears

Retiring today
Male
Female

26.9
29.6

26.6
29.1

23.5
25.7

Retiring in 20 years
Male
Female

28.9
31.7

28.1
30.7

24.5
26.8

Principal demographic assumptions

The longevity assumptions have been selected to reflect the characteristics and experience of themembership of the scheme. This has been done by adjusting standard mortality tables (PMAC07MC+0.5
and PFAC07MC+1) which reflect recent research into mortality experience in the UK.
The demographic assumptions have been updated from those used for the actuarial valuation of thescheme as at 1 April 2007 to reflect the likely assumptions which will be used for the actuarial valuationof the scheme as at 1 April 2010.
Expected long-term rate of return (per annum)*

2009
%

2008
%

Equities
Bonds and gilts
Property
Alternatives
CashTotal expected rate of return

8.6
3.7
6.2
8.6
4.4
6.9

9.3
4.5
6.9
9.3
5.1
7.9

*

As at the beginning of each financial year.

F38

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8c ix Scheme membership analysis and maturity profile

Contributors
Pensioners
Dependents
Deferred pensioners

2009
Number

2008
Number

2007
Number

17,774
17,9703,863
19,137

18,736
17,5693,798
18,286

19,974
17,372
3,744
17,723The scheme is becoming more mature with the number of contributors decreasing along with
the number of pensioners increasing. This is also reflected in the reduction in cash inflows shownin Note 8cx.

The maturity of ascheme provides anindication of the cash
requirements of thescheme and the likely
attitude of the Trustees torisk within their investment
policy. The more mature ascheme, the more likelythat Trustees will favour
low risk investments.

8c x Scheme cash flows (day-to-day liquidity)
In 2009 cash inflows of the pension scheme exceeded its cash outflows, but to a lesser degree than in
2008. The employer’s contribution rate increased from 18.8% to 19.35% from 1 July 2008 but this has
been offset by a significant reduction in member contributions. In addition, there has been an increase inpensions paid and lump sums on retirement which have combined to reduce the cash inflow compared
to 2008.
In 2008 cash inflows of the pension scheme exceeded its cash outflows, largely as a result of the increasein the employer’s contribution rate from 7.5% to 18.8% from 1 April 2007.
In 2007 cash inflows of the pension scheme exceeded its cash outflows, largely as a result of the increasein the employer’s contribution rate from 6.0% to 7.5% from 1 April 2006 and the employee’s contribution
rate from 5.5% to 6.0% from 1 September 2006. Offset against this, was a £16.8million transfer to the
Red Bee Media Pension Plan on 30 June 2006.

Contributions (employer and employee)
Investment income
Cash inflows
Payments of pensions and transfers out
Expenses
Net cash inflow

2009
£m

2008
£m

2007
£m

196.3
225.2
421.5
(313.1)(36.9)
71.5

242.9
225.1
468.0
(286.5)(42.0)
139.5

163.6
206.4
370.0
(303.6)(33.5)
32.9

8d UK Public Service Broadcasting pension charge
UK Public Service Broadcasting, in accordance with the group pension provision in FRS 17, accounts for
the BBC Pension Scheme as if it were a defined contribution scheme. This is because it is not possible toidentify the UK Public Service Broadcasting’s share of the underlying assets and liabilities of the Scheme
on a reasonable and consistent basis.
The expenditure for UK Public Service Broadcasting of £161.0million (2008: £165.0million) therefore
represents the contributions payable in the year. A salary sacrifice arrangement was introduced on 1 June2008 for Old and New Benefit members. The contributions paid via the salary sacrifice arrangement
have been treated as employer contributions.
No contributions were prepaid or accrued as at 31 March 2009 (2008: nil). The contributions are set
based on the funding needs identified from the actuarial valuation and they may therefore vary fromthe underlying cost after taking into account factors such as the actuarial surplus.

F39

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
9 TAXATION
9a Analysis of charges for the year
The charge for the year, based on the rate of corporation tax of 28% (2008: 30%) comprised:
Note

2009
£m

2008
£m

9b

22.5
(11.1)
11.4
3.4
14.8
10.1
16.0
40.9

16.8
(5.3)
11.5
–
11.5
8.4
14.3
34.2

(12.0)(4.9)(16.9)
24.0

6.4
(3.3)
3.1
37.3

Current tax
UK corporation tax
Deduct: double tax relief
Adjustments in respect of prior years
Foreign tax
Share of associates’ and joint ventures’ tax
Total current tax
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior years
Total deferred tax (credit)/charge
Total charge for the year

9d

9b Factors affecting the tax charge
The group is only liable to taxation on those activities carried out with a view to making a profit and onrent, royalties and interest receivable. The BBC does not therefore receive relief for all its expenditure,and the tax assessed for the year consequently differs from the standard rate of corporation tax in the
UK. The differences are explained below:
Note

Surplus before tax
Surplus before tax multiplied by standard rateof corporation tax in the UK of 28% (2008: 30%)
Effects of
Public services taxable external income(Non-Taxable Licence Income)/Disallowable costs of Public Services
Non-cash element of net group pension charge
Commercial activities
Non-taxable income
Disallowed expenditure
UK taxation on intra-group overseas dividends
Depreciation in excess of (less than) capital allowances
Tax differential regarding overseas earnings
Other timing differences
Other – Associates
Adjustments in respect of prior years
Current tax charge for the year

9a

2009
£m

2008
£m

278.2

139.5

77.9

41.9

6.6
(37.3)(32.9)

4.5
30.7(44.1)

–
6.9
–
6.5
3.0
5.0
1.8
3.4
40.9

(2.9)
6.7
1.0
(1.4)
2.8
(5.0)
–
–
34.2

The tax impact of loss on sale and termination (Note 5) of operations and profit on disposal of fixed
assets (Note 6) is £nil (2008: £nil).

F40

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
9c Factors that may affect future tax charges
The group anticipates that the future tax charge will not alter significantly since all licence fee income
is free of tax.

9d Deferred tax analysis
In accordance with FRS 19 ‘Deferred Tax’, the group provides for all deferred tax liabilities in full lessavailable deferred tax assets at 28% (2008: 28%).
Movement in deferred tax asset in the year

Net asset at start of year
Exchange adjustment
Deferred tax (credit)/charge
Acquired on investment acquisition
Current year overseas tax losses reclassified as current tax
Net asset at end of year

Note

9a

2009
£m

2008
£m

(6.1)
(5.6)
(16.9)
1.3
0.7(26.6)

(9.6)
1.8
3.1
(1.4)
–
(6.1)

(5.6)
(2.7)
–
(8.3)
(18.3)(26.6)

8.8
(0.1)
8.7
–
(14.8)(6.1)

Analysis of deferred tax (asset)/provision(Decelerated)/accelerated capital allowances
Other timing differences
Deferred tax provision
Deferred tax asset
Overseas timing differences
Net deferred tax asset at end of year

1715

10 INTANGIBLE FIXED ASSETS
Note

Cost
At 1 April 2008
AdditionsExchange adjustment
At 31 March 200919

Goodwill
£m

94.5
10.6
2.9
108.0

Amortisation
At 1 April 2008
Charge for the year
At 31 March 2009

7.2
5.1
12.3

Net book value
At 31 March 2009
At 31 March 2008

95.7
87.3

Goodwill is the difference
between the value paid fora business and the fairvalue of its net assets. It
represents the premium
the purchaser is preparedto pay for the business.

F41

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
11 TANGIBLE FIXED ASSETS
11a Group
Land andbuildings£mPlant and Furniture andmachinery
fittings£m£mAssets underconstruction
£m

Total
£m

Cost or valuation
At 1 April 2008
Additions
Brought into service
Disposals
Transfers
Exchange adjustments
At 31 March 2009

439.3
9.8
1.1
(9.3)
–
0.9
441.8

1,086.7
64.3
27.1(110.2)8.2
2.9
1,079.0

162.5
9.1
3.0
(9.2)
(8.2)
0.5
157.7

71.2
64.4
(31.2)
(2.1)
–
–
102.3

1,759.7
147.6–(130.8)–4.3
1,780.8

Depreciation
At 1 April 2008
Charge for the year
Disposals
Transfers
Impairment
Exchange adjustments
At 31 March 2009

260.8
12.1
(3.1)
–
3.7
0.7
274.2

674.6
100.8
(96.9)
3.2
9.8
2.1
693.6

76.4
15.8
(5.2)
(3.2)
0.8
0.4
85.0

–
–
–
–
–
–
–

1,011.8
128.7(105.2)–
14.3
3.2
1,052.8

Net book value
At 31 March 2009

167.6

385.4

72.7

102.3

728.0

At 31 March 2008

178.5

412.1

86.1

71.2

747.9

BBC World Service’s and BBC Monitoring’s plant and machinery and furniture and fittings are stated at
the estimated current replacement cost of the assets, as at 1 April 1996, as adjusted for remaining service
potential, or cost if acquired later, less accumulated depreciation.
There is no significant difference (2008: no significant difference) between the net book value of thesetangible fixed assets and their value as determined on an historical cost basis. The assets revalued in
1996 have a useful life remaining of one year.
The impairment charge for the year is comprised of the write down of assets in BBC Studios and Post
Production Limited £6.4million, £4.9million in BBC Worldwide Limited of which £3.4million relates to
Project Kangaroo (Note 5), and £3.0million in Public Service Broadcasting for the impairment ofWoodlands land and buildings.

F42

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
11b UK Public Service Broadcasting
Land andbuildings£mPlant and Furniture andmachinery
fittings£m£mAssets underconstruction
£m

Total
£m

Cost
At 1 April 2008
Additions
Brought into service
Disposals
Transfers
At 31 March 2009

365.8
1.9
1.0
(7.3)
–
361.4

647.5
24.6
13.7
(46.3)
8.2
647.7

132.1
4.9
2.0
(8.1)
(8.2)
122.7

46.4
49.7
(16.7)––
79.4

1,191.8
81.1–(61.7)–
1,211.2

Depreciation
At 1 April 2008
Charge for the year
Disposals
Impairment
Transfers
At 31 March 2009

213.1
8.2
(2.5)
3.0
–
221.8

393.2
58.1
(41.4)
–
3.2
413.1

62.1
11.8
(4.5)
–
(3.2)
66.2

–
–
–
–
–
–

668.4
78.1
(48.4)
3.0–
701.1

Net book value
At 31 March 2009

139.6

234.6

56.5

79.4

510.1

At 31 March 2008

152.7

254.3

70.0

46.4

523.4

Group
2009
£m

UK Public
Service
Group Broadcasting
2008
2009
£m
£m

UK Public
Service
Broadcasting
2008
£m

17.1
87.5
104.6
21.0
42.0
167.6

16.5
98.5
115.0
27.3
36.2
178.5

11c Land and buildings at net book value

Undepreciated land
Freehold buildings
Total freeholds
Long leaseholds
Short leaseholds
Total

16.8
80.2
97.0
21.0
21.6
139.6

16.5
88.7
105.2
24.6
22.9
152.7

Group
2009
£m

UK Public
Service
Group Broadcasting
2008
2009
£m
£m

UK Public
Service
Broadcasting
2008
£m

21.5
(15.2)
6.3

24.4(15.0)
9.4

11d Finance leases
Assets held under finance leases, capitalised and included in tangible fixed assets:

Cost
Accumulated depreciation
Net book value

16.4(12.2)
4.2

19.9(13.1)
6.8

The finance leases primarily relate to IT equipment.

F43

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
12 INVESTMENT IN PROGRAMMES FOR FUTURE SALE
Group
£m

Cost
At 1 April 2008
Exchange adjustment
AdditionsElimination in respect of programmes fully amortised
At 31 March 2009

173.9
18.5
100.8
(60.2)
233.0

Amortisation
At 1 April 2008
Exchange adjustment
Charge for the year
Elimination in respect of programmes fully amortised
At 31 March 2009

88.8
17.7
87.0
(60.2)
133.3

Net book value
At 31 March 2009

99.7

At 31 March 2008

85.1

Investment by BBC Worldwide in programmes for future sale relates to programmes provided by the
BBC and external producers. Additions include £84.2million direct investment in BBC programmes(2008: £75.1million).

F44

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13 INVESTMENTS AND OTHER INTERESTS
Details of significant joint ventures and associates along with principal subsidiary undertakings, including
their activities, are provided in Note 29.

13a Movements in the year for the Group
Note

Cost
At 1 April 2008
Additions
Provision
At 31 March 2009

Interests
in joint
ventures£mInterests inTradeassociates investments
£m
£m

Group
Total
£m

29.5
6.8
–
36.3

(2.7)
0.4
–
(2.3)

2.7
–
(2.7)
–

29.5
7.2
(2.7)
34.0

19.6
0.1
(3.4)
16.3

4.0
9.9
(0.9)
13.0

–
–
–
–

23.6
10.0
(4.3)
29.3

16.5
2.0
36.3
(3.5)
–
(4.2)
(19.4)(33.4)
1.6
(4.1)

2.5
(0.3)
(6.3)
(0.5)
(1.3)
–
–
(3.6)
10.0
0.5

–
–
–
–
–
–
–
–
–
–

19.0
1.7
30.0
(4.0)
(1.3)
(4.2)
(19.4)(37.0)
11.6(3.6)

Loans receivable from joint ventures andassociates
At 1 April 2008
Additions
Provision
At 31 March 2009

–
5.7
(5.7)
–

–
–
–
–

–
–
–
–

–
5.7
(5.7)
–

Net book value
At 31 March 2009

48.5

11.2

–

59.7

At 31 March 2008

65.6

3.8

2.7

72.1

68.8
(20.3)
48.5

11.2
–
11.2

–
–
–

80.0
(20.3)
59.7

Goodwill
At 1 April 2008
Additions
Amortisation and impairment
At 31 March 2009
Share of post acquisition reserves
At 1 April 2008
Exchange adjustment
Share of profits/(losses) after taxation
Provision for unrealised profit
UK.TV Elimination of pre-acquisition reserves
Asset impairment
UK Gold Holding Limited reserves adjustment
Dividends received
Adjustment to reflect effective obligation*
At 31 March 2009

The net book value at 31 March 2009 ispresented within:
Interests in joint ventures and associates
Provisions*

13d

13d, 19b

13e

Under the terms of the agreements with the other investors in certain of the group’s joint ventures and associates, the group
has no obligation to fund losses incurred by those joint ventures and associates or to make good their net liabilities. As aresult the group does not share in the losses of the relevant entities. The share of net liabilities not recognised comprised:– Joint ventures: £22.8million (2008: £42.2million – updated to reflect the final statutory position of UKGH see Note 13e)
– Associates: £191.4million (2008: £107.9million).

F45

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13b Group share of joint ventures’ and associates’ assets and surplus
Group share of joint
ventures
2009
2008
£m
£m

Group share of associates
2009
2008
£m
£m

2009
£m

Total
2008
£m

Current assets
Non-current assets
Total assets

165.1
44.3
209.4

178.1
39.3
217.4

39.0
31.8
70.8

46.7
12.9
59.6

204.1
76.1
280.2

224.8
52.2
277.0

Current liabilities
Non-current liabilities
Total liabilities(96.1)(87.6)(183.7)(110.0)(84.0)(194.0)(38.5)(212.5)(251.0)(41.5)(122.2)(163.7)(134.6)(300.1)(434.7)(151.5)(206.2)(357.7)

Adjustment to reflect
effective obligation

22.8

42.2

191.4

107.9

214.2

150.1

Total net book value

48.5

65.6

11.2

3.8

59.7

69.4

68.8
(20.3)
48.5

65.6
–
65.6

11.2
–
11.2

3.8
–
3.8

80.0
(20.3)
59.7

69.4
–
69.4

Income

300.5

274.6

57.8

48.8

358.3

323.4

Operating surplus for the year

44.5

58.8

4.8

1.5

49.3

60.3

The net book value
is presented within:
Interests in joint ventures
and associates
Provisions

Prior year comparatives were updated to reflect the final statutory position of UKGH (see Note 13e).
Certain 2entertain employees participate in the Woolworths Group Pension Scheme which is managed
by the Woolworths Group Pension Trust Limited. Following the administration of Woolworths Groupplc, a liability crystallised in 2entertain in respect of this pension scheme. The group’s share of joint
venture results includes a £7.5million charge in respect of this pension liability, being 60% of theoperating exceptional expense recorded by 2entertain. The group’s share of the corresponding tax credit
was also equity accounted for, resulting in a net £5.5million impact on the group’s after taxation results.

F46

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13c Disclosure in respect of group share of significant joint venture
In accordance with FRS 9 ‘Associates and Joint Ventures’ 2entertain Limited meets the criteria for
additional disclosures:Group share of:

2entertain Limited
2009
2008
£m
£m

Turnover

155.6

146.8

Surplus before taxation
Taxation
Surplus after taxation
Goodwill amortisation
Share of joint venture surplus after taxation

25.6
(7.7)
17.9
(1.5)
16.4

44.0
(12.1)
31.9
(1.5)
30.4

Fixed assets
Current assets
Gross assets

9.5
69.6
79.1

8.8
74.2
83.0

Liabilities less than one year
Liabilities more than one year
Gross liabilities
Goodwill
Net book value(59.7)–(59.7)
12.6
32.0(72.5)–(72.5)
14.1
24.6

Group share of 2entertain Limited’s results includes a £7.5million charge and a corresponding tax credit,
resulting in a net £5.5million charge in relation to a pension liability following the administration of
Woolworths Group plc.

F47

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13d Additions to joint ventures and associates
The additions in joint ventures during the year relate to the investment in UK VoD LLP and the Park
Publishing Partnership.
The additions in associates during the year relate to the acquisition of minority shareholdings in
Clerkenwell Films Limited, Hardy Pictures Limited, Plain Vanilla Productions LLP, Big Talk Productions
Limited, Baby Cow Productions Limited, Sprout Pictures (TV) Limited and Temple Street Productions
Inc. During the year, the group acquired the remaining 80% of the issued share capital of UK TV Pty
Limited (‘UK.TV‘). The group previously held a 20% interest in UK.TV (note 19a).

13e UK Gold Holdings Limited (UKGH)
The group headed by UK Gold Holdings Limited (UKGH) has been cumulatively profitable sinceformation in 1997 but has net liabilities which arose from acquisition goodwill written off to reserves in
1997. In prior years, the group has not recognised a share of these net liabilities but instead recorded
dividends received, as the group has no obligation to fund losses incurred by the entity or to make good
its net liabilities. These dividends approximated to the group’s share of operating profits. In the current
year, the group has commenced equity accounting because dividends received in the current year are
no longer considered to present a fair reflection of the group’s share of operating profits. This is due to
UKGH’s distributions in the year ended 31 March 2009 being materially lower than its operating profit.
The recognition of the group’s share of net liabilities (which do not represent operating losses) as at
1 April 2008 has been recorded in the Consolidated Statement of Total Recognised Gains and Losses,
resulting in a reserves adjustment of £19.4million. A share of operating profit of £15.0million has beenrecognised in the profit and loss account (2008: £6.2million dividends credited to operating profit).

13f Movements in the year for UK Public Service Broadcasting

At 1 April 2008
Surplus for the year
At 31 March 2009

Interest in
BBC World
Serviceand BBC
Monitoring
net assets£mInterests in
subsidiaries
£m

Total
£m

170.7
0.4
171.1

125.3
–
125.3

296.0
0.4
296.4

UK Public
Service
Group Broadcasting
2009
2008
£m
£m

UK Public
Service
Broadcasting
2008£m

14 STOCKS
Group
2009
£m

Raw materials
Work in progress– originated programmes– books, audiobooks and DVDs
Finished goods– acquired programmes and films– originated programmes– books, audiobooks and DVDs
Total

2.9

2.0

0.1

0.2

269.8
6.1

281.5
5.9

269.8
–

281.5
–

127.4
74.1
10.7
491.0

118.7
79.8
12.2
500.1

106.5
74.1
–
450.5

108.7
79.8
–
470.2

F48

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
15 DEBTORS

Note

Receivable within one year
Trade debtors
Department for Culture, Mediaand Sport – licence fee debtors
Amounts owed by subsidiaries
Amounts owed by associates
and joint ventures
VAT recoverable
Deferred tax asset
Other debtors
Prepayments
Derivative financial assets
Total debtors due within one year
Receivable after morethan one year
Deferred tax asset
Other debtors
Amounts owed to joint ventures
and associates
Prepayments
Derivative financial assets
Total debtors due after more than
one year
Total

9d

23c

9d

23c

Group
2009
£m

Group
2008
£m

UK Public
Service
Broadcasting2009£m

UK Public
Service
Broadcasting
2008
£m

143.8

138.7

17.2

17.2

384.6
–

368.4
–

384.6
91.1

368.4
71.7

41.4
30.8
4.0
19.7
196.1
10.9
831.3

33.1
26.2
3.0
13.1
209.8
2.6
794.9

0.7
28.9
–
7.6
151.1
–
681.2

0.2
23.6
–
10.2
164.0
–
655.3

22.6
6.6

11.8
6.2

–
0.2

–
0.2

2.8
78.0
110.0
12.2

–
29.5
47.5
2.6

–
77.2
77.4
–

–
20.9
21.1
–

122.2

50.1

77.4

21.1

953.5

845.0

758.6

676.4

Licence fee debtors
are amounts due from the
Department for Culture,
Media and Sport. Althoughlicence fee income
represents the value of
licences issued (recognised
when a licence is issued to
the licence fee payer), thecash in relation to theselicences is paid to the BBC
by the Department for
Culture, Media and Sport,
rather than being received
directly from the licencefee payer. As a result the
debtor at the year end
represents licences issued
for which cash has not
yet been paid in full to
the BBC.

16 CREDITORS
16a Prompt payment policy
It is the BBC’s policy to comply with the Better Payment Practice Code in relation to the paymentof suppliers, provided that the supplier is complying with the relevant terms and conditions of theircontracts. The BBC monitors compliance against the terms of this code. Payments for programmeacquisitions are made in accordance with contractual terms. The group’s number of creditor days
outstanding in respect of trade creditors at 31 March 2009 was 32 days (2008: 39 days).
Residual creditors and associated costs have been excluded for the purpose of this calculation, as
they relate to payments to artists and contributors other than trade creditors.

F49

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
16b Amounts falling due within one year

Note

Bank and other loans
Bank loan and overdrafts
Unsecured loan notes

21, 2321, 23

Trade creditors
Programme creditors
Programme acquisitions
Salaries and wages
Residual copyright payments
Other trade creditors
Other creditors
Amounts owed to subsidiaries
Amounts owed to joint ventures andassociates
Corporation tax
Other taxation and social security
Obligations under finance leases
Other*

23b

Accruals and deferred income
Accruals and deferred income
Licence savings stamps deposits and direct
debit instalments
Derivative financial liabilities

23c

Total
*

Group
2009
£m

UK Public
Service
Group Broadcasting
2009
2008
£m
£m

UK Public
Service
Broadcasting
2008
£m

2.5
3.3
5.8

58.6
0.7
59.3

–
–
–

–
–
–

60.7
49.8
59.6
38.5
170.8
379.4

68.4
47.3
68.9
35.1
211.3
431.0

60.7
49.7
30.8
–
104.6
245.8

68.0
47.1
42.3
–
135.7
293.1

–

–

34.9

37.2

7.1
15.4
27.4
4.7
46.2
100.8

–
12.7
28.1
5.8
46.4
93.0

–
3.1
24.9
2.9
6.9
72.7

–
4.3
25.8
4.3
12.1
83.7

372.4

405.6

271.8

311.3

71.5
443.9
22.5

73.5
479.1
2.3

71.5
343.3
–

73.5
384.8
–

952.4

1,064.7

661.8

761.6

Other creditors include a £32.3million (2008: £31.0million) liability in relation to a put option exercisable by minority
shareholders. The increase in the liability since the previous year-end date is due to exchange rate movements, as theliability is denominated in Australian dollars.

16c Amounts falling due after more than one year

Bank and other loans
Other creditors
Amounts owed to subsidiaries
Obligations under finance leases
Other
Derivative financial liabilities
Total

Note

Group
2009
£m

UK Public
Service
Group Broadcasting
2009
2008
£m
£m

21, 23

268.0

140.1

–

–

–
16.9
7.9
24.8
21.8

–
22.3
9.6
31.9
0.6

7.3
1.3
8.0
16.6
–

9.5
2.7
9.7
21.9
–

314.6

172.6

16.6

21.9

23b

23c

UK Public
Service
Broadcasting
2008
£m

F50

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
17 PROVISIONS FOR LIABILITIESGroup

Licence fee
Restructuring
Litigation and insurance
Property
BBC jam suspension
Share of joint ventures net
liabilities
Other
Deferred tax
Total

Note

At 1 April
2008£m

Charge forthe year£m

Utilisedduring the
year
£m

5

20.6
120.0
13.8
16.4
1.5

21.2
44.1
2.9
4.1
0.1

(20.5)(67.4)
(1.7)
(0.9)
(0.9)

(0.1)
(3.8)
(2.4)
–
(0.4)

–
2.7
–
–
–

21.2
95.6
12.6
19.6
0.3

9d

–
1.3
173.6
8.7

20.3
1.4
94.1
–

–
(0.2)
(91.6)
(0.1)

–
(0.3)
(7.0)
(8.6)

–
–
2.7
–

20.3
2.2
171.8
–

182.3

94.1

(91.7)(15.6)

2.7

171.8

Releasedduring the Unwinding
year of discount
£m
£m

At
31 March2009£mLicence fee provisions are made for the expected level of refunds (money repayable on the unexpired
portion of a licence where the licence is no longer required) and revocations (where no money isreceived in relation to a licence sold). Licence fee provisions are expected to be utilised or released
within one year in line with the annual nature of the licence fee and are based on historical average
refunds and revocations adjusted for volume and sales price growth.
The restructuring provision includes a net charge for the year of £29.9million (2008: £99.8million)
for exceptional redundancy costs relating to change programmes occurring within the BBC and nonexceptional redundancy costs of £10.4million (2008: £11.9million) as per Note 4c. The Continuous
Improvement programme is a five-year programme to secure annual efficiencies ending in 2012/13.
Litigation and insurance provisions relate to self-insurance and production related insurance based on
previous experience as well as potential legal claims. Insurance provisions are expected to be utilisedin 2009/10 and 2010/11.
Property provisions relate to the cost of returning leasehold properties to their original condition at theend of the lease. The longest lease has 122 years remaining with the average lease life remaining being
eight years.
On 20 March 2007 the Executive Board, following a decision by the BBC Trust, suspended BBC jam, theBBC’s online interactive learning service for 5–16 year olds. The Trust’s decision followed extensive
discussions with Government and the European Commission about how to address allegations fromsome in the industry that BBC jam was damaging their interests. A provision of £0.3million (2008:£1.5million) for the costs of redundancy and terminating contracts with content suppliers remains at
the end of the current year.
Other provisions consist of a number of balances arising across the BBC in the normal courseof business.
Share of joint ventures net liabilities represents the amount held in provisions relating to the groupshare of joint ventures with net liabilities (see Note 13a).
Deferred tax is now an asset and is no longer shown in provisions.

F51

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
17 PROVISIONS FOR LIABILITIES continued
UK Public Service
Broadcasting

Note

Licence fee
Restructuring
Litigation and insurance
Property
BBC jam suspension
Other
Total

5

At 1 April
2008£m

Charge forthe year£m

Utilisedduring the
year
£m

20.6
112.7
12.2
12.0
1.5
1.0
160.0

21.2
17.4
1.6
2.8
0.1
1.4
44.5

(20.5)(57.7)
(1.5)
(0.1)
(0.9)
(0.1)
(80.8)

Pensionreserve£m

Total
operatingreserve£m

Releasedduring the Unwinding
year of discount
£m
£m

(0.1)
(3.1)
(1.0)
–
(0.4)
(0.3)
(4.9)

At
31 March
2009
£m

–
2.7
–
–
–
–
2.7

21.2
72.0
11.3
14.7
0.3
2.0
121.5

Capitalreserve£m

Other Revaluation
reserve*
reserve
£m
£m

Total
£m

18 RESERVESGroup

At 1 April 2008
Exchange differences
Surplus for thefinancial year
Actuarial loss on
defined benefit
pension schemes
Revaluation reservetransfer
Pension reservetransfer
Recognised on
acquisition ofUK.TV**
Recognised share ofjoint venture liabilities
Foreign exchange
movement
Capital reservetransfer
At 31 March 2009

Note

13e

Operatingreserveexcludingpensionreserve
£m

206.3
22.9

523.3

729.6
22.9

812.3
–

(31.0)–

1.6–

1,512.5
22.9

253.7

–

253.7

–

–

–

253.7

–

(784.2)(784.2)–––(784.2)

0.8

–

0.8

–

–

(0.8)

–

(117.6)

117.6

–

–

–

–

–

(1.3)

–

(1.3)

–

–

–

(1.3)

(19.4)–(19.4)–––(19.4)

1.3

–

1.3

–

(1.3)

–

–

9.8
356.5

–
(143.3)

9.8
213.2

(9.8)
802.5

–
(32.3)

–
0.8

–
984.2

350.8

(143.3)

207.5

638.1

(32.3)

–

813.3

5.7
356.5

–
(143.3)

5.7
213.2

164.4
802.5

–
(32.3)

0.8
0.8

170.9
984.2

Represented by:General groupreserves
BBC World Service
and BBC Monitoring
reserves
Total*

Other reserve comprises a put option of up to 25% of the issued share capital of Lonely Planet, which is exercisable by theminority shareholders for a period of up to 25 months from the acquisition date of 1 October 2007.
** An adjustment of £1.3million was recognised in the Reconciliations of movements in BBC reserves, being the cumulative
profits recognised by the group in relation to UK.TV for the period during which it was an associate. This adjustment isrequired to properly reflect the increase in stake in accordance with UK GAAP.

F52

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
18 RESERVES continued
UK Public Service Broadcasting

Operatingreserve£m

Capitalreserve£m

Revaluation
reserve£m

At 1 April 2008
Surplus for the financial year
Revaluation reserve transfer
Capital reserve transfer
At 31 March 2009

215.3
219.0
0.8
9.8
444.9

812.3
–
–
(9.8)
802.5

1.6 1,029.2
–
219.0
(0.8)
–
–
–
0.8 1,248.2

439.2
5.7
444.9

638.1
164.4
802.5

–
0.8
0.8

Total
£m

Represented by:

UK Public Service Broadcasting reserves
BBC World Service and BBC Monitoring reserves
Total

1,077.3
170.9
1,248.2

UK Public Service
Broadcasting, BBC World
Service and BBC
Monitoring are fundedfrom different sources.
As such, the reserves
relating to BBC World
Service and BBC
Monitoring are maintained
separately from the restof the group and are
restricted for use solely
on BBC World Service or
BBC Monitoring activities.

Under FRS 10 ‘Goodwill and Intangible Assets’ any newly arising goodwill must be capitalised andamortised over its useful life. As is permitted by the standard, goodwill arising in periods prior to 1999of £6.8million (2008: £6.8million) remains offset against the operating reserve.
The cumulative exchange differences at 31 March 2009 were a loss of £21.1million (2008: gain of£1.8million), of which a gain of £22.9million arose during the year (2008: gain of £1.0million). In accordancewith FRS 23 ‘The Effects of Changes in Foreign Exchange Rates’, any differences relating to years prior to2006 have not been separated out and remain within the operating reserve.

F53

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED

19 ACQUISITION OF BUSINESSES
19a Acquisition of UK.TV
On 1 July 2008 the group acquired the remaining 80% of the issued share capital of UK.TV, registeredin Australia for a total cash consideration of AU$31.2million (£15.1million). The group previously held
a 20% interest in UK.TV.
The total adjustments required to the book values of the assets and liabilities of UK.TV in order topresent the net assets of those companies at fair value and under the UK GAAP accounting policiesof the group were £0.6million. These are set out below:

Bookvalue*£m

Fair value
andaccounting
policyalignments**
£m

Fair
value
£m

Fixed assets
Tangible fixed assets

0.1

–

0.1

Current assets
Stock
Debtors
Cash
Other current assets
Total assets

5.6
1.9
1.9
0.1
9.6

–
–
–
–
–

5.6
1.9
1.9
0.1
9.6

Liabilities
Taxation– Current– Deferred
Creditors

(0.1)
(1.3)
(3.1)

–
–
(0.6)

(0.1)
(1.3)
(3.7)

Total Liabilities

(4.5)

(0.6)

(5.1)

Net assets acquired

5.1

(0.6)

4.5

Goodwill

10.6

Purchase consideration and costs of acquisition

15.1

*

The book values of the assets and liabilities have been taken from the management accounts of UK.TV at 1 July 2008
(the date of acquisition) at the actual exchange rates used to settle the consideration on that date.
** The adjustments between book value and fair value reflect the restatement of assets and liabilities from UK.TV’s accounting
policies to the group’s accounting policies.

Goodwill is amortised over its estimated useful economic life of 20 years.
In its last financial year to 30 June 2008, UK.TV made a profit after tax of AU$6.6million. An adjustmentof £1.3million was recorded in the reconciliation of movements in BBC reserves, being the cumulative
profits recorded by the group in relation to UK.TV for the period during which it was an associate. Thisadjustment is required to properly reflect the increase in stake in accordance with UK GAAP.

19b Other acquisitions
During the year ended 31 March 2009, the group also acquired minority shareholdings in several
production companies, accounted for as associates or joint ventures, whose aggregate net assets
amounted to £0.4million. Total purchase consideration and costs of acquisition were £10.4millionof which £0.9million is payable in future years. Goodwill of £10.0million was recognised, £9.9million
relating to associates and £0.1million relating to joint ventures.

F54

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
20 RECONCILIATION OF GROUP OPERATING DEFICIT TO NET CASH FLOWFROM OPERATING ACTIVITIESGroup operating surplus/(deficit)
Depreciation, amortisation and impairment
Difference between pension charge and cash contribution
Profit on disposal of tangible fixed assets
Loss on disposal of tangible fixed assets
Decrease/(increase) in stocks
Increase in debtors(Decrease)/increase in creditors(Decrease)/increase in provisions
Net cash inflow from operating activities

2009
£m

2008
£m

114.0
238.7
(0.3)
(0.5)
10.4
13.8
(103.0)(34.2)(23.7)
215.2(62.2)
216.7
1.9
–
–
(8.7)
(72.7)
26.4
57.3
158.7

2009
£m

2008
£m

43.8
(66.5)(22.7)
4.3
(4.9)
–
(3.2)
(26.5)(149.5)(176.0)(66.7)(93.0)(159.7)
(6.7)
–
(4.3)
(6.9)
(177.6)28.1(149.5)

21 MOVEMENT IN NET DEBT
21a Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in year
Net cash inflow from financing
Change in net debt resulting from cash flows
Exchange differences
Non-cash increase in derivatives associated with loans
Non-cash increase in loan notes
Non-cash increase in finance leases
Change in net debt
Net (debt)/funds at the beginning of the year
Net debt at the end of the year

21b Analysis of changes in net debt
At 1 April
2008£mCash flows£m

Non-cashchanges£m

Exchange£m

At
31 March
2009£m

Net cash
Bank overdrafts
Cash at bank and in hand
Gross funds
Debt
Loans from third parties
Derivatives associated with loans
Unsecured loan notes
Finance leases
Net (debt)/funds

–
78.0
78.0

(2.5)
42.0
39.5

–
–
–

–
4.3
4.3

(2.5)
124.3
121.8

(198.7)–(0.7)(28.1)(149.5)(73.6)–(2.6)
9.7(27.0)

–
(4.9)
–
(3.2)
(8.1)

4.3
–
–
–
8.6

(268.0)(4.9)(3.3)(21.6)(176.0)Made up of:
Public Service (including BBC World
Service and BBC Monitoring)
Commercial Businesses
Centre House Productions Limited
Net (debt)/funds

16.7(149.9)(16.3)(149.5)32.9(62.6)
2.7(27.0)

(3.2)
(4.9)
–
(8.1)

–
8.6
–
8.6

46.4
(208.8)(13.6)(176.0)The debt and repayments on finance leases held by Centre House Productions Limited are offset directly
by cash held on matching deposits, and the income from them, such that there is no long-term cash effect.
F55

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
22 RECONCILIATION OF NET DEBT TO THE DEPARTMENT
FOR CULTURE, MEDIA AND SPORT (DCMS) BORROWING CEILINGS
Commercial
Businesses

Public Services
Digitalswitchover
Current
expenditure
on Digital
Switchover
Help
Scheme*
£m

£m

2009

Note

Capital or
current
expenditure£m

Net funds/(debt)

21b

46.4

–

(208.8)(200.0)(25.0)(350.0)Borrowing ceiling

Public Services in thiscontext represent the UK
Public Service BroadcastingGroup (excluding Centre
House Productions Limited– see Note 23b), BBC
World Service and BBC
Monitoring.

2008

Net funds/(debt)

21b

Borrowing ceiling
*

16.7

–

(149.9)(200.0)(25.0)(350.0)£25million may only be used in respect of borrowing to fund current expenditure on meeting the responsibilities placed on
the BBC by any scheme agreed under clause 39 of the Framework Agreement (targeted help schemes), including costs
incurred by the BBC for the scheme’s overheads and financing costs.

The Public Service borrowing limit of £200million is set by the Secretary of State in accordance with
the Framework Agreement between the BBC and DCMS. As at 31 March 2009, 31 March 2008, andthroughout both financial years, the BBC was in compliance with the borrowing ceilings.
When the DCMS granted a £350million borrowing limit for BBC Commercial Holdings Limited in July
2002, three financial covenants were defined which are required to be met at 31 March each year. As
at 31 March 2009 and 31 March 2008 BBC Commercial Holdings Limited was in compliance with eachof these covenants.

23 FINANCIAL INSTRUMENTS
23a Financial risk management
The group’s financial risk management operations are carried out by a Group Treasury function, withinparameters defined formally within the policies and procedures manual agreed by the Executive Board.
Group Treasury’s activity is routinely reported and is subject to review by internal and external auditors.
Group Treasury uses financial instruments to raise finance and to manage financial risk arising from theBBC’s operations in accordance with its objectives which are:•••to ensure the business of the BBC, both Public Services and Commercial, is funded in the mostefficient manner and remains compliant with borrowing ceilings
to protect the value of the BBC’s assets, liabilities and cash flows from the effects of adverse interest
rates and foreign exchange fluctuations
to maximise the return on surplus funds, whilst ensuring sufficient cash is retained to meetforeseeable liquidity requirements

The group’s financial instruments, other than those used for treasury risk management purposes,
comprise cash and liquid resources, borrowings and various items such as trade debtors and creditorsthat arise directly from its operations. The group finances its operations from these financial instruments.
The group does not undertake speculative treasury transactions.

F56

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23a Financial risk management continued
Market risk

Market risk comprises
currency risk, interest raterisk and other price risks.

Currency risk: The group is principally a domestic organisation with the majority of transactions, assets
and liabilities arising in the UK and sterling based. However, the group has operations all over the world
whose income, expenditure, assets and liabilities may be denominated in currencies other than sterling.
Due to movements in exchange rates over time, the amount the group expects to receive or pay when
it enters into a transaction in a currency other than sterling may differ from the amount that it actually
receives or pays when it settles the transaction.

A forward currency
contract is a contract tobuy or sell foreign currency
in exchange for sterling at a
specific rate on a specificdate. By locking into aparticular exchange rate,
the currency risk that
may be associated witha future purchase orsale is eliminated.

Some contracts may also contain clauses whereby changes in currency rates outside an agreed range
impact on the contract price; in the majority of cases the value of the individual contracts and otherfeatures within the contract limit the currency risk exposure to a level that is not significant to thegroup. The fair value of such an embedded derivative has been recognised as at 31 March 2009 for
one contract agreed during the year.
The most significant currency exposure by total value of transactions is US dollars, however due to therelative size of this exposure in comparison to the group’s sterling-denominated business; the BBC does
not consider this to be significant for the group. The group does, however, generally enter into forward
currency contracts to manage, or hedge, this currency risk, which allows the group to settle transactions
at known exchange rates, reducing further any uncertainty.
The overall income or expenditure to be recognised in relation to contracts denominated in foreign
currency (and the related hedges) is therefore fixed, however where these contracts span financial years,
the recognition of the fair value of the forward currency contracts results in timing gains/losses in eachfinancial year. These timing gains/losses are therefore a result of market conditions as opposed tovariances in underlying contract value. As a result of this certainty of cash flows the group has mitigatedits underlying sensitivity to currency fluctuations such that no sensitivity analysis need be presented.
Interest rate risk: The group’s main exposure to interest rate fluctuations arises on externalborrowings. Since March 2003 the group has been borrowing at floating rates of interest and then using
interest rate swaps, caps and collars to manage the group’s exposure to interest rate fluctuations andprovide greater certainty of cash flows. Interest rate swaps, caps and collars are taken out based on
projected borrowing requirements, therefore differences will occur between the notional amount of theswaps, caps and collars and the actual borrowing requirements. As a result of the volatile market seen
throughout the financial year, the changes in the fair value measurement of the interest rate swaps, caps
and collars have been greater than in previous years. However, the effect of taking out the interest rate
swaps, caps and collars is that in the longer term the group has no significant underlying sensitivity tointerest rate fluctuations and hence no sensitivity analysis has been presented.

An interest rate swap
is a contract between two
parties to change the basisof their interest rate
payment or receipt either
from fixed to floating rates
or vice versa. By fixing afloating interest ratecertainty about the levelof future interest payments
can be achieved.

Other price risk of financial assets: The group invests surplus cash in money market funds andmoney market deposits, therefore it is not subject to other price risks, such as market price risk.

Other price risk isany price change otherthan those arising fromchanges in currency orinterest rates.

F57

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23a Financial risk management continued
Credit risk
Trade receivables: The majority of the group’s financial assets are trade receivables, £526.1million(2008: £507.1million). The largest element is the licence fee debtor, £384.6million (2008: £368.4million)
which is received directly from DCMS (not directly from the licence fee payer). The amount of incomethat the BBC receives from DCMS is directly related to the amount of licence fee collected fromhouseholds in the UK.

Credit risk is the riskof financial loss to thegroup if a customer orcounterparty to a financial
instrument fails to meet its
contractual obligation.

Of the remaining £141.5million (2008: £138.7million) trade receivables, £40.8million (2008: £34.1million)
is past due and not impaired. £9.2million (2008: £5.2million) has been provided for during the year
against the £10.3million (2008: £7.8million) trade receivables which are considered impaired.
Investments: The group limits its exposure to credit risk by only investing in liquid securities and onlywith counterparties that have a minimum credit rating of A-, with a higher minimum rating up to AArequired depending upon the duration and amount.
Guarantees: In order to assist employees relocating as part of an enforced move within the UK, theBBC operates a ‘Homeowners Guaranteed Support Scheme’. After professional valuations, the beneficial
interest of the employees’ property is transferred to a third party to sell, allowing the employee to find a
new property chain-free within their relocation area. The BBC offers a guarantee to the third party forpart of the market value of the property and is therefore exposed to fluctuations in the property market
between the time the property is valued and sold. Only one employee entered this scheme during
2008/09 (2007/08 none) and therefore the fair value of this guarantee is not significant.
Other than this scheme, the group enters into financial guarantees for intra-group purposes only.
Liquidity risk
The BBC is subject to ceilings on its borrowings set by the Secretary of State in accordance with theAgreement between the BBC and DCMS (see Note 22). In order to comply with these ceilings together
with the terms of any individual debt instruments the BBC’s Group Treasury manages the group’s
borrowings by continuously monitoring group cash flow forecasts. The BBC holds its surplus liquidity inreadily convertible financial instruments with highly rated financial institutions.

Liquidity risk is the riskthat the group will not beable to meet its financial
obligations as they fall due.

F58

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23b Fair values of financial instruments
The following table shows the fair value and carrying value of the group’s financial instruments, incategories according to how the financial instrument is measured. It also shows the maturity profile
for each category of financial asset and liability.
Amounts
Amountsdue in less due between
than one two and five
year
years
£m
£m

Amounts
due after
more than
five years
£m

Total
£m

2009 – Carrying value and fair value
Financial assets at fair value through income
and expenditure
Derivative financial instruments
Loans and receivables
Trade debtors
Other debtors

10.9

12.2

–

23.1

526.1
0.1

–
–

–
–

526.1
0.1

Cash at bank and in hand

124.3

–

–

124.3

–

–

–

–

Financial liabilities at fair value through income
and expenditure
Derivative financial instruments(22.5)(21.8)–(44.3)

Financial liabilities measured at amortised cost
Loans and overdrafts
Trade creditors
Other creditors
Programme acquisitions
Obligations under finance leases(5.8)(327.4)(32.3)(49.8)(4.7)(268.0)
–
–
–
(1.9)

–
–
–
–
(15.0)(273.8)(327.4)(32.3)(49.8)(21.6)

Available-for-sale financial assets
Other investments (non-current)

2008 – Carrying value and fair value
Financial assets at fair value through income
and expenditure
Derivative financial instruments
Loans and receivables
Trade debtors
Other debtors

2.6

2.6

–

5.2

504.6
0.3

–
–

–
–

504.6
0.3

Cash at bank and in hand

78.0

–

–

78.0

–

–

2.7

2.7

Financial liabilities at fair value through income
and expenditure
Derivative financial instruments

(2.3)

(0.5)

(0.1)

(2.9)

Financial liabilities measured at amortised cost
Loans
Trade creditors
Other creditors
Programme acquisitions
Obligations under finance leases(59.3)(327.6)(31.0)(47.3)(5.8)(140.1)
–
–
–
(3.0)

–
–
–
–
(19.3)(199.4)(327.6)(31.0)(47.3)(28.1)

Available-for-sale financial assets
Other investments (non-current)

F59

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23b Fair values of financial instruments continued
As at 31 March 2009 there are no differences (2008: no differences) between the fair value and carrying
value of any of the group’s financial instruments. The fair value of forward currency contracts, interest
rate swaps, caps and collars and embedded derivatives are based on market prices and exchange rates
at the balance sheet date. These are recorded in the statement of income and expenditure (see Notes 3
and 7). The remaining financial instruments are carried at cost or amortised cost in accordance withFRS 26 ‘Financial Instruments: Recognition and Measurement’, which approximates to fair value.
The finance leases include £15.0million (2008: £18.0million) relating to Centre House Productions
Limited. Centre House Productions Limited enters into finance leases as a means of financing drama
productions which result in lower production costs for the BBC. These finance leases are matched bydefeasance deposits which may only be used to settle the finance lease liabilities and therefore do not
represent separate assets and liabilities. Consequently they are netted off the finance lease creditor toshow the net unmatched liability at the year end. These defeasance deposits, £199.8million at 31 March2009 (2008: £219.0million), are structured such that the principal on deposit and interest earned will be
sufficient to cover the rental obligations on the finance leases until the end of the lease. Accordingly it is
not included as borrowing for the purposes of compliance with the BBC’s borrowing ceilings.

Defeasance deposits areamounts deposited withbanks which earn the exact
amount of interest needed
to cover the capital
repayment and interest
element of each of thefinance leases. The
defeasance deposits are‘ring-fenced’ and therefore
cannot be used for any
transactions apart fromthe agreed capital andinterest payments.

BBC Worldwide Limited has guaranteed bank loans in respect of their joint venture, Worldwide Media
Limited, which were rupees 155million (£2.1million) on 31 March 2009 (2008: rupees 155million,£2.0million). The fair value has been assessed as not significant.

F60

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23c Derivative financial instruments
Assets£m

Liabilities£m2009
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Total

11.8
0.3
0.1
12.2

(10.4)(5.1)(6.3)(21.8)

Less than one year
Forward foreign currency contracts
Embedded derivatives
Total

10.9
–
10.9

(20.3)(2.2)(22.5)

2008
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Total

2.2
0.3
0.1
2.6

(0.2)
(0.1)
(0.3)
(0.6)

Less than one year
Forward foreign currency contracts
Embedded derivatives
Total

2.6
–
2.6

(2.2)
(0.1)
(2.3)

At 31 March 2009 the group had entered into a net commitment to purchase foreign currencies
amounting to £135.6million (2008: £17.9million) that mature in the period through to 2013 in order
to fix the sterling cost of commitments through this period (mainly Euros and US dollars). After taking
into account the effects of these forward foreign exchange contracts, the group had no significant
currency exposure.
Interest rate risk is managed by the use of interest rate swaps, caps and collars. Sterling fixed rateborrowings are achieved by entering into interest rate swap transactions; all outstanding swaps mature by
April 2014. The impact of a change in interest rates can also be limited by entering into interest rate cap
and collar transactions; all outstanding caps and collars mature by April 2013. In total, £213.4million(2008: £80.0million) of swaps and £209.6million (2008: £128.2million) of caps and collars were entered.
Of these only £108.4million (2008 £80.0million) of swaps and £129.6million (2008 £128.2million) of
caps were effective at 31 March 2009 as new agreements are arranged to ensure borrowings are suitably
covered for the foreseeable future. This is £29.9million lower (2008: £8.8million higher) than the current
level of borrowings of £267.9million (2008: £199.4million).
In accordance with FRS 26, the group has reviewed contracts for embedded derivatives that are required
to be separately accounted for if they do not meet certain requirements set out in the standard. Anysuch embedded derivatives have been recognised at fair value.

23d Hedges of net investments in foreign operations
The group has Australian dollar (AUS$) denominated borrowings which it has designated as a hedge ofa net investment in foreign operations (Lonely Planet), in order to hedge against the risks associated withexchange rate movements between sterling and the AUS$. The fair value of the AUS$ borrowings at
31 March 2008 was £90.3million and the fair value of the investment at 31 March 2008 was £93.7million.
The net investment hedge was discontinued from September 2008 following the settlement of theassociated foreign currency borrowings.

Depending on how
exchange rates and interest
rates move between thetime the group enters into
the transaction and theyear-end, these derivatives
can either be profitable(‘in the money‘) or lossmaking in their own right.
However, the rationale inentering into thesederivatives is not to profit
from currency markets orinterest rate fluctuations,but to provide stability to
the BBC’s cash flows. The
movements relating tothese derivatives (ie where
they are either in profit orloss-making) are taken to
the group’s statement ofincome and expenditure
for the year.

F61

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
23e Borrowing facilities

Facility

Interest rate

UK Public Service Broadcasting
LIBOR-based loan
Loan – margin
or overdraftof 0.175% Overdraft– bank base rates
plus 1%
Sterling revolving
Loan – margin
credit facilityof 0.45%agreement
Uncommitted money Margin of between
market lines (short- 0.125% and 0.3%
term borrowings)
over LIBOR
BBC Commercial Holdings Limited
Multicurrency,
LIBOR* plus 0.275%
revolving credit
rising to LIBOR* plus
facility agreement
0.325% when thefor loans and letters facility is more thanof credit
50% utilised.
Letter of credit fee
is the same as thebank lending margin,
but does not include
LIBOR.
Overdraft or money Money market line –market lines
margin of 0.45%
Overdraft – bankbase rates plus 1%
BBC Worldwide Limited
Loan with European European Investment
Investment Bank
Bank’s own funding(50% secured bycost plus a marginletters of credit)**of 0.09% on
unsecured loans

Totalfacility
31 March2009£mAmountdrawn
down at
31 March
2009
£m

Total
facility
31 March2008£mAmountdrawn
down at
31 March
2008
£m

–

–

50

–

ExpiredJune 2008

200

–

–

–

June 2013

25

–

24

–

350**

218

350**

145

June 2012

20

–

20

4

January
2010

50

50

50

50

£20m
December
2011 and£30m May
2012

Expiry orreviewdate*

The base rate used will vary according to the currency drawn. At 31 March 2009 £47.8million (2008 £90.3million) was drawn
down in AUS$ and consequently linked to BBSW rather than LIBOR. All other amounts drawn are in sterling andconsequently linked to LIBOR.
** Of this amount, up to £100million is available to issue letters of credit in favour of the European Investment Bank to support
its lending under facilities to the group. At 31 March 2009, total drawn on this facility was £243.5million which consisted of
cash drawings of £217.8million (2008: £145million) and £25.6million (2008: £25.6million) utilised by way of letters of credit.

There have been no defaults or breaches of covenants on the facilities above during the year (2008: none).
In addition to the facilities above, the group has other smaller facilities with total amounts drawnof £3.3million in aggregate (2008: £0.7million), used to manage working capital.

F62

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24 COMMITMENTS
24a Contracts placed for future expenditure
Group
2009
£m

Fixed asset additions
Programme acquisitions and sports rights
Independent programmes

51.8
1,302.3
112.1
1,466.2

UK Public
Service
Group Broadcasting
2008
2009
£m
£m

65.2
1,333.7
112.3
1,511.2

45.4
1,260.4
98.0
1,403.8

UK Public
Service
Broadcasting
2008
£m

44.0
1,272.8
97.8
1,414.6

24b Operating leases
Operating lease commitments payable in the following year, analysed according to the period in which
the lease expires:Group
Within one year
In two to five years
After five years
UK Public Service BroadcastingWithin one year
In two to five years
After five years

Land andbuildings
2009£mLand andbuildings
2008
£m

Other
2009
£m

Other
2008
£m

2.8
19.3
86.2
108.3

2.1
21.4
92.2
115.7

2.8
15.0
1.4
19.2

1.2
9.0
7.8
18.0

1.2
14.9
85.7
101.8

1.6
11.9
91.3
104.8

0.4
9.9
1.4
11.7

0.4
3.3
7.8
11.5

An operating lease is alease where the lessee has
not taken on the risks andrewards of owning theasset. The lessee (the BBC)is hiring rather than buying
an asset.

24c Other financial commitments
In the ordinary course of business the BBC enters into a large number of contracts with artists andwriters and with providers of other services including licence fee collection, IT maintenance and support
and channel distribution.

25 CONTINGENT ASSETS AND LIABILITIESAt 31 March 2009 the group had contingent liabilities estimated to be £1.0million (2008: £1.3million)
in respect of guarantees and indemnities.
The group has a number of contingent liabilities arising from litigation. The BBC makes specific provision(see Note 17) for its best estimate of any damages and costs which may be awarded. Provision is only
made to the extent that the group consider it probable that there will be an outflow of economic
benefits and the amount can be reliably estimated.

26 POST BALANCE SHEET EVENTS
There are no material events after the balance sheet date to disclose.

F63

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
27 RELATED PARTY TRANSACTIONS
The related party transactions of the group have been presented in accordance with FRS 8 ‘Related party
disclosures’, which does not require disclosure of transactions between group entities that have been
eliminated on consolidation.
In all transactions, the terms of trade were negotiated on an arm’s length basis.

27a Transactions with joint ventures and associated undertakings
2009
£m

2008
£m

12.5

12.8

30.1
29.0

25.7
31.9

27.6

17.9

2.0
9.0

5.1
9.0

Dividends from joint ventures and associated undertakings

2009
£m

2008
£m

UK Channel Management Limited
UK Gold Holdings Limited
2entertain Limited
Other

16.7
7.6
9.0
3.7

0.5
6.2
42.3
0.2

2009
£m

2008
£m

33.1

17.3

2.1
0.7

2.2
1.4

2.2
1.2

1.1
1.4

3.3
15.8

3.4
4.7

Income from joint ventures
and associated undertakings

UK Channel Management Limited
UK Gold Holdings Limited
JV Programmes LLC
2entertain Limited
Daunus Limited
Other

Charges payable to joint ventures
and associated undertakings

Daunus Limited
Frontline Limited
JV Programmes LLC
2entertain Limited
DTV Services Limited
Freesat UK Limited
Other

Nature of services provided

Sale of programmes
Sale of programmes andmanagement fees
Sale of programmes
Licensing of programmes andother commissions
Reimbursement of Broadcasting
House development costs
VariousNature of services received

Rent
Distribution of BBC
Worldwide’s magazinesMarketing services
Commissions on distributionof Children’s DVDs
Marketing services
Written off in respect offunding contribution
Various

Amounts owed by/to joint ventures and associated undertakings at the year end are disclosed within
Notes 15 and 16.

F64

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
27b Other transactions
The BBC’s related parties, as defined by FRS 8, the nature of the relationship and the extent of thetransactions with them are summarised below. In the normal course of business the BBC transacts withother parties which are related to it by virtue of its senior employees being married or closely related
to employees of the BBC or individuals who own or are employed at other media, production andbroadcasting companies. The BBC has set procedures for dealing with situations to avoid any conflictof interest. Where transactions have arisen between connected parties, the BBC Trustee or employee
is not a party to the approval process.
27b i Trustees
During the year, Diane Coyle and Richard Tait had close family members who were employed by theBBC. Their remuneration was based on the BBC’s standard terms and conditions applicable to otherstaff employed in similar capacities.

Related parties include
Trustees, the Executive
Board members and othersenior managers, their
immediate families andexternal entities controlled
by them.
Transactions between the
BBC and those relatedparties are explained inthis note.

27b ii Members of the Executive Board and other senior management
Menna Richards is Controller of BBC Wales. Her sister has a controlling interest in Torpedo Limited. The
BBC made payments on contracts to the value of £147,372 (2008: £320,774) with Torpedo Limited forthe provision of independent radio and television programmes in the year. These amounts had been paidin full by 31 March 2009 (2008: paid in full). Also the BBC entered into artists’ contracts worth £49,143(2008: £53,263) with her husband Patrick Hannan, which had been paid in full by 31 March 2009 (2008:£1,032 outstanding at 31 March 2008).
Peter Salmon is Director, BBC North. The BBC entered into artists’ contracts worth £185,000(2008: not significant) with his wife Sarah Lancashire, which had been paid in full by 31 March 2009(2008: not significant).
Juniper Communications Limited is co-owned by BBC non-executive Director Samir Shah (70%), his wife
Belkis Shah (20%) and the husband of Jana Bennett (Director, BBC Vision), Richard Clemmow (10%).
During the year the BBC received services from Juniper Communications Limited to the value of£715,261 (2008: £946,693). These amounts had been paid in full by 31 March 2009 (2008: paid in full).
In addition, Juniper Communications Limited received services from the BBC to the value of £108,520(2008: nil), with £10,684 outstanding at 31 March 2009 (2008: nil).
Andy Parfitt is Controller, Radio 1, 1Xtra, Asian Network and Switch. His wife owns White Pebble Media
who produce independent programmes for BBC radio. During the year, the BBC received services fromWhite Pebble Media to the value of £72,924 (2008: not significant) with £3,551 outstanding at 31 March2009 (2008: not significant),
During the year, Jenny Abramsky (Director, Audio & Music until September 2008), David Moody(Worldwide Managing Director, Digital), Samir Shah (non-executive Director) and Janice Hadlow(Controller BBC 4 until November 2008 and then Controller BBC 2) had close family members who
were employed by the BBC. Their remuneration was based on the BBC’s standard terms and conditions
applicable to other staff employed in similar capacities.

F65

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
28 UK PUBLIC SERVICE BROADCASTING GROUP EXPENDITURE BY SERVICE
Service licences are used by the BBC Trust to regulate the BBC’s services and ensure that each service
provides public value and contributes to the delivery of the BBC’s public purposes. The annual
assessment of performance compares actual costs for content against an agreed and authorised baselinebudget. These costs may vary by up to 10% of the baseline budget to permit management flexibility in its
commissioning decisions. During the year there were 28 service licences in operation, including the BBC
ALBA licence which launched in September 2008.
Service licences show the cost to the licence fee payer of providing the relevant service and therefore
exclude any costs funded by a third party co-producer. A number of television programmes arebroadcast on more than one channel and in general the full cost of the programme is recognised asa cost of the channel when the programme is first broadcast. Where a programme is commissionedby two channels the cost of the programme is recognised as a cost of the primary channel irrespectiveof which transmits the programme first. Accordingly, the costs of, individual service licences are notnecessarily equivalent to the costs which would be incurred by such service on a stand-alone basis.
For BBC HD, BBC Online and BBC Red Button, the licence reflects only the incremental costs of getting
content to air unless the content is specifically commissioned for one of these three services. The costof the original content is allocated to the service on which it is first transmitted.

F66

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
28 UK PUBLIC SERVICE BROADCASTING GROUP EXPENDITURE BY SERVICE continued
2009 Service

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC HDBBC ALBA
BBC News channel
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five LiveSports Extra
BBC 1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidhael
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online
OnlineSpend regulated by service
Licence fee collection costs
Orchestras and performing groups
S4C
Development spend
DAB digital radio
Digital text
Other
Exceptional restructuring costs
Total UK public
services expenditure
Digital UK Limited ring-fenced
expenditure
Digital switchover ring-fenced
expenditure
Total UK PublicService Broadcasting Group
expenditure

Content(i)£m

Distribution(ii)£mInfrastructure/support£m

Other items
£m

Total
£m

1,142.0
450.6
87.3
54.8
35.8
16.3
2.1
3.0
47.9
2.8
13.5
1,856.1
33.1
40.1
40.0
85.9
56.5

47.9
34.1
4.2
3.0
3.4
3.5
2.7
0.8
6.6
5.1
12.3
123.6
3.5
3.8
4.1
8.3
5.7

202.9
85.0
23.1
13.6
10.8
5.7
1.9
0.6
6.5
1.7
4.3
356.1
6.4
6.8
7.0
14.4
10.0

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

1,392.8
569.7
114.6
71.4
50.0
25.5
6.7
4.4
61.0
9.6
30.1
2,335.8
43.0
50.7
51.1
108.6
72.2

2.6
6.8
6.5
5.2
9.2
108.6
25.0
4.0
12.9
12.0
14.5
462.9
112.2
112.2

0.3
0.5
0.4
0.4
0.5
6.3
2.4
0.9
1.0
1.3
1.1
40.5
18.5
18.5

0.8
2.3
2.1
1.3
2.4
18.1
4.9
0.8
2.3
2.1
2.8
84.5
46.5
46.5

–
–
–
–
–
–
–
–
–
–
–
–
–
–

3.7
9.6
9.0
6.9
12.1
133.0
32.3
5.7
16.2
15.4
18.4
587.9
177.2
177.2

2,431.2
–
21.5
27.6
30.9
–
–
80.0
–

182.6
–
–
–
–
10.3
6.9
17.2
–

487.1
–
3.6
4.9
5.2
–
–
13.7
–

–
122.8
–
–
–
–
–
122.8
11.0

3,100.9
122.8
25.1
32.5
36.1
10.3
6.9
233.7
11.0

2,511.2

199.8

500.8

133.8

3,345.6

xi

–

–

–

26.0

26.0

xi

–

–

–

24.4

24.4

2,511.2

199.8

500.8

184.2

3,396.0

Note

iv
v
vi

vii

viii
ix

x

F67

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
28 UK PUBLIC SERVICE BROADCASTING GROUP EXPENDITURE BY SERVICE continued
2008 Service

Content£m

Distribution£m

Infrastructure/support£m

Other items
£m

Total
£m

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC HDBBC News channel
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five Live Sports Extra
BBC 1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidheal
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online
Online1,126.2
439.7
96.5
47.7
36.0
16.3
3.4
45.7
2.4
20.4
1,834.3
31.5
39.5
37.4
81.2
55.2
2.5
6.7
5.6
5.5
10.1
109.0
29.5
4.7
13.6
12.7
15.2
459.9
113.9
113.9

45.4
29.5
3.1
2.0
2.4
2.3
2.6
4.4
2.9
10.2
104.8
4.2
4.5
4.7
10.0
6.6
0.3
0.6
0.5
0.4
0.8
6.0
2.9
1.2
1.3
1.7
1.5
47.2
15.4
15.4

246.6
98.7
25.6
15.1
10.3
4.7
0.7
7.9
0.5
6.1
416.2
7.4
7.3
7.3
14.3
10.5
0.5
2.0
1.4
1.4
2.1
21.5
6.1
1.0
2.6
2.4
3.5
91.3
52.7
52.7

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

1,418.2
567.9
125.2
64.8
48.7
23.3
6.7
58.0
5.8
36.7
2,355.3
43.1
51.3
49.4
105.5
72.3
3.3
9.3
7.5
7.3
13.0
136.5
38.5
6.9
17.5
16.8
20.2
598.4
182.0
182.0

Spend regulated by service licence

2,408.1

167.4

560.2

–

3,135.7

Licence fee collection costs
Orchestras and performing groups
S4C
BBC jamDevelopment spend
DAB digital radio
Digital text
Other
Exceptional restructuring costs
Total UK public services expenditure
Digital UK Limited expenditure
Digital switchover ring-fenced expenditure
Total UK Public Service BroadcastingGroup expenditure

–
16.2
27.5
2.5
31.3
–
–
77.5
–
2,485.6
–
–

–
–
–
–
–
9.6
8.7
18.3
–
185.7
–
–

–
3.1
5.2
0.5
6.0
–
–
14.8
–
575.0
–
–

123.2
–
–
–
–
–
–
123.2
117.6
240.8
21.2
5.9

123.2
19.3
32.7
3.0
37.3
9.6
8.7
233.8
117.6
3,487.1
21.2
5.9

2,485.6

185.7

575.0

267.9

3,514.2

F68

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
28 UK PUBLIC SERVICE BROADCASTING GROUP EXPENDITURE BY SERVICE continued
Infrastructure/support costs

Marketing, press and publicity
On-air trailsMarket research and consumer services
Libraries, learning support and community events(Reduction)/additional pension payment
Overheads (excluding restructuring)

Note

2009
£m

2008
£m

xii
iii
iii

42.9
22.9
16.1
49.9
(19.5)
388.5
500.8

41.6
22.1
14.6
55.5
20.0
421.2
575.0

(i) Content costs are made up of the direct programme/service specific costs of production and an apportionment of otherproduction related costs that are managed centrally including, for example, newsgathering and copyright costs. Of the total
content costs of £2,431.2million (2008: £2,408.1million) direct costs were £2,259.0million (2008 £2,229.5million) and thecentrally allocated were £172.2million (2008: £178.6million).
(ii) The cost of distribution represents the transmission and carriage of the BBC’s UK public services (television, radio andinteractive) on digital and analogue broadcast platforms – this includes analogue television, Digital Terrestrial Television (DTT),
satellite, cable, broadband, analogue radio and DAB digital radio. Of the distribution costs, £77.0million relates to analogue
services (2008: £81.8million) and £122.8million to digital services (2008: £103.9million).
(iii) Overheads represent expenditure on the BBC’s central functions, for example the Director-General’s office, BBC People,
BBC Finance, Policy and Legal departments. Spend incorporates accommodation and staff costs relating to those functions.
The proportion of these costs which are directly attributable to programme-making are included within total content spend,whilst costs of services provided across the BBC as a whole or managed at a corporate level (for example marketing, press
and policy) are shown as infrastructure and support spend.
(iv) BBC HD’s content costs were under the baseline budget by more than the 10% tolerance due to significant savings incontractual costs.
(v) BBC ALBA’s content costs were under baseline budget by more than the 10% tolerance level as the service was only
operational for six months of the year whereas the baseline budget was set on annual basis.
(vi) Included within BBC News channel content costs are production costs of £29.8million, newsgathering costs of £17.6million
and other costs of £0.5million (2008: production costs of £25.7million, newsgathering costs of £19.5million and other costsof £0.5million).
(vii) The service licence for BBC Local Radio covers all of the individual stations in England.
(viii) The BBC is required to provide Welsh language programming to S4C (the Welsh language channel) as part of the StrategicPartnership Agreement between the BBC Governors and the S4C Authority.
(ix) Development spend is not regulated by service licence and, as such, is separately identified. The 2009 figure includes costson the development of new on-demand technology applications and investment in digital media technology.
(x) Exceptional restructuring costs relate to the Value for Money and Continuous Improvement programmes occurring within
UK Public Service Broadcasting (see Note 4c).
(xi) Under the terms of the current licence fee settlement, a proportion of licence fee income is set aside to help pay for wider
industry costs of relating to digital switchover. This includes a marketing and awareness campaign run by Digital UK Limited
and the Digital Switchover Help Scheme administered by DSHS Limited. See Notes 2b and 2d for details of this expenditure.
(xii) See Note 8 for a full explanation of pension costs.

F69

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
29 INTERESTS IN JOINT VENTURES, ASSOCIATES AND SUBSIDIARIESThe group holds (directly and indirectly) interests in the following significant joint ventures, associates
and subsidiaries listed below which, except where otherwise stated, are incorporated in Great Britain
and registered in England and Wales. A full list of joint ventures, associates and subsidiaries is available
on request from the General Counsel and Secretary, BBC, Media Centre, 201 Wood Lane, London
W12 7TQ.

29a Significant joint ventures and their activities
The group has a 50% equity interest in the following joint ventures which are all incorporated in
Great Britain and registered in England and Wales, unless otherwise stated:
Name of entity

Activity

Accounting dateCommercial joint ventures:2entertain Limited*
Home entertainment
UK Gold Holdings Limited
Channels
UK Channel Management Limited
Channels
UK VoD LLP**
Development
JV Programmes LLC (incorporated in the USA)
Sales and distribution
Ragdoll Worldwide Holdings Limited
Magazines and children’s

31 March 2009
31 March 2009
31 March 200931 December 2008
31 March 2009
31 March 2009

Joint ventures of UK Public Service Broadcasting
DTV Services Limited***MarketingFreesat (UK) Limited
Provision of free to air
satellite television service

Joint ventures arebusinesses the BBC jointly
controls with other parties.

31 August 2008
31 March 2009***

60% equity interest.
33% equity interest. UK VoD LLP has a December year-end, since it was set up in February 2008, results were equity
accounted for the year to 31 December 2008.
*** 20% equity holding.

29b Significant associates and their activities
Holding ofissuedordinaryshares %Activity

Commercial associates:
Frontline Limited
OPL Holdings Limited
3sixtymedia Limited
The Animal Planet (Europe) Partnership

23
39
10
50

Magazines and children’s
Magazines and children’s
Production
Channels

Associates of UK Public Service Broadcasting
Parliamentary Broadcasting Unit Limited
Broadcasters Audience Research Board Limited (BARB)The Commonwealth Broadcasting Association
Radio Joint Audience Research Limited (RAJAR)

44
*
*
50

Content provider
Audience research
Broadcasting forum
Audience research*

Associates are businesses
over which the BBC exerts
significant influence but does
not have overall control.

Broadcasters Audience Research Board Limited and The Commonwealth Broadcasting Association are companies limited
by guarantee, of which the BBC is a joint member with other broadcasters.

F70

FINANCIAL STATEMENTS/

NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
29c Subsidiary undertakings
Name of entity

Commercial Subsidiaries:
BBC Commercial Holdings Limited
BBC Worldwide Limited
BBC World News Limited
BBC Ventures Group Limited
BBC Studios and Post Production Limited
Lonely Planet Pty Limited(incorporated in Australia)
BBC Worldwide Australia Pty Limited(incorporated in Australia)
BBC Magazines Limited
BBC Magazines Rights Limited
BBC Worldwide Americas Inc.
(incorporated in the USA)
BBC World Distribution Limited
Subsidiaries incorporated to act onbehalf of UK Public Service
Broadcasting:
BBC Property Limited
Centre House Productions Limited
Digital UK Limited***DSHS Limited

Activity

*
**
^ **
**
^^ **
**

Holding company
Publishing, channels and programme distribution
Channels
Holding company
Programme making facilities and services
Travel Guides Publisher

**
**
**

Investment company
Investment company
Investment company****

Investment company
Programme distribution

*
*
*
*

Property
Production financing
Digital switchover
Digital switchover

Subsidiary
undertakings arebusinesses the BBC
controls.

* Directly owned.
** Indirectly owned.
*** The BBC controls 56% of the voting rights of Digital UK Limited. Its results have been consolidated into the group accounts.
Digital UK Limited is a company limited by guarantee of which the BBC is a joint member. The other members and their voting
rights in Digital UK Limited are: ITV plc 11%, Channel Four Television Corporation 11%, Channel Five Broadcasting Limited
8.75%, National Grid Wireless 6.25%, SON Limited 3.5%, S4C 2.25% and Teletext Limited 1.25%.
^ BBC World Limited changed its name to BBC World News Limited on 1 August 2008.
^^ BBC Resources Limited changed its name to BBC Studios and Post Production Limited on 1 April 2009.

F71

BBC Corporate Governance Framework/

BBC Corporate
Governance Framework/
The Executive Board has complied withthe requirements of the Charter, creating
appropriate and effective governancearrangements for the BBC.
The BBC’s corporate governance framework is
defined in the Royal Charter (the Charter).
The BBC Trust assesses the performance of theBBC’s management and its services. Its review andassessment for 2008/09 can be found in Part Oneof this Annual Report and Accounts, and online atwww.bbc.co.uk.annualreport
The Charter also requires the Executive Board tohave regard to generally accepted principles of good
corporate governance.
So, although the BBC is not a listed company, it
has opted to follow the relevant provisions of the
Financial Services Authority’s Listing Rules and the2006 Financial Reporting Council Combined Codeon Corporate Governance (the 2006 FRC Code),in order to be consistent with companies quoted
on an EU regulated market.
The Executive Board has complied with therequirements of the Charter, creating appropriate andeffective governance arrangements for the BBC.This
has also secured substantial compliance with the 2006
FRC Code although in a number of areas the 2006
FRC Code is not appropriate to the circumstances of
the BBC. Compliance with the Charter has resulted
in a small number of areas where compliance withthe 2006 FRC Code has not been achieved, although
the Board believes that this does not compromise
the quality of the governance arrangements in place,as shown here:T
Principle of the 2006 frC CodebbC position

explanation

A.2 – There should be a clear division of
responsibilities at the head of the company
between the running of the board and theexecutive responsible for the running of
the company’s business. No one individual
should have unfettered powers of decision.

The Chairman of the Board is the
Director-General, the chief executive officerof the BBC.

The Charter specifies that the DirectorGeneral may be the Executive Chairmanof the Board.
In addition, the strategic oversight by the
BBC Trust ensures that no single individual
has unfettered powers.

A.3 – The Board should include a balance ofexecutive and non-executive Directors (andin particular independent non-executive
Directors) such that no individual or small
group of individuals can dominate theBoard’s decision taking.

The Board comprises 16 directors, of which
ten are executive directors and six are nonexecutive Directors. As a result, the Board
does not comply with the provision (A.3.2)
that at least half the Board, excluding the
Chairman, should be independent.
All non-executive Directors are considered
independent for the purposes of the 2006
FRC Code, after recognising the need for
insight from the media sector in the UK.

The Charter specifies that non-executive
Directors must not be less than one-thirdand not equal to or more than one half ofthe members of the Board.
The Board includes a balance of executive
and non-executive Directors and no
individual or small group of individuals candominate decision taking.

Some provisions of the 2006 FRC Code are notappropriate to the BBC’s circumstances as a public
body that is not profit-oriented and does not haveshareholders. In particular provisions relating tointeraction with shareholders clearly do not apply to

the BBC, although in some circumstances it is possible
to consider, by analogy, the way in which the Trustengages with licence fee payers.This is set out in Part
One of the Annual Report and Accounts.

F72

Another 2006 FRC Code provision that is linked
to shareholders relates to aligning executive
remuneration with enhancing shareholder value andtherefore making performance-related elementsof remuneration a significant proportion of total
remuneration (provision B.1.1).The BBC’s strategy forthe remuneration of executive directors, set by theTrust and the Executive Remuneration Committee,
complies with the 2006 FRC Code principle B.1
that levels of remuneration should be sufficient to
attract, retain and motivate directors of the quality
required to run the BBC successfully. However, taking
into account the BBC’s public purposes, the amountof variable (or performance-related) remunerationthat may be earned is limited. During 2008/09 theBoard decided to suspend the discretionary bonus
arrangements for all staff (other than staff employedin certain commercial businesses); any bonuses thatwere contractual commitments were honoured.

Executive Board

Role of the Executive Board

The Board is responsible for managing all the BBC’s
operations, with the sole exception of the BBC Trust
Unit.This includes the following:• delivering the BBC’s services in line with the
purpose remits, service licences and otherbusiness strategies.
• directing editorial and creative output.
• ensuring compliance with all relevant legal andregulatory requirements (including initial handlingof complaints about the BBC), except where theseareas specifically relate to the BBC Trust or the BBC
Trust Unit.

• appointing the management teams for the BBC
and its subsidiaries and holding them to account.
• conducting the BBC’s financial affairs to ensure value
for money.
• accounting to the BBC Trust for its own
performance, as well as the performance of the
BBC and its subsidiaries, and complying with any
decisions from the BBC Trust.
The Board meets monthly (except for August);
summary minutes of meetings are available online atwww.bbc.co.uk/info/running/executive/minutes.shtml
In practice, the Board delegates some of its
responsibility to other managerial groups. Any
delegation from the Board is stated in the relevant
standing orders for each group and a framework forreporting and review is established.
An evaluation of the effectiveness of the Board and its
Committees began this year.The evaluation is being
facilitated by external consultants and includes a series
of interviews and questionnaires.The results will beconsidered by the Director-General, and discussed by
the Board as a whole.
In accordance with the requirements and provisionsof the Charter the following Committees continued
to operate last year:• Audit Committee• Fair Trading Committee• Nominations Committee• Remuneration Committee

T
Executive
Board
Ordinary Extraordinary
number of meetings for the period

114Mark Thompson
Mark Byford
Jenny Abramsky2
Jana Bennett
Tim Davie3
Ashley Highfield4
Erik Huggers4
Stephen Kelly5
zarin Patel6
John Smith
Caroline Thomson
Marcus Agius

11
9
4/4
10
11
3/3
7/7
7/10
8/9
11
11
9

4
3
2/2
4
4
0/2
2/2
2/4
2/3
4
4
3

Val Gooding
Dr Mike Lynch
David Robbie

9
10
11

3
4
3

Dr Samir Shah
Robert Webb

8
10

4
4

Senior Independent Director,
Chairman of the Remuneration Committee

Chairman of the Audit Committee

Chairman of the Fair Trading Committee

Audit
Committee
MemberAttendee4

Fair Trading
Committee

Nominations
Committee1
MemberAttendeeRemuneration
Committee
MemberAttendee

1

7

4
1
1

4

7

1
3/3

4
2

4
4

6/7

3/4

1

6

1

7

4

6

4

1

For those directors serving for only part of the year the total number of meetings they could have attended is presented alongside the number attended (number attended/total possible).
Membership of the Committee differs depending on the appointment (non-executive or executive) being made. Marcus Agius, Mark Thompson and Dr Mike Lynch are members for all appointments.
Mark Byford is a member for executive appointments and a regular attendee for non-executive appointments. Mark Thompson is the Chairman for executive appointments and Marcus Agius is thechairman for non-executive appointments.
2
Jenny Abramsky stepped down as Director, Audio & Music in September 2008.
3
Tim Davie stepped down as Director, Marketing, Communications & Audiences in August 2008 and was appointed Director, Audio & Music in September 2008.
4
Ashley Highfield stepped down as Director, Future Media & Technology in June 2008 and Erik Huggers was appointed as Director, Future Media &Technology in August 2008.
5
Stephen Kelly stepped down as Director, BBC People in February 2009.The Acting Director, BBC People attended one meeting of the Executive Board.
6
zarin Patel had three months study leave at Harvard during August to October 2008, during which time the Acting Chief Financial Officer attended three meetings of the Executive Board and one
meeting of the Audit Committee.
1

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BBC Corporate Governance Framework/

Induction, performance anddevelopment

All new directors receive an induction programme
and a wide range of information about the BBC on
joining.The content of the induction programme willvary depending on whether the appointment is toan executive or non-executive position and whether
the new director was an external candidate or not.
The information always includes details of Board
procedures and directors’ responsibilities. All directors
have access to external independent advice ifthey wish.
The Trust assesses the performance of the Boardin delivering the BBC’s services and activities, inaccordance with the Charter.This includes an ongoing review of progress and an annual performanceday, which is attended by both the Board and the
BBC Trust.The Chairman of the BBC Trust also has aseparate meeting with the non-executive Directors
every year.
The performance review processes for the Board’s
Committees continues to evolve and each reviews
its own performance and effectiveness. No significant
issues were identified.
All the executive directors have their own personaland divisional objectives, and their performanceagainst them is reviewed by the Director-Generaleach year, and by the Remuneration Committee.

Nominations Committee

The Nominations Committee oversees the processof proposing, appointing and – if necessary –dismissing members of the Board.The only exception
is the Chairman, who is appointed by the BBC Trust.
Membership of the Nominations Committee isdependent on whether it is dealing with executive
or non-executive appointments.

Executive appointments

Four executive appointments were made this year.
Two of these directors took up their appointment
prior to the year end – Erik Huggers, Director,
Future Media & Technology, and Tim Davie, Director,
Audio & Music – and two after the year end – Sharon
Baylay, Director, Marketing, Communications &Audiences, and Lucy Adams, Director, BBC People.
As always the Nominations Committee was advised
by BBC People in making all these appointments; each
was made on merit and against objective criteria.
Our new Director, BBC North was also appointed
this year, joining the Board in April 2010.

Non-executive appointments

Four non-executive Directors were due to step
down on 31 December 2008. After a thoroughreview of the composition and needs of the Board,as well as the skills, experience and knowledge of theindividual directors, the Nominations Committee
recommended to the Executive Board and the Trustthat Dr Mike Lynch, David Robbie, Dr Samir Shah andRobert Webb all be re-appointed for further twoyear terms.

Report of the Senior Independent Director
The 2008/09 financial year is the second year during
which the Board has operated with non-executive
Directors and, as anticipated in my Report in lastyear’s Annual Report and Accounts, effective working
relationships have been established around the Board
table based on a strong collaborative ethos.There has
been a full agenda of regular as well as incidental business,and much to test the deliberative ability of the directors.
The Board operates on the basis that the executive
directors recognise and understand that the nonexecutive Directors have a right – indeed a duty –to challenge them by enquiry and interrogation andthat this applies both to matters on the agenda andto matters of topical interest. At the same time, thenon-executive Directors recognise in their turn that
their obligation is to help the executive directors toreach optimum decisions after analysis and debate,then to provide them with collegiate support in theprosecution of executive actions.
Of the many matters discussed around the Board table,most of which are described elsewhere in this Annual
Report and Accounts, I would single out the following(in no particular order) as representing topics where
the benefit of having access to a wide range of viewsand experience was perhaps felt most keenly:• Ofcom’s review of Public Service Broadcasting• ongoing development of BBC iPlayer• suspension of the discretionary bonus scheme
for executive directors• review of options for BBC Worldwide• coping with the impact of the recession on the
BBC’s finances
In each case, the issues involved were complex andsensitive and the reputational consequences were
far reaching. I can confirm that these items – as withothers – were discussed openly and transparently andthat the debate was conducted with the underlying
objective of serving the public purposes of the BBC.
Marcus Agius
Senior Independent Director
18 June 2009

Accountability and internal
control

The Board is responsible for ensuring there is aprocess for managing significant risks to the BBC, andfor maintaining an adequate system of internal control
and reviewing its effectiveness.

Risk identification, management
and ownership

We consider the overall management of risk within
the BBC, which is integral to the delivery of businessobjectives, to be most effectively achieved throughthe engagement of the entire Board and so risk
management is not delegated to a sub-committee.
An ongoing process for identifying, evaluating,managing, monitoring and reporting significant risks

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BBC Corporate Governance Framework/

to the BBC, which accords with the Turnbull guidance(Internal Control: Revised Guidance for Directors
on the Combined Code), has been in place for theyear ended 31 March 2009 and up to the date of
approval of this BBC Annual Report and Accounts.
Key elements of the process include:• the director of each business group is responsiblefor identifying and managing the risks facing theirbusiness, and maintaining a register of identified key
business risks which may have an impact on meetingits strategic objectives or core business purposes,
together with mitigations. Risk registers are subject
to regular review and assessment throughout theyear and feed into consideration of risk exposure atboth local and Board level.
• the Board receives regular reports and updates
on the BBC’s risk exposure, focusing on those we
consider critical to the success of the BBC including
how these risks are managed.
• an annual report on the overall risk management
process is submitted to the Audit Committee.
• specialist functions oversee the management ofcertain major areas of risk ensuring appropriate
frameworks and arrangements are in place tomanage them consistently across the business, andensuring effective ownership at senior level.
• the responsibility to minimise the risk of fraud istaken very seriously. Our fraud policy establishes
a clear framework of controls designed tominimise the risk of fraudulent activity, and assigns
responsibility for managing them. All suspected
incidents of fraud are investigated.

Internal control

The Board, supported by senior management
teams, is responsible for establishing, maintaining
and reviewing the effectiveness of the BBC’s system
of internal control and for ensuring necessary
actions are taken to remedy significant failings or
weaknesses identified. Our system of control isdesigned to manage rather than eliminate the riskof failure to achieve business objectives. Although
no system of internal control can provide absoluteassurance against material misstatement or loss, theBBC’s controls are designed to provide reasonableassurance that assets are safeguarded, transactions
are appropriately authorised and material errors or
irregularities are either prevented or detected on atimely basis. Key elements of our system of internal
control include:• comprehensive monthly, quarterly and annual
financial and other reporting processes, both within
business groups and up to the Board.
• formal authorisation processes covering all financialtransactions.There are clearly defined criteria forwhen Board approval is required.
• processes to ensure compliance with all applicablelaws and regulations, including Ofcom requirements.
• processes to manage the risks associated with theoutsourcing of key business services (such as licencefee collection and technology systems and support)

and to ensure the day-to-day continuity of ourbusiness operations.
• formal policies and procedures concerning all
material business processes, to ensure that timely,
relevant and reliable information is available acrossthe business.
• processes to ensure that our staff are professionaland competent, such as recruitment policies,
performance appraisals and training programmes.
The Board, in reliance upon the detailed work of
the Audit Committee and by review and discussionof quarterly reports on both risk and compliance,
confirms that it has considered the effectivenessof the system of internal controls in operation
throughout the financial year and up to the date of
approval of the Annual Report and Accounts.
A number of editorial standards issues arose acrossthe year.The most prominent involved comments
made on The Russell Brand Show. The programme
raised important issues of editorial standards and theeffectiveness of programme compliance. A series ofmeasures have been taken to ensure that programmecompliance processes are strictly adhered to and thatpre-recorded programmes that have not completed
the compliance process will not be transmitted. At thesame time the BBC Trust has asked management tore-examine the boundaries of tastes and standards
and to feed any relevant conclusions in to the revisionof the BBC’s Editorial Guidelines.

Internal audit

Internal Audit, Risk Management and Investigation
Services combine to form our Business Assurancefunction, which is led by the Director of Risk
and Assurance. Internal Audit’s authority andindependence is assured by the Director of Risk
and Assurance’s independent and direct access to
the Director-General and to the Audit Committee.
Internal Audit regularly tests our control systems andcore business processes, evaluating their adequacy andeffectiveness and ensuring their consistent application
across the BBC.The work plan, which is based on acontinuing assessment of key risks, is agreed annuallywith the Audit Committee and covers financial,
operational and compliance controls, including theexercise of the BBC’s right of audit over external
parties, such as independent production companies
and suppliers of key outsourced business services.
Any significant control failings or weaknesses identified
are reported to appropriate levels of management.
The status of corrective actions taken to address
them are reported to the Audit Committee.

Executive Audit Committee

The members of the Audit Committee, all appointed
in January 2007, are non-executive Directors David
Robbie (Chairman), Dr Mike Lynch and Dr Samir
Shah.The Board is satisfied that David Robbie hassignificant, recent and relevant financial experience.
The committee augments the broad range of skillsof its three members, gained from considerable
experience in senior roles with other organisations,

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BBC Corporate Governance Framework/with advice as necessary from internal and external
professionals, on relevant matters including
developments in financial reporting and company law.
During the year, the Audit Committee has reviewed
its Terms of Reference and has approved theircontinued application, deeming them appropriate toensure the committee’s continued effectiveness.
The Audit Committee met four times during thefinancial year.The meetings were attended by the
Director-General, the Chief Financial Officer (forthree meetings, with one meeting being attended
by the Acting Chief Financial Officer) and from
June 2008 onwards the new Director of Risk andAssurance. Representatives from Internal Audit,
Risk Management and the external auditors werealso present.The committee meets at least annuallywith the external auditors without any member ofmanagement present.The Chairman of the Audit
Committee meets with the Director of Risk andAssurance, alone or with the external auditors, but
without management, and also meets privately withthe external audit lead partner.
Minutes of each Audit Committee meeting, once
approved, are available to the Executive Boardand to the BBC Trust. Recommendations of thecommittee on any area within its remit where
action or improvement is needed are reported backto the Board by whatever route is deemed mostappropriate to the nature and circumstances of theissue.The committee Chairman formally reports to
the Board at least once a year on all matters within
the committee’s duties and responsibilities.
The Audit Committee has fulfilled its responsibilities
for the year; it has:• reviewed the effectiveness of the system ofinternal controls. In doing so it has considered
the findings of the internal and external auditorsand sought assurance from management that any
control issues highlighted are being addressed. It
has also considered reports from management on
processes for managing significant risks.
• reviewed the BBC’s group financial statements,
including accounting policies, compliance with legal
and regulatory requirements, and the findings of theexternal auditors.
• overseen the BBC’s relationship with the external
auditors, including their engagement, the scopeof and approach to their work, their fees, theirperformance and their independence, including
the approval and compliance with the policy on
non-audit work.
• approved the work plan of Internal Audit.
• reviewed the fraud detection processes andwhistle-blowing arrangements.

Independence of external auditors

We comply with the 2006 FRC Code guidanceon maintaining an appropriate relationship withexternal auditors.The external auditors appointed
by the BBC are KPMG LLP, who have safeguards inplace to avoid the possibility of their audit objectivity

R
The Audit Committee’s main focus is to review
and oversee corporate governance at the BBC, inparticular financial reporting, internal control and risk
management. At our meetings, we regularly review
issues raised by Internal Audit and management’s
progress with actions that address these. We
challenge management to make the needed changes
with the minimum of delay, drawing upon our
combined knowledge and diverse experience withother organisations. We also receive regular updates
from our external auditors; these outline their audit
approach and any issues they wish to bring to ourattention for discussion
To gain a deeper understanding of the most significant
risks facing the BBC and a fuller appreciation of
the existing and proposed mitigation of those risks,
we also request papers and presentations frommanagement on major risk concerns high on the
BBC agenda and on risk profiles from across the BBC
selected on a rotational basis. Our interest is in theappropriateness and adequacy of actions taken to
manage risk and we challenge management where
we feel there are improvements to be made.This year
in particular we have considered failures in editorial
controls and the detailed plans to prevent recurrence,
the global recession and its impacts on the BBC and
its numerous stakeholders, and issues around dataprotection in light of general public concern.
The scope of this committee covers the whole BBCgroup; therefore we also receive and discuss updates
from the other Audit Committees which oversee ourcommercial businesses.
david robbie
Chairman of the Audit Committee
18 June 2009and independence being compromised.The Audit
Committee also reviews the audit objectivity andindependence of its external auditors, and recruitment
from KPMG LLP into any senior management
position in the BBC requires its prior approval.
The Audit Committee has set a clear policy which
defines the threshold above which proposed nonaudit work to be carried out by KPMG LLP must
be approved in advance by the committee, and also
defines when it must be submitted to competitive
tender. In all cases, KPMG LLP are not considered
for work which might compromise their ability to
independently opine on the BBC’s financial statements.

Whistle-blowing

We have a ‘whistle-blowing’ (protected disclosure)policy, to facilitate the confidential communication via
a number of routes of any incident in which there is a
suspicion that the BBC’s codes have been breached.
The BBC fosters an environment where all staff
should feel free to report concerns and suspicions
to line management. However, as there could be

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BBC Corporate Governance Framework/

sensitivities regarding actual or suspected incidents,
we also provide the alternative of a ‘whistle-blowing’
hotline, administered by an independent external
company to ensure anonymity. Each incident or
suspicion reported via any route is investigated in aconfidential manner, a response is communicated andaction is taken as appropriate.The Audit Committee
ensures that there are appropriate arrangements
in place for the proportionate and independent
investigation of matters reported and for appropriate
follow-up action.

Executive Board
Remuneration Report

This report sets out the BBC’s remuneration policy
and details the remuneration received by members of
the Board. It has been prepared on the basis that therequirements of the Directors’ Remuneration Report
Regulations 2002 and those of the Financial Services
Authority apply to the BBC wherever these disclosure
provisions are relevant.The sections on pensions andremuneration received by the Board members areaudited by KPMG LLP.

Remuneration Committees: constitution
and operation

The Remuneration and Appointments Committee(RAC) of the BBC Trust is responsible for setting
the remuneration strategy for the Board and is
responsible for all aspects of the remuneration of the
Director-General and the non-executive Directors.
For more information on the RAC please see theTrust’s review and assessment in Part One of theAnnual Report and Accounts 2008/09.
The Executive Remuneration Committee (ERC) is
responsible for implementing the agreed strategy
for all executive members of the Board, with the
exception of the Director-General.The members of
the ERC are non-executive Directors, namely Marcus
Agius (Chairman), Dr Mike Lynch and Robert Webb.
Meetings of the ERC are also attended, on invitation,by the Director-General and the Director, BBC
People, who advise on matters relating to othermembers of the Board and the overall performanceof the BBC. When matters concerning the
remuneration of the Director, BBC People areconsidered, he/she is not present.The ERC has accessto internal expertise through the BBC’s Reward
Director who also attends the meetings.
Complying with the 2006 FRC Combined Codeon Corporate Governance, the ERC takes specialist
advice from external professional advisers. During
the year, independent advice was received from
Hewitts until September 2008 and thereafter fromPricewaterhouseCoopers.

Remuneration of non-executive Directors

The fees of non-executive Directors are determinedby the Trust. For information on how the fee level isset, see the Trust’s review in Part One.

Remuneration of executive directors

The strategy, set by the Trust, is to provide remunerationthat attracts, motivates and retains the key people
required to lead the corporation, whilst also recognising
the BBC’s status as a publicly funded corporation whichmust deliver value to the licence fee payer.This isachieved by aligning base pay with the market medianof the commercial organisations with which the BBC
competes for talent, whilst not seeking to match thelevels of variable pay offered by those organisations.
Each year the ERC reviews independently provided
market pay data to support it in its decision making
on remuneration, and ensure that levels of pay are
consistent with the agreed strategy. Data obtained
for the 2008 annual pay review showed that base
pay was broadly aligned with the median of themarket but that total direct compensation (basesalary plus variable pay) ranged between 40% and
66% of the level paid by our competitors in thecommercial sector.This differential arises becauseof the substantial additional amounts of variable pay(including share based awards) that are provided
in the commercial sector.
Further details on each component of the
remuneration of executive directors are provided
in the following paragraphs.

Base pay

In determining base pay the ERC takes into accountthe base pay of the BBC’s principal competitors
and the other organisations with which it competes
for talent; the affordability of the BBC to reward its
executives; and the performance of the executive.
Base pay is aligned at around the median of themarket ensuring that the BBC does not lead themarket on executive pay in the media sector.

Variable pay

A limited element of variable pay, linked tothe achievement of key objectives and overall
contribution to BBC performance, is provided.
Executive directors (with the exception of the Chief
Executive Officer (CEO) of BBC Worldwide) are
eligible for a discretionary annual bonus of up to a
maximum of 10% of base pay, of which up to 6% is
for the achievement of divisional value-for-money
targets, and up to 4% is for the achievement ofdivisional transformational objectives. No discretionary
bonuses will be paid in 2009.
With regard to the CEO of BBC Worldwide, theBBC’s remuneration strategy recognises that as acommercially funded business, it is appropriate that its
CEO participates in the annual bonus and the longterm incentive plans of BBC Worldwide.The designof the annual bonus and long term incentive plans
are approved by the Trust. Details of the plans areprovided under BBC Commercial Businesses section.

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BBC Corporate Governance Framework/

Report of the Chairman of the Executive
Remuneration Committee
Managing executive reward at the BBC poseschallenges that are unique in the UK.The BBC has tobalance its value-for-money responsibilities as a public
sector corporation with its need to recruit, retain andmotivate the talent required to deliver outstanding
public service broadcasting in competition withprivate sector media and technology companies.
The BBC operates a remuneration strategy for the
Board, approved by the Trust, designed to enable therecruitment and retention of staff in the markets inwhich it operates as both a public service broadcasterand a commercial business.This strategy aligns
base pay at the BBC with the median levels of thecommercial sector but, it does not seek to match thelevels of variable pay that are paid by our commercial
competitors. Our strategy takes account of theopportunity that working for the BBC provides, alongwith the greater than typical level of job security
available due to our revenue being more predictable.
The remuneration strategy for the Board flows down
throughout the rest of the organisation where asimilar approach is taken. Each year we review market
pay data and this shows that, although base pay isbroadly aligned with median levels in the commercial
sector, the level of total remuneration received byeach of the executive directors is significantly behindthe levels paid by our commercial competitors.This
includes the Chief Executive Officer (CEO) of BBC
Worldwide who participates in the annual bonus andlong term incentive plans of BBC Worldwide, ourcommercial business.
A significant factor in differentiating executive
salaries at the BBC is the need to recognise thedifferent market dynamics between creative staff andprofessional support staff and we acknowledge thatthe professional support staff are in the main likely
to remain at the BBC for a shorter period of timeand are likely to be able to achieve greater levelsof reward in the commercial sector.

During the year we have responded to the change
in economic circumstances, recognising that the
gap in pay between the BBC and its commercial
competitors is likely to diminish as levels of variable
pay reduce in the media and technology sectors.
We therefore restricted base salary increases for the
majority of executive directors to 2% in August 2008
and have decided that there will be no base salary
increases for any executive director in August 2009. In
addition the Board decided to suspend discretionary
bonus arrangements for all staff and as a result
no discretionary bonuses will be paid until August2010 at the earliest (except that in the Commercial
Businesses, contractual bonuses will be paid, including
to the CEO of BBC Worldwide). We have also
recognised the need to ensure that remuneration at
the BBC continues to be appropriate and relevantin the future and we are undertaking a formal
review of our remuneration strategy.This review will
examine whether the alignment of base pay with thecommercial sector continues to be appropriate andwill conclude on the best approach to variable pay
for the BBC going forward. We plan to complete thereview and to agree any changes in remuneration
strategy with the Trust by October 2009.This will
provide an even stronger framework than at present
and ensure that the policy remains resilient in theface of the challenges facing the BBC now andin the longer term.
Although we face some complex and challenging
issues, my colleagues and I believe that we havecontinued to apply a remuneration strategy that is in
the interests of our licence fee payers, that is sensitive
to the current economic circumstances, and which
has enabled us to recruit, retain and motivate theexecutive talent that the BBC requires.
Marcus Agius
ChairmanRemuneration Committee
18 June 2009

Benefits

age is 60. For an employee who joined on or after
1 November 2006 the accrual rate is 1.67% of theirpensionable salary for each year of service, adjusted inline with inflation up to retirement. For employees inthis group, the normal pensionable age is 65.
All current executive directors (except Erik Huggers)
have a normal pensionable age of 60 but may
continue in employment to age 65.The normal
retirement date for Erik Huggers is 65 as he joined
the Pension Scheme after 1 November 2006. For
those who joined the Pension Scheme after 31
May 1989 earnings are subject to the maximum
annual limit (£117,600 per annum for 2008/09). No
maximum annual limit is applied to those who joinedon or before 31 May 1989.The Pension Scheme
provides for early retirement on medical grounds andlife assurance of four times pensionable salary up toa prescribed limit.

In addition to pensions, the other main contractual
benefits are a car and fuel allowance, private healthinsurance, and life assurance.The Director-Generaland Deputy Director-General are entitled to achauffeur-driven car under earlier arrangements.
The Director-General has no entitlement toa personal car or fuel allowance.

PensionExecutive members of the Board are eligible toparticipate in the BBC Pension Scheme, which provides
for pension benefits on a defined benefit basis.
For an employee joining the Pension Scheme before
1 November 2006, the accrual rate is 1/60th of the
final pensionable salary for each year of service withpensionable salary being base pay, including London
Weighting, but not including any bonuses or otherpayments. For this group, the normal pensionable

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A variety of arrangements were put in place, formembers of the Board who joined after 31 May
1989, and whose pensionable salary exceeds the
maximum annual limit, including funded and unfundedarrangements outside of the Pension Scheme. Since
1 April 2006 these arrangements have been replaced
by a cash supplement paid to each director on apensionable salary above the maximum annual limit.
Any participating employee who reaches or exceeds
the Lifetime Allowance (£1.65million for 2008/09)
may opt out of the Pension Scheme and instead
receive a cash supplement.

The BBC’s commercial businesses

The CEO of BBC Worldwide participates in theannual bonus plan and long term incentive plan (LTIP)
of BBC Worldwide which were established by the
Board of BBC Commercial Holdings and approvedby the Trust.These plans are not funded by the licence
fee and the full costs of base pay, annual bonus andthe LTIP are self-funded by the commercial revenuesof BBC Worldwide.
The CEO of BBC Worldwide is eligible for a maximum
annual award of 50% of base pay under the annual
bonus plan; 75% of the bonus is determined by theperformance of BBC Worldwide against profit targets

and 25% is discretionary and determined by the
Director-General based on the achievement of key
objectives relating to the overall success of the BBC. In
line with decision regarding other executive directors, thislatter 25% discretionary bonus will not be paid in 2009.
The CEO is entitled to defer up to 75% of the previous
year’s annual bonus into the LTIP.
The LTIP is a cash incentive plan designed to align the
CEO’s remuneration with the strategy of the business.
The maximum payout under the LTIP is 20% of basepay, plus a potential 100% match of deferred annual
bonus. Both elements are subject to two performancemeasures: Profit Growth (75% weighting) and Returnon Sales growth (25% weighting), measured overa three year period and relative to a comparatorgroup of at least 15 other international media
companies .The companies are ranked according
to their performance.These measures were chosen
as they most directly support the objectives of BBC
Worldwide and are the key drivers of success.
BBC Worldwide must be ranked at least at themedian of the comparator group for any of the award
to vest. Maximum vesting is achieved for a ranking at
the upper quartile or above.There is a straight-line
vesting scale between these two points.

T
The remuneration of the Board members and the Trustees during the year is shown below:
total
Other remuneration
remuneration7
2008/09
£000
£000

Total
remuneration
2007/08£000

Fee/base pay6£000

Annualbonus£000

Taxablebenefits
£000

212
412
471
325
104
223
327
346
397
664
333

–
–
–
–
–
–
–
–
69
–
–

5
15
14
16
3
9
11
14
14
6
15

31
88
–
62
17
42
58
69
–
164
65

248
515
485
403
124
274
396
429
480
834
413

419
536
513
413
466
–
431
440
486
816
440

total executive directors

3,814

69

122

596

4,601

4,960

non-executive directors
Marcus AgiusVal Gooding
Mike Lynch
David Robbie
Samir Shah
Robert Webb

50
35
35
40
35
40

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

50
35
35
40
35
40

50
9
35
40
35
40

executive directors
Jenny Abramsky1
Jana Bennett
Mark Byford
Tim Davie
Ashley Highfield2
Erik Huggers3
Stephen Kelly4
zarin PatelJohn Smith5Mark Thompson
Caroline Thomson

total non-executive directors
total executive Board
total trustees
total

235

–

–

–

235

209

4,049

69

122

596

4,836

5,169

677

642

5,513

5,811

Jenny Abramsky retired 30/09/08, base pay includes a payment for contractual leave of £46,414.
Ashley Highfield left 30/06/08, base pay includes a payment for contractual leave of £16,515.
3
Erik Huggers appointed as a Director 01/08/08.
4
Stephen Kelly left 28/02/09, base pay includes a payment for contractual leave of £25,143.
5
John Smith’s base pay, bonus and benefits have been fully funded by BBC Commercial Businesses since 1 September 2006. In addition to the annual bonus, an equal amount has been invested
in the Long Term Incentive Plan for BBC Worldwide which may vest in March 2012.
6
The BBC introduced a salary sacrifice arrangement on 1 June 2008 for members who joined the Pension Scheme before 1 November 2006, and those Directors as indicated in the table above
participated in the arrangement. From that date on, the terms and conditions of employment were changed for those employees opting for the salary sacrifice arrangement and as a result employee
pension contributions made via the salary sacrifice arrangement have been treated as employer contributions, with a corresponding reduction in salary. Base salaries for executive directors have notbeen adjusted to reflect the impact of salary sacrifice to enable like for like comparison with prior years.The total salary sacrifice by executive directors was £84,704.
7
Other remuneration relates to pension arrangements and comprises the following:a. cash pensions supplements which replaced FURBS arrangements.
b. a cash supplement for Jenny Abramsky as she no longer accrued benefits under the Pension Scheme.
1
2

F79

governance/
BBC Corporate Governance Framework/

table 4/ defined benefit schemesT

executive directors
Jana Bennett
Mark Byford
Tim Davie
Ashley Highfield1
Erik Huggers2
Stephen Kelly3
zarin PatelJohn Smith
Mark Thompson
Caroline Thomson

Age as at
31 March
2009

Increasein accrued
pensionover year
£000

53
50
41
43
36
43
48
51
51
54

2
13
2
1
2
2
3
15
2
5

						
Transfer
Transfer
Totalvalue ofvalue ofaccruedaccruedaccruedpension at
pension at
pension at
31 March
31 March
31 March
4
2009
2009
20084
£000
£000
£000
14
206
8
15
2
5
21
209
9
67

212
3,406
57
116
7
37
220
3,673
130
1,475

Director’s
contributions(excluding
contributions
paid via thesalary sacrificearrangement)£000

Increasein transfer
value lessdirector’s
contributions
£000

1
5
1
1
–
1
1
4
1
1

47
638
19
16
7
16
49
502
38
166

164
2,763
37
99
–
20
170
3,167
91
1,308

Ashley Highfield both resigned as a director and left the Pension Scheme on 30 June 2008.The accrued pension on leaving the Pension Scheme has been valued as at 31 March 2009.
Erik Huggers was appointed as a director on 1 August 2008, although he joined the Pension Scheme on 1 April 2008.The figures shown include the period before he was appointed as a director. He
is a member with less than 2 years’ service, and so he is not entitled to a deferred pension at 31 March 2009. However, for consistency his accrued deferred pension has been calculated and valued.
3
Stephen Kelly both resigned as a director and left the Pension Scheme on 28 February 2009.The accrued pension on leaving the Pension Scheme has been valued as at 31 March 2009.
4
The transfer value of accrued benefits represents the estimated cost to the Pension Scheme of providing the benefits accrued to date.The value is affected by many factors, including age, pensionablesalary, pensionable service, section of the Pension Scheme and investment market conditions at the date of calculation. It is not a sum paid to or due to the individual and therefore cannot bemeaningfully added to remuneration.
No payments in respect of termination or compensation for loss of office were paid to or receivable by Board members during the year.
1
2

T
Performance ranking for BBC Worldwide

LTIP payment

Upper quartile or above
MedianBelow median

20% of base salary, and 100% match of deferred bonus
10% of base salary, and 50% match of deferred bonus
Nothing vests

Notes:
1. Straight line pro-ration applies between median and upper quartile.
2. 50% of the amount of any deferred annual bonus is also forfeited if performance is below the lower quartile.

T

			

			

LTIP Award

Bonus
deferred£000

End ofperformance
PeriodLTIP
award
vested£000

Deferredbonus
matching
award
vested£000a–March 2009

b
80

c
–

Potential
deferredbonus
matching (atmaximum)
£000

Total
potential(at target)
£000

Total
potential (atmaximum)
£000

e
80
88

a+b+d
160
172

a+c+e
240
256

LTIP 2006 to 2009

Total
vested
£000
a+b+c
80

T

LTIP Award
LTIP 2007 to 2010
LTIP 2008 to 2011

Bonusdeferred£000

End ofperformance
PeriodPotential
LTIP
vesting(at target)
£000

a
80
88

March 2010
March 2011

b
40
40

Potential
LTIP
vesting (atmaximum)£000

Potential
deferredbonus
matching
award(at target)
£000

c
80
80

d
40
44

Notes:
1. LTIP 2007-2010 for performance below lower quartile 100% of deferred bonus is forfeited.
2. Potential LTIP vesting is based on current earnings and rounded to nearest 1,000
The comparator group is selected for their mix of business, industry and geographical representation and comprises Aegis Group, British Sky Broadcasting Group, Emap, Informa, ITV,
Pearson, Reuters Group, Taylor Nelson Sofres, WPP, Yell Group, Cablevision Systems Corp, Comcast A, Disney (Walt) Company, Eastman Kodak, Interpublic Group Cos, News Corp A,
SBS Broadcasting, Time Warner, Pro Sieben Sat1, Axel Springer (R), Havas Advertising, JC Decaux, M6-Metropole Television, Publicis Groupe, TF1, Vivendi Universal, Arnoldo Mondadori,Mediaset, RCS Mediagroup, Jetix Europe, Dentsu Inc, Fuji Television Network, Nippon Television Network Corp, SKY Perfect Communications.

F80

Employment contracts

Employment contracts of executive directors havea notice period of a maximum of 12 months, andare subject to earlier termination for cause. As
at 31 March 2009 the unexpired term of each
executive director was a maximum of 12 months.
There is no contractual entitlement to any additional
remuneration in the event of early termination
other than for reason of redundancy.

Outside interests

Where there is no potential for conflict of interest, andwith the prior agreement of the Director-General andthe Nominations Committee, executive members of theBoard may hold one remunerated external directorshipwith up to 15 days per year permitted to fulfil theseduties. Remuneration which arises from directorships
may be retained by the executive member.The policy
encourages the take up of external non-executive
appointments to support professional development andbringing broader business skills to the BBC. Executive
directors may also hold non-remunerated external posts.
During the year the Chief Operating Officer served
as non-executive director of The Pensions Regulator
until 28 February 2009 and retained the fees forthis directorship as set out in table 8 below.The
Board’s register of interests can be obtained at www.
bbc.co.uk/info/running/executive/register.shtml It is
recognised that non-executive Directors are likely tohave other directorships and the restrictions applying
to executive directors do not apply to them.
T
COO

Organisation

Payment received£000

The Pensions Regulator

9

Executive Board
responsibility statement

Statement of Executive Board
responsibilities in respect of theAnnual Report and Accounts

The Charter requires that an annual report andstatement of accounts is prepared in accordancewith UK Generally Accepted Accounting Principles
and audited.The Trustees’ responsibilities are detailed
in Part One of the Annual Report and Accounts.
The Board is responsible for the preparation ofan operating and financial review (this comprises
the Executive Board’s performance review and thefinancial overview), statements of compliance withapplicable codes and regulations and the statement ofaccounts. As a result the Board is required to preparea statement of accounts (or ‘financial statements’) for
each year that gives a true and fair view of the state ofaffairs of the BBC and of the income and expenditure
for that period.
In preparing those financial statements the Board
is responsible for:• selecting suitable accounting policies and thenapplying them consistently.
• making judgements and estimates that arereasonable and prudent.
• stating whether applicable UK accounting standards
have been followed, subject to any material departures
disclosed and explained in the financial statements.
• preparing the financial statements on the going
concern basis, unless it is inappropriate to presume
that the BBC will continue in business, in whichcase there should be supporting assumptions or
qualifications as necessary.
In addition, the Board has elected to comply withthe accounting and disclosure provisions of theCompanies Act 1985 and, where applicable, theFinancial Services Authority Listing Rules which
apply to a company quoted on an EU regulated
market except that International Financial ReportingStandards have not been adopted.
The Board is responsible for keeping properaccounting records that disclose with reasonableaccuracy at any time the financial position of the
BBC and enable them to ensure that the financial
statements comply with the Charter and theapplicable disclosure provisions of the Companies
Act 1985.They also have a general responsibility fortaking such steps as are reasonably open to them tosafeguard the assets of the BBC and to prevent anddetect fraud and other irregularities.
The Board is responsible for the maintenance andintegrity of the corporate and financial information
included on the BBC’s website. Legislation in the
UK governing the preparation and dissemination offinancial statements may differ from legislation in otherjurisdictions.
The Board members who held office at the date of
approval of the Annual Report and Accounts confirm
that, to the best of their knowledge:• the financial statements, prepared in accordancewith UK Generally Accepted Accounting Principles,
give a true and fair view of the assets, liabilities,
financial position and surplus of the BBC and theundertakings including in the consolidation taken
as a whole.
• the operating and financial review includes a fairreview of the development and performance ofthe business and the position of the BBC and theundertakings included in the consolidation taken asa whole, together with a description of the principal
risks and uncertainties that they face.

Statement of disclosure of information
to auditors

The Board members who held office at the date of
approval of the Annual Report and Accounts confirm
that, so far as they are each aware, there is no relevant
audit information of which the BBC’s auditors areunaware; and each member has taken all the steps
that they ought to have taken as an Board member
to make themselves aware of any relevant audit
information and to establish that the BBC’s auditors
are aware of that information.

Going concern

Although the BBC is not immune from the effectsof the current economic environment, the Board
believes the BBC is well placed to manage the risks
effectively, and has adequate resources to continue
in operation for the foreseeable future. As a result
the going concern basis has been adopted in the
preparation of the financial statements.
This statement was approved by the Board.

Mark Thompson
Director-General
18 June 2009
F81