FULL FINANCIAL STATEMENTS
2011/12

BBC FULL FINANCIAL STATEMENTS 2011/12

Presented to Parliament by the Secretary of State
for Culture, Olympics, Media and Sportby Command of Her Majesty
July 2012

The BBC’s Annual Report and Accounts 2011/12, giving narrative context to the numbers contained in this document,
were also laid before Parliament on 16 July 2012 and are available online at www.bbc.co.uk/annualreport

CONTENTS
F2
F3
F4
F12
F13
F14
F15
F91

Chief Financial Officer’s review
Summary financial performance
Financial overview
Collecting the licence fee
Looking forward with confidence
Independent auditor’s report
Group financial statements and notes
Statement of responsibilities

F1

CHIEF FINANCIAL OFFICER’S REVIEW
Careful financial management of the licence fee and our commercial businesses
this year has put solid foundations in place for us to transform the way we workover the next five years and to enable us to afford our future obligations, as well
as funding the landmark broadcast events of 2012.

Strong financial foundation
2011/12 has been a year in which we consolidated
our financial position to prepare for future
demands and challenges. It is a year when
we have worked together across the BBC todevelop the detailed plans for Delivering Quality
First, not only to live within the means of ourlicence fee settlement, which cut funding by 16%
in real terms, but also to go further and provide
reinvestment into the key service developments
our audiences will require of us.
Careful management of the BBC’s finances has
meant that as well as funding programmes andother content which have delivered record
audience reach, we have taken early action
to provide funding for future plans.
Our group surplus is inflated by two nonrecurring items: the sale of BBC Worldwide’s
Magazines business (at a profit of £95million) andgains relating to our pension scheme (£45million).
Therefore we have an underlying surplus of£249million. We need this to pay for increased
programme spend in 2012 to cover the Olympics
and the Diamond Jubilee, but also to cover thecosts of implementing our efficiency plans, and of
implementing the new ways of working throughour digital media initiative and the move into
New Broadcasting House. As well as the one-off
profit on the disposal of the Magazines business,the group surplus includes £127million of profit
generated by our commercial activities to beinvested into programmes and to deliver futurecommercial revenues.
This result reflects an increase in licence fee
income of £93million. £74million of which can be
attributed to increased digital switchover activity.
Underlying licence fee income collected roseby £19million due to an increase in household
growth, albeit slower than the historical trends,
but also reflecting our ability to hold evasion rates
level despite difficult economic conditions andpressure on household budgets. This year we
signed a new collection contract that reduces thecost of collection and looks at ways of lowering
evasion rates in the future to offset the risk ofslower rates of household growth.
Our overall cash balance was £262million,
excluding £145million ring-fenced savings fromour digital switchover activity (the Help Scheme
F2and Digital UK). The £145million is due forrepayment to the Government and is on topof £214million we repaid this year from savings
built up in earlier years of this programme.
The public service cash balance will provide thenecessary funding for the restructuring required
to deliver the efficiencies and new ways ofworking needed for our Delivering Quality First
plan. It will also fund our further pension deficit
recovery payments and a planned increase in
spend on content in this landmark year of the
Olympics and the Diamond Jubilee at the level
our audiences expect.
This year we have changed the presentation of
our Annual Report and Accounts to make themsimpler and to present the financial position of
the BBC more logically.
Ready to deliver
We look forward to the financial challenges
with a track record of success in deliveringtrue efficiencies, not cuts. Our Continuous
Improvement programme concluded its fourthand penultimate year by delivering £499millionof continuing savings, bringing the cumulative
total achieved to £1,498million. This translates toa projected out-turn equivalent to 3.6% averageannual savings, exceeding the 3% target set by
the Trust for this licence fee period. The National
Audit Office (NAO) concluded positively on the
programme this year when they examined it
in detail.
In addition to the efficiency challenge, we cannot
forget as we look forward that 2012/13 will be
one of the biggest broadcasting years in the
BBC’s history, with audiences looking to us tocover the year’s historic events with breadth,depth and quality.
Beyond 2012 there are significant challenges.
We need sharp financial focus to manage the
16% reduction in our funding that is necessary
to fund the additional financial obligations of BBC
World Service, BBC Monitoring and S4C fromthe licence fee. I am confident that the BBC is ingood financial shape to meet this challenge.
Zarin Patel
Chief Financial Officer
21 June 2012

SUMMARY FINANCIAL PERFORMANCEUK PSB Group spend• 71p in every £1 of licence fee was spent directlyon programmes or the property and technology
infrastructure to support their production …
• … and another 6p in every £1 is spent getting
our services to audiences on analogue, Digital
Terrestrial Television (DTT) and the internet• The cost of collecting the licence fee is 3.4p per£1 collected

Efficiency savings• £1.5billion of sustainable savings achieved since the startof the Continuous Improvement Programme without
deterioration in quality of our content• £559million of recurring annual efficiency savings• We will exceed our 3% annual savings target• Total gross savings are forecast to be £2.1billion(before implementation costs)

Breakdown of UK PSB Group expenditure 2011/12£m%

Service licences – direct content spend
Other direct content spend
Distribution
Property and technology
Other infrastructure and support
Other items including licence fee collection
and digital switchover
Restructuring costs
Pension deficit payment

2,356
90
208
315
304

61
2
6
8
8

387
101
89

10
3
2

Total

3,850

100

Cumulative gross efficiency savings £mProjected
2,000
1,500

499

1,000

434

500
0

2.1bn

559

328
237

237

08/09

09/10

1.5bn

999

565
10/11

11/12

12/13

Total

New savings
Cumulative savings
From 2012/13 we will deliver ongoing annual savings of £559million.

Commercial performance• BBC Worldwide gross sales (excluding Magazines)
up 5.4% on last year
• BBC World News advertising revenue holding steadyin a tough market• BBC S&PP continues to broaden its customer base
• BBC Worldwide returned a record £216million
to Public Service Broadcasting during the year

Commercial income
2011/12£m

UK PSB Group including
BBC World Service and
BBC Monitoring*
BBC Worldwide**
BBC World News
Studios & Post Production (S&PP)

230
1,085
70
52

Headline profit

2010/11 2011/12£m£m

2010/11
£m

n/a
155
4
5

n/a
144
9
6

213
1,030
72
59

		Headline profit is not applicable to this Group.
	Commercial income excludes Magazines and includes joint venture revenue.

*

**

F3

FINANCIAL OVERVIEW
With a licence fee fixed until 2017, the BBC might be regarded as being in a morestable position than other commercial businesses, but a fixed licence fee and new
funding commitments (including BBC World Service) mean that the BBC licencefee funding is subject to 16% cuts in real terms.

As well as dealing with its own financial
challenges, the BBC is not immune fromthe effects of the economic downturn:• pressure on household budgets in the UK
poses a continuing challenge for licence feecollection. We have held evasion at 5% for
a number of years now through targeted
collection and helping licence fee payers findtheir most suitable method of payment• difficult trading conditions in some markets
have put pressure on the BBC’s commercial
operations, mitigated to some extent by
successes in new markets• significant inflationary pressures have to be
managed through the delivery of efficiency• BBC World Service has seen reductions to its
grant-in-aid funding in line with the rest of the
public sector• the low returns available on the world’s
financial markets place significant pressureon all pension schemes, including the BBC’s

The Choir: Military Wives scored BBC
Two’s highest AI score (93).
F4We have faced these challenges by bearing
down on our costs and reviewing our businessmodels. In addition to the efficiency plans we are
putting in place, which are reviewed later in thissection, a number of other initiatives have been
implemented. A new contract has been signed
for licence fee collection and we continue to offer
a number of methods to pay the fee.
The BBC earns a return on its programmes
through BBC Worldwide. BBC Worldwide
reinvests part of its profit into ensuring that it is
not left behind by the digital transformation weare seeing in commercial media markets.
We have restructured many of our strategic
contracts to remove automatic indexation basedon published inflation rates.
A pension deficit repayment plan continues tobe followed to ensure that our pension scheme
is brought back into equilibrium in a way that isfair both to our staff and to current and future
licence fee payers and audiences.

We are proud of the fact that the BBC’s financial
structures and plans will ensure that the BBC
remains strong, despite these pressures. No
services will close as a result of the plans, andthe services which our audiences value the mostwill be largely protected. We continue to focus
resources on the editorial priorities we know
matter most to our audiences.
Our efficiency achievements this year
As well as planning our future efficiencies under
Delivering Quality First, we have continued todeliver sustainable efficiency savings under
our Continuous Improvement programme,
which has now completed its fourth andpenultimate year.
This year, we delivered another £499million
worth of savings, bringing the cumulative total
achieved since 2008/09 to £1,498million. Ourfull programme is on track to exceed the Trust’s
target of 3% average annual efficiencies, with aprojected out-turn of 3.6%, and total predictedcumulative savings in excess of £2billion by
the end of 2012/13. This has been delivered
without compromising the quality of our
output and whilst delivering record audienceappreciation figures.
Our annual savings achievement is reviewed by
our auditors, KPMG LLP. Additionally, and forthe first time, the NAO examined Continuous
Improvement this year. Their report, issued in
November 2011, commended the programme
and the way it was managed. It confirmed that
we were on track to exceed our target, helpedby clear incentives for management to deliver
the savings targets set for their divisions. They
also made useful recommendations on identifying
cross-divisional initiatives and for further
improvements to performance tracking. We areapplying these findings to the design of Delivering
Quality First.

Efficiency savings by category
Category

PeopleRefocusing to get the right mix of people to continue to deliver
distinctive output that audiences value. We are committed toa real-term reduction in talent spend.
Production and process improvement
Using innovative technology to improve how we do things andminimise costs across our operations, from scheduling to shooting.
Procurement and contracts
Releasing funds for programmes and content with savings frombulk buying, outsourcing and renegotiating contracts.
Property and technology
Transforming the way we work, for example using tapeless, digitalproduction to make multiplatform content more efficiently thanever before.
Optimising content quality
Delivering Quality First builds on our existing efficiency programme,with a focus on more effective allocation of commissioning spend
to deliver maximum audience impact.

% of total savings

13%
29%
23%
7%
28%

The successful delivery of Continuous
Improvement shows that the BBC hasembedded a culture of efficiency into its
operations that we can build on to deliver
the ever more challenging savings requiredin the future.
BBC World Service
2011/12 was the first year to reflect the outcomeof the 2010 Comprehensive Spending Review
for BBC World Service, and BBC World Service
has been focused on delivering the first trancheof savings as announced in January 2011. Around
450 posts were closed in the year, althoughhigher levels of redeployment than originallyprojected have provided significant savings on
implementation costs.

F5

FINANCIAL OVERVIEWCONTINUED

Summary Consolidated Income Statement
For the year ended 31 March 2012

2012
£m

2011
£m

Licence fee income

3,606

3,513

Other income and revenue

1,480

1,480

Total income

5,086

4,993

Operating costs (excluding restructuring costs
and exceptional pension income)(4,750)(4,789)

45

250

(103)

(63)

(4,808)(4,602)

Share of results of associates and joint ventures

21

27

Gain on sale of operations and disposal of fixed assets

100

96

Tax and net financing income

(10)

(31)

Group operating surplus

389

483

Exceptional pension gain
Restructuring costs
Total operating costs

Income Statement
Our results this year show how we havecontinued to manage successfully our financial
challenges, and make sound preparations for the
future. This is reflected in the Income Statement
for the year.
Our group surplus was £389million. This includeda £45million actuarial gain resulting from finalising
the benefits of pension reform undertaken in theprevious year, and a profit of £95million from thedisposal of BBC Worldwide’s Magazines business.
This sale represents a further move in focusing
commercial activities on BBC-branded channels
and platforms.
After excluding these two items, the underlying
surplus was £249million, or 4.9% of our grossincome. Our licence fee funding is managed overthe licence fee period, and costs will not match
income in all years. The surplus this year reflects
savings made to cover the future anticipatedcosts of increased broadcast expenditure in 2012
(Olympics, Diamond Jubilee, European footballchampionships) but also restructuring provisions
to enable the delivery of savings in future years
and to fund major projects like the move to New
Broadcasting House and the new digital ways ofworking. In our recently published Workplan for
2012/13, we are projecting a deficit of £137million
for the year, which this year’s surplus will fund.

F6

Income has risen because of increased
digital switchover activity and limited
growth in household numbers
Commercial income has held up
in a challenging economic climate
Despite significant inflationarypressures and increased digital
switchover activity, costs haveremained broadly stable, reflecting
the impact of our efficiency andsavings programmes
Exceptional pension gain results fromthe finalisation of pension scheme
members’ decisions under the recent
pension reform
Restructuring costs relate primarily
to Delivering Quality First initiatives
The gain this year results principallyfrom the sale of BBC Worldwide’s
Magazines business

Licence fee income
Licence fee income increased by £93million
this year, despite the freeze in the licence fee.
Included within the annual licence fee is a sum
to fund the activities of the Digital Switchover
Help Scheme as well as Digital UK. Underspends
within this funding have to be repaid to theGovernment and are therefore netted from
our income. Digital switchover activity was
greater this year than last year, and accountedfor £74million of the £93million increase in our
income. The remainder was the result of modest
household growth. We have also held licence
fee evasion rates at their prior year level despitepressure on household budgets by targeting ourcollection activity and by highlighting easier ways
to pay to licence fee payers.

Commercial operations
The licence fee is supplemented by income
from the commercial exploitation of licencefee funded content and infrastructure throughthree commercial subsidiaries – BBC Worldwide,
BBC World News and BBC Studios & Post
Production (S&PP).
As a result of its activities in 2011/12, BBC
Worldwide returned a record £216millionof cash to the BBC (2010/11: £182million),equivalent to 6% of licence fee income. Despite
unpredictability in some of its markets, thecompany has continued to grow. Underlying sales(excluding sales of Magazines) increased 5.4% to£1,085million and the headline profit (excluding
exceptional items) increased to £155million.

During the year, BBC Worldwide wrote
down the carrying value of its investment in
Lonely Planet by £16million. This was caused bycontinued appreciation of the Australian dollar.
At the date of the annual impairment review
in January 2012, the Australian dollar was at
a 28-year high against sterling. Lonely Planet
management have taken steps to reduce thecompany’s Australian cost base to mitigate thepotential impact of further appreciation.
BBC World News continued to deliver highquality journalism to an international audience.
Although both revenue and profits fell slightly
overall in the face of tough economic conditions,advertising revenue in particular came underpressure. Distribution revenue fared better andwas able to show a small improvement. The
company also benefited from the first full yearof a significant cost saving plan.
In a difficult trading environment, S&PP recordeda headline profit of £5million this year. The
company continued to broaden its customer
base, compensating for the loss of income after
BBC Sport and Children’s activities relocated to
Salford where S&PP has no operating base.

The BBC Proms were broadcast live on BBC Radio 3
with over 300,000 people attending the concerts.

F7

FINANCIAL OVERVIEWCONTINUED

UK Public Service Broadcasting (UK PSB) Group ExpenditureService

Content£m

Distribution£m

Infrastructure/
support
£m

2012
Total
£m

2011
Total
£m

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC HDBBC ALBA
BBC News Channel
BBC Parliament
BBC Red Button

1,041.1
416.6
83.8
49.2
81.9
29.2
1.2
5.0
42.4
2.1
13.5

54.8
19.3
4.4
3.5
3.6
3.9
15.0
1.7
6.9
5.8
18.3

241.7
101.2
24.7
15.1
21.8
9.3
1.6
1.3
8.2
1.4
5.4

1,337.6
537.1
112.9
67.8
107.3
42.4
17.8
8.0
57.5
9.3
37.2

1,400.8
527.4
110.0
67.0
99.2
39.7
11.8
7.6
61.0
8.0
39.5

Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio 5 LiveBBC Radio 5 Live Sports Extra
BBC 1Xtra
BBC 6MusicBBC Radio 4 Extra
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidhael
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle

1,766.0
38.4
47.2
37.8
88.1
51.1
2.6
7.2
7.8
5.0
8.5
112.7
23.2
3.6
13.0
11.4
17.3

137.2
4.6
4.6
4.7
8.6
5.8
1.2
1.3
1.3
1.3
1.5
8.1
3.0
1.4
1.5
1.6
2.0

431.7
7.6
8.7
10.0
19.2
12.4
1.5
2.6
2.6
1.9
3.0
25.7
5.9
1.0
3.2
2.9
4.5

2,334.9
50.6
60.5
52.5
115.9
69.3
5.3
11.1
11.7
8.2
13.0
146.5
32.1
6.0
17.7
15.9
23.8

2,372.0
48.1
59.1
50.7
119.7
72.8
4.9
11.0
10.7
8.2
12.6
147.3
32.3
6.1
17.0
16.0
21.6

Radio

474.9

52.5

112.7

640.1

638.1

BBC Online

115.3

18.7

52.8

186.8

193.9

Online

115.3

18.7

52.8

186.8

193.9

Spend regulated by service licence

2,356.2

208.4

597.2

3,161.8

3,204.0

The largest element of the BBC’s expenditure is the cost of
programmes and other content supplied to audiences andusers under the 28 service licences the Trust uses to hold BBC
management to account.
Total content spend by service shows that our spending reduced
to £2,356million (2010/11: £2,475million). This reflects the ongoing
impact of our efficiency programme, and the normal biennial
cycle of broadcasting costs with the previous year including thefootball World Cup and no equivalent event in 2011/12.
No service licences spent above the permitted baseline budget
threshold during 2011/12. Five services underspent by morethan 10%:• the BBC HD channel benefited from falling costs of highdefinition productions• BBC 1Xtra, BBC Radio 5 Live and BBC Radio 4 Extra secured
early Delivering Quality First savings• BBC Red Button spent less than budgeted because of adecision to defer some transmissions until 2012/13, coupledwith efficiencies from relocation to Salford

In all cases the delivery of savings did not compromise theeditorial performance of the relevant services.
During the year, the continuing delivery of efficiencies led
headcount to reduce in both licence fee funded operations of the
BBC and in commercial subsidiaries. Staff numbers in the BBCGroup reduced by 4.2% to 21,940 from 22,899 in the year andsalaries and wages paid to staff reduced by 2.1%. In the UK PSBGroup, staff numbers reduced by 2.2% to 16,858 from 17,242,
and there was a 0.8% fall in the pay-bill (excluding restructuringcosts and pension deficit recovery payments).

F8

Total Public Service Broadcasting Group expenditure

Spend regulated by service licence

Content£m

Distribution£m

Infrastructure/
support
£m

Other
items
£m

2012
Total
£m

2011
Total
£m

2,356.2

208.4

597.2

–

3,161.8

3,204.0

–

–

–

126.1

126.1

123.6

Orchestras and performing groups

23.6

–

5.4

–

29.0

24.0

S4C

23.2

–

6.0

–

29.2

32.2

Research and development spend

Licence fee collection costs

42.7

–

9.8

–

52.5

32.8

UK PSB Group pension deficit reduction payment

–

–

–

89.1

89.1

–

Costs incurred to generate intra-group income

–

–

–

156.8

156.8

152.6

Costs incurred to generate third-party income
Other content-related spend
Restructuring costs
Total UK public services content expenditure

–

–

–

55.9

55.9

64.6

89.5

–

21.2

427.9

538.6

429.8

–

–

–

100.6

100.6

29.6

2,445.7

208.4

618.4

528.5

3,801.0

3,663.4

Digital switchover (Digital UK Limited)

–

–

–

40.8

40.8

25.0

Digital switchover (DSHS Limited)

–

–

–

89.7

89.7

55.3

2,445.7

208.4

618.4

659.0

3,931.5

3,743.7–––(81.7)(81.7)(58.2)

2,445.7

208.4

618.4

577.3

3,849.8

3,685.5

2012
£m

2011
£m

Property

186.9

150.0

HR and training

46.2

48.8

Policy and strategy

9.6

10.8

Total UK PSB Group expenditure
Lease reclassification
UK PSB Group expenditure
Infrastructure and support costs are made up of:Finance and business

56.8

61.3

Marketing, audiences and communication

72.0

70.5

Executive Unit

2.7

4.4

Total central costs

374.2

345.8

Technology

128.0

85.8

Libraries, learning support and community events

36.1

38.6

Divisional running costs

63.7

63.3

BBC Trust Unit (excluding restructuring)

11.9

13.3

Other

4.5

(5.4)

618.4

541.4

Total infrastructure/support costs

Central department costs have all reduced this year in real terms.
The two exceptions are Property and of Technology, whichreflect directly the significant investment the BBC has been
making in both its technology and its operating infrastructure in
recent years (e.g. MediaCityUK, Broadcasting House in London
W1, Digital Media Initiative). As a direct consequence of thisinvestment, annual depreciation and running costs in property
and technology have increased this year.

This investment is essential to support the new ways of working
and to provide the technological capacity, to enable the BBC toproduce the dynamic content our audiences and users require ina digital economy where the platforms used to consume content
have, and will continue to, develop rapidly. As we implement
plans to reduce our property footprint we have to bear thecosts of vacant production sites, both as we ready them for use
and up to the point of disposal. These surplus property expenses
are included in infrastructure and support. The disposal of sites(Television Centre (TVC), White City) in the coming years will
deliver significant savings against current cost levels.

F9

FINANCIAL OVERVIEWCONTINUED

Summary Consolidated Balance Sheet
For the year ended 31 March 2012

2012
£m

2011
£m

Non-current assets

1,920

1,947

Current assets

2,069

2,052

Current liabilities(1,259)(1,314)Non-current liabilities (excluding pension liabilities)(1,206)(1,357)

Net assets (excluding pension liabilities)

1,524

1,328

Net pension liabilities(1,179)

(927)

345

401

338

394

Net assets
Represented by
BBC reserves
Non-controlling interests

7

7

345

401

Balance sheet
Plant property and equipment (PP&E)
This has been a year of significant further
progress in developing our operating estate andtechnology to deliver ongoing savings throughnew technology and collaborative working, as
well as enhancing programme output. The year
saw the opening of MediaCityUK in Salford andour new Drama Village at Roath Lock in Cardiff.
Additionally, BBC World Service has commenced
operation from New Broadcasting House in
London W1. The Fabric project (our new digitalproduction system) has led development of ourtechnology infrastructure. In total £175million
was invested this year, with W1 (£44million),
North (£37million) and Fabric (£38million) as
the key constituents.
As these new properties and technology
infrastructure become operational, we start
to incur depreciation and the additional cost,
combined with the transfer to current assetsof TVC, as an asset held for sale, means there isa net reduction in the book value of our PP&E
this year. Our depreciation charge increased by£20million this year as a direct consequence of
our investment in our property and technology
infrastructure.
The significant operating facilities we now have in
Salford, Glasgow and Cardiff mean the BBC is ina strong position to meet our target of spending
50% of the network TV budget outside ofLondon by 2016.
Pensions liabilities
Financial markets experienced a volatile year in
2011/12 as investors worried about the possibilityof a double-dip recession in the developed
world, a ‘hard landing’ in China, and the futureof the Eurozone. Bond markets performed
particularly strongly, and conventional fixedcoupon Gilt yields fell to what was reported tobe their lowest level in 300 years.
F10

Many of our building and technology
projects of recent years are now
operational which has increased
depreciation. This has led the valueof non-current assets to reduce. TVC
has been reclassified as a current asset‘held for sale’
The estimate of the pension scheme’s
net liabilities reflects changes toscheme benefits, the deficit reduction
payments and changes in the market
valuation of assets

Gilt yields are used to calculate the discount rate
for future liabilities of our pension scheme, andtheir fall from last year has caused the current
value of these liabilities to increase. This is an issue
that all other defined benefit schemes face in thecurrent economic environment. This increasein the value of the scheme’s liabilities was theprimary driver behind a rise in the accounting
valuation of the pension scheme deficit to£1,179million at the year end, from £927million
12 months earlier. The next formal actuarial
valuation of the scheme is due in April 2013, andwe continue to fulfil our obligations under theagreed deficit reduction plan with the pension
scheme trustees, making annual payments of
between £60million and £100million throughto 2021/22.
Twelve months ago, the BBC was in the middleof significant pension reforms to reduce theburden of future pensions on the licence fee.
Consequently, we had to make assumptions on
the choices that staff would be making between
the different options. We now know what the
final choices staff made are, and this has resulted
in a higher saving than we initially projected so
we have recognised a further curtailment gainof £45million in this year’s accounts.
Restructuring provision
The Group has provided £103million of
restructuring costs this year, primarily relating
to those of our Delivering Quality First
plans which are sufficiently advanced tohave been communicated to staff and otherkey stakeholders. This is essential enabling
expenditure for the delivery of our long-termtarget of £700million of annual savings. Further
provisions are expected in 2012/13 as otherdivisions develop their implementation plans
to the point of communication.

Summary Consolidated Cashflow Statement
For the year ended 31 March 2012

2012
£m

2011
£m

Net cash inflow from operating activities

266

475

Net cash outflow from investing activities

(203)

(146)

Net cash outflow from financing activities

(136)

(113)

Net (decrease)/increase in cash and cash equivalents

(73)

216

Cash and cash equivalents at the beginning of the year

513

264

Effect of foreign exchange rate changes on cash and cash equivalents

(1)

(1)

Movement in cash held as restricted funds

(32)

34

Cash and cash equivalents at the end of the year

407

513

by region through the UK with just Tyne Teesand Northern Ireland remaining. Both value
for money and customer services targets
have been exceeded.
Many of the people eligible for help withconverting their television for digital switchover
had already switched before the Help Scheme
reached their area. As a result, spending on
support for digital switchover has been lower
than expected, and we will return the part ofSummary Consolidated Cashflow
the licence fee cash that was ring-fenced for thisstatement
Our overall cash balance was £262million at the purpose by the Department for Culture, Mediaend of the year, excluding £145million ring-fenced and Sport (DCMS).
At the end of 2010/11, the amount due to thesavings from our digital switchover activity
DCMS was £266million, and reflecting the(both Digital Switchover Help Scheme andrepayment plan agreed, we returned £214million
Digital UK). Of this, £33million is held by ourduring 2011/12. We made further savings ofcommercial operations for investment in their£93million on the scheme during 2011/12, leaving
development. The remaining £229million cash
a projected £145million due for repaymentbalance will provide:overall, £92million of which will be repaid in the• the accumulated funding for £107million
coming year.
of restructuring cost provisions to deliver
efficiencies and new ways of working, primarily Delivering Quality First
as part of the Delivering Quality First plan
As already described, our Delivering Quality First(£82million provided to date for Deliveringsavings plans will require upfront restructuringcosts to deliver the savings. This will involve
Quality First, but will increase as plans
payment of redundancy costs, as well as somedevelop further)further investment in new technology. To fund• further annual pension deficit recovery
these exceptional items of expenditure, we needpayments (next payment due is £60million)
to set aside the cash now.
• a planned increase in spend on content inthis landmark year of the Olympics and theMovements in cash £mDiamond Jubilee
900
800• the costs of moving into and occupying
266
203
700
New Broadcasting House in W1 and600
completion of our digital production system
136
500
for television (Fabric)
266

The Group’s operating cash surplus
before depreciation and amortisation.
The reduction reflects the lower
operating surplus, plus increased
programme inventory
This increase primarily relates to thepurchase of additional intangible assetsof £53million from the prior year
This is primarily interest paid on
property leases
2012 figure represents:£145million digital underspend;£33million commercial companies;£229million UK PSB Group, BBC
World Service and BBC Monitoring

Programmes for future transmission
The balance sheet also reflects a 11.7% increasein the value of completed programmes,
programmes in production, and advancepayments for sports rights. This increase reflects abuild-up of our stock of special programmes andcontracted sports rights for a year that will bringthe London Olympics and the celebration of the
Queen’s Diamond Jubilee to BBC audiences.

Digital Switchover Help Scheme
The Help Scheme is run by the BBC to support
older and disabled people through digital TV
switchover. Designing and implementing anationwide social care programme has beena new undertaking for the BBC. More than
1.2 million people have taken up this practicalassistance as switchover has rolled out region

33

400

145

300
200

262

247

100
0

Cash
Digitalexcluding Switchover
digitalring-fenced
switchover
cash atbalances start of year
at startof yearCash fromoperatingactivities

Cashoutflowfrominvestingactivities

Cashoutflowfromfinancing
activities

Other
cash flow
movements

DigitalSwitchoverring-fenced
cash atend of year

Cashexcluding
digitalswitchoverbalancesat endof year

F11

COLLECTING THE LICENCE FEE
The unique relationship between the BBC and
its audiences has at its core the way in which the
BBC is funded. The BBC needs to maintain thetrust of licence fee payers in the way that welook after their money. As well as spending
the licence fee as efficiently as possible on
programmes and services that our audiences
value, we also need to make sure that we makeit easy to pay for everyone who is required tohave a television licence.
Our new collection contract with Capita
starts in July 2012, and contains incentives toreduce evasion while maintaining perceptionsof fairness. We believe that targeting lower
evasion rates, together with making savings on
the contract, will more than compensate forslower household growth going forward thanhistorically experienced. The eight-year contract
will also deliver savings in our collection costs of£220million (based on existing collection rates),
meaning that more money will be available tospend on programmes and services.
The savings have been made possible by the
success of our campaigns to encourage the useof web-based self-service options for licence fee
payers managing their account, and by the highproportion of licence fee payers now paying byDirect Debit.

BBC Radio 4’s The Reith Lectures,in 2011 entitled Securing Freedom,featured the Burmese pro-democracy
leader Aung San Suu Kyi.
F12Capita will carry out further improvements
to the TV Licensing website, making it eveneasier for licence fee payers to interact withTV Licensing in a way which suits them.
At the same time, we will continue to offer
the cash payment schemes valued by manyof our customers.
For the second year, we have prepared alicence fee revenue statement. This accountsets out the amounts we collected during theyear, and paid over to the DCMS. The NAO
audits the statement. Alongside its audit work,
the NAO examines an aspect of our collection
arrangements and reports on it to Parliament.
This year, the NAO looked at licence expiry
and renewal processes including cancellations,refunds, and licence fee concessions.

LOOKING FORWARD WITH CONFIDENCE
In the face of many challenges, 2011/12 canbe seen to have been a strong one for the
BBC financially, and it has put the organisationin excellent shape to deliver on its futurechallenges, specifically:• to make 2012 a year of truly exceptional
output in this ‘once in a generation’ year
• to complete the delivery of the moves to
London W1 and Salford, making them far
more than relocations, but projects which
drive new ways of working to make sure the
BBC can deliver against the further challenges
to come• to deliver £700million of savings to enable
the BBC to live within its means following thelicence fee settlement in 2010
• to be in stable financial shape for the Charter
renewal discussions in 2017
We have committed through Delivering
Quality First to deliver £700million per annumof sustainable savings by the end of 2016/17,
equivalent to 20% of what we currently spend.
This will enable us to take over funding throughthe licence fee of BBC World Service, BBC
Monitoring and S4C and to support local TV
channel development as well as the roll-out
of broadband in the UK. In total these newcommitments are equivalent to 16% of our
2011/12 costs. An additional 4% of savings will
provide a reinvestment fund to enable us to keep
pace with the latest technology and meet evermore demanding audience expectations. All thiswill have to be achieved with a licence fee frozen
until 2016/17 and in an uncertain economic
climate with inflation remaining high.

Putting together a plan to deliver these savings,
whilst minimising the impact on our audiences,
will demand some difficult choices. That is why
we are focusing spend on our five editorial
priority areas:• the best journalism in the world• inspiring knowledge, culture and music• ambitious UK drama and comedy• outstanding children’s content• content that brings together the nationand communities.
In line with this, we have chosen to broadly
maintain current levels of spending on BBC
One, BBC Radio 4, CBBC and CBeebies. We
will reduce spending on the BBC Two daytime
schedule, and focus the remit of BBC Four onscience and the arts.
A key feature of the programme is that support
areas of the BBC will make disproportionately
higher savings of 25% by 2016/17, in order toprotect our programme-making divisions as far
as possible. We will also seek to further reduce
our property footprint by a third and ultimately
vacate West London entirely. This process will
begin in 2013 with our exits from TVC andthe original White City building. By moving ourLondon-based journalists into New Broadcasting
House we will also provide new opportunities
to share facilities and material between domestic
and international teams, increasing the efficiency
of both.

Celebrating the stars: Stargazing Live presenters Prof BrianCox and Dara O‘Briain. The programme formed part of the
BBC Outreach activity.
F13

INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF THE
BRITISH BROADCASTING CORPORATION (“BBC”)
We have audited the group financial statementsof the BBC for the year ended 31 March 2012set out on pages F15 to F90. The financial reporting
framework that has been applied in their preparation
is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU.
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 that is described as having
been audited, which the Executive Board havedecided to prepare as if the BBC were required tocomply with the requirements of Schedule 8 to The
Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 (SI 2008
No. 410) made under the Companies Act 2006.
This report is made solely to the Trustees 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 tothem in an auditor’s report and, in respect of theseparate opinions 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 thefullest extent permitted by law, we do not accept orassume 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 directors andauditor
As explained more fully in the Trustees’ and Executive
Board responsibilities Statements set out on pageF91, the Executive Board are responsible for the
preparation of the group financial statements andfor being satisfied that they give a true and fair view.
Our responsibility, in accordance with the termsof our engagement letter, is to audit the financial
statements in accordance with relevant legal andregulatory requirements and International Standards
on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.

F14

material misstatements or inconsistencies weconsider the implications for our report.
Opinion on financial statements
In our opinion the group financial statements:• give a true and fair view of the state of theGroup’s affairs as at 31 March 2012 and of its
surplus for the year then ended; and• have been properly prepared in accordance with
IFRSs as adopted by the EU;
Opinion on other matters prescribed by
the terms of our engagement
In our opinion:• the information given in the Chairman’s
Foreword and the Trustees’ performance
review in Part One of the Annual Report andAccounts, the Director-General’s Foreword,
the Executive Board’s performance review andfinancial overview and highlights, the Corporate
Governance Statement and the unaudited partsof the Remuneration Report is consistent withthe group financial statements; and• the parts of the Remuneration Reports which
we were engaged to audit have been properly
prepared in accordance with Schedule 8 to The
Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008, as if
those requirements were to apply to the BBC.

Matters on which we are required
to report by exception by the termsof our engagement
We have nothing to report in respect of the following:
Under the terms of our engagement we are
required to report to you if, in our opinion,
we have not received all the information andexplanations we require for our audit.
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 thesematters. Under the terms of our engagement we
Scope of the audit of the financial
are required to review:statements• the Executive Board statement, set out on
An audit involves obtaining evidence about thepage F91, in relation to going concern; andamounts and disclosures in the financial statements•
the part of the Corporate Governance Statement
sufficient to give reasonable assurance that
included in Part Two of the Annual Report
the financial statements are free from materialand Accounts relating to the BBC’s compliancemisstatement, whether caused by fraud or error.
with the nine provisions of the UK Corporate
This includes an assessment of: whether theGovernance Code specified for our review.
accounting policies are appropriate to the BBC’s
circumstances and have been consistently applied andadequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and theoverall presentation of the financial statements. In
Scott Cormack
addition we read all the financial and non-financial
for and on behalf of KPMG LLP, Statutory Auditor
information in the Annual Report to identify
material inconsistencies with the audited financial
Chartered Accountants
statements. If we become aware of any apparent
15 Canada Square, London, E14 5GL
21 June 2012

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

INTRODUCTION
THE BBC’S CONSOLIDATED FINANCIAL STATEMENTS
We have made a change in the way the accounts are presented from the past to make it clearer to the licence fee payer andother stakeholders how we have maintained stewardship of the assets and monies of the BBC.
With the aim of improving comprehension, but within accounting guidelines, we have used plain English to support and explain
the numerical disclosures required to clarify the picture which the financial statements portray.
These financial statements comprise both the primary statements and additional supporting disclosure notes. The primarystatements are:• Consolidated income statement

The income the BBC earns and expenditure incurred in running
the Group’s operations during the year.

• Consolidated statement of comprehensive (loss)/income

Items of income and expense, including reclassification
adjustments that are not directly recognised in the income
statement and hence go straight to reserves.

• Consolidated balance sheet

The financial position of the BBC at a specific point in time, thefinancial year end. The statement sets out the assets andliabilities of the Group.

• Consolidated statement of changes in equity

Components that make up the capital and reserves of theGroup and sets out the movement of each component during
the financial year.

• Consolidated cash flow statement

Cash generated by the BBC from its operations and how thosecash flows have been used by the group.

We have regrouped the disclosures required by the International Accounting Standards Board (IASB) and interpretations issued
by the IFRS Interpretations Committee of the IASB as adopted by the EU (IFRS) and under the Royal Charter (the “Charter”)
into the key themes of the BBC’s activities during the financial year.

F15

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED INCOME STATEMENT
Note

Licence fee income
Other income
Total income
Operating costs excluding restructuring costs and exceptional pension income
Exceptional pension income
Restructuring costs
Total operating costs
Group operating surplus
Gain on sale and termination of operations
Gain on disposal of fixed assets
Share of results of associates and joint ventures
Financing income
Financing costs
Net financing income
Surplus before taxation
Taxation
Surplus for the year

1a
1a
1a
3gii
3c
1a
5c
4d
5d
6i
6i
6i
7b i

Attributable to:BBC
Non-controlling interests
Surplus for the year

2012
£m

2011
£m

3,606.3
1,480.2
5,086.5(4,750.0)
45.0(103.4)(4,808.4)
278.1
95.0
4.8
21.3
655.8
(631.4)24.4
423.6(34.5)
389.1

3,513.4
1,479.6
4,993.0(4,789.4)
250.4(63.3)(4,602.3)
390.7
96.4
–
26.6
613.6
(606.8)6.8
520.5(37.6)
482.9

383.9
5.2
389.1

477.6
5.3
482.9

For the BBC Group, as a public benefit entity, any surplus arising does not represent a ‘profit’ that can be returned to an entity’sfunders, but a timing difference relating to future expenditure.

CONSOLIDATED STATEMENT OF COMPREHENSIVE(LOSS)/INCOME
Note

Group surplus for the year
Other comprehensive (loss)/income:Exchange differences on translation of foreign operations
Cash flow hedges
Recycling of cumulative currency translation reserve on disposal
Actuarial (loss)/gain on defined benefit pension schemes
Fair value gain on asset available for trading
Other
Other comprehensive (loss)/income net of tax
Total comprehensive (loss)/income for the year
Attributable to:BBC
Non-controlling interests
Total comprehensive (loss)/income for the year

F16

3gii
4b

2012
£m

2011
£m

389.1

482.9

1.7
0.5
(0.7)
(460.7)18.3–(440.9)(51.8)

(5.8)
(0.2)
–
303.6
76.9
0.9
375.4
858.3

(57.0)
5.2(51.8)

853.0
5.3
858.3

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED BALANCE SHEET
Note

2012
£m

2011
£m

Non-current assets
Intangible assets (including goodwill)
Property, plant and equipment
Interests in associates and joint ventures
Other receivables
Assets available for trading
Derivative financial instruments
Deferred tax assets

5a
4a
5d
6f i
4b
7d ii
7b iv

289.4
1,451.8
31.3
30.6
100.9
2.3
13.4
1,919.7

265.6
1,513.9
36.5
25.9
76.9
1.9
25.9
1,946.6

Current assets
Programme-related assets and other inventories
Trade and other receivables
Assets classified as held for sale
Derivative financial instruments
Cash and cash equivalents

2e
6f ii
7a
7d ii
6a

691.7
875.2
90.9
3.4
407.3
2,068.5

619.2
861.5
50.3
8.0
513.4
2,052.4

6g i
6c i
6h
7a
7d ii

(1,118.3)(36.8)(86.1)–(4.2)(13.1)(1,258.5)(1,130.6)(23.2)(103.7)(36.5)(5.8)(14.6)(1,314.4)

6g ii
6c ii
6h
7d ii
7b iv
3g i

(73.6)(1,052.9)(68.0)(5.9)(6.0)(1,178.6)(2,385.0)
344.7(197.2)(1,089.4)(45.7)(7.6)(16.9)(926.8)(2,283.6)
401.0

209.2
–
95.2
1.0
32.1
337.5
7.2
344.7

286.0
–
76.9
0.5
31.1
394.5
6.5
401.0

Current liabilities
Trade and other payables
Borrowings
Provisions
Liabilities classified as held for sale
Derivative financial instruments
Current tax liabilities
Non-current liabilities
Other payables
Borrowings
Provisions
Derivative financial instruments
Deferred tax liabilities
Pension liabilities
Net assets
Attributable to the BBC:Operating reserve
Other reserve
Available-for-sale reserve
Hedging reserve
Translation reserve
Non-controlling interests
Total capital and reserves

The financial statements were approved by the Executive Board on 21 June 2012 and signed on its behalf by:

Mark Thompson Director-General

Zarin Patel Chief Financial Officer

F17

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Operatingreserve£m

Otherreserve£m

Available-forsale reserve£m

Hedging
reserve£m

Translation
reserve
£m

Total
£m

Noncontrollinginterests£m

Total
equity£m

At 31 March 2010
Profit for the year
Exchange differences ontranslation of foreign operations
Cash flow hedges
Actuarial gain on defined benefit
pension scheme
Fair value gain on available forsale asset
Other
Total comprehensive
income/(loss) for the year
Dividends paid
Exercise of put option overnon-controlling interests
Transfer of foreign exchange
movement on put option(469.7)477.6(36.3)
–

–
–

0.5
–

35.6
–

(469.9)
477.6

15.6
5.3

(454.3)
482.9

–
–

–
–

–
–

(0.1)
(0.2)

(5.7)
–

(5.8)
(0.2)

–
–

(5.8)
(0.2)

303.6

–

–

–

–

303.6

–

303.6

–
0.9

–
–

76.9
–

–
–

–
–

76.9
0.9

–
–

76.9
0.9

782.1
–

–
–

76.9
–

(0.3)
–

(5.7)
–

853.0
–

5.3
(3.0)

858.3
(3.0)

(26.4)

37.5

–

0.3

–

11.4

(11.4)

–

–

(1.2)

–

–

1.2

–

–

–

At 31 March 2011
Profit for the year
Exchange differences ontranslation of foreign operations
Cash flow hedges
Recycling of cumulative currencytranslation reserve on disposal
Actuarial loss on defined benefit
pension scheme
Fair value gain on available forsale asset
Total comprehensive(loss)/income for the year
Dividends paid
At 31 March 2012

286.0
383.9

–
–

76.9
–

0.5
–

31.1
–

394.5
383.9

6.5
5.2

401.0
389.1

–
–

–
–

–
–

–
0.5

1.7
–

1.7
0.5

–
–

1.7
0.5

–

–

–

–

(0.7)

(0.7)

–

(0.7)

(460.7)

–

–

–

–

(460.7)–(460.7)

–

–

18.3

–

–

18.3

–

18.3

(76.8)
–
209.2

–
–
–

18.3
–
95.2

0.5
–
1.0

1.0
–
32.1

(57.0)
–
337.5

5.2
(4.5)
7.2

(51.8)
(4.5)
344.7

54.6

–

95.2

1.0

32.1

182.9

7.2

190.1

154.6
209.2

–
–

–
95.2

–
1.0

–
32.1

154.6
337.5

–
7.2

154.6
344.7

Represented by:General Group reserves
BBC World Service and BBC
Monitoring reserves

UK Public Service Broadcasting (UK PSB) Group, BBC World Service and BBC Monitoring are funded from different sources. As
such, the reserves relating to BBC World Service and BBC Monitoring are maintained separately from the rest of the Group andare restricted for use solely on BBC World Service and BBC Monitoring activities.

F18

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED CASH FLOW STATEMENT
2012
£m

2011
£m

299.8
(33.5)
266.3

506.4(31.5)
474.9

Investing activities
Interest received
Dividends received from associates and joint ventures
Proceeds from sale of operations
Proceeds from disposal of property, plant and equipment
Acquisition of non-controlling interests
Acquisition of assets held for sale
Acquisition of investments
Acquisition of interests in associates and joint ventures
Drawdown of loan by joint venture
Purchases of other intangible assets
Purchases of property, plant and equipment
Net cash used in investing activities

5.8
18.8
111.1
10.3
–
(4.6)
(0.6)
(1.8)
–
(168.1)(174.3)(203.4)

9.0
43.8
109.5
–
(41.7)
–
–
(3.7)
2.2
(115.1)(149.6)(145.6)

Financing activities
Interest paid
Proceeds from increase in borrowings
Repayments of borrowings
Payments of obligations under finance leases
Dividends paid to non-controlling interests
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes on cash and cash equivalents
Repayment of overdraft
Movement in cash held as restricted funds
Cash and cash equivalents at the end of the year

(15.5)
75.8(90.4)(101.2)(4.5)(135.8)(72.9)
513.4
(0.9)
(0.3)
(32.0)
407.3(13.9)
100.0(102.3)(94.0)(3.0)(113.2)
216.1
263.9
(0.6)
–
34.0
513.4

Note

Operating activities
Cash generated from operating activities
Tax paid
Net cash from operating activities

6e

6a

6a

F19

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

KEY THEMES FOR THE BBC
Page

F21

1. Where the BBC’s funding comes from• Income and operating results• Licence fee income• Contribution of commercial operations

2. How the BBC spends the funds• Total operating costs• Auditor remuneration• UK PSB Group expenditure by service

F25• Analysis of total operating costs by activity• Programme-related assets and other inventories• UK PSB ring-fenced expenditure

3. What the BBC spends on its people••••

Persons employed
Employee remuneration
Restructuring costs
Key management personnel compensation

F31• Related party transactions with key management
personnel• Group pension plans

4. The property, technology and equipment used by the BBC to make its programmes••••

Property, plant and equipment
Assets available for trading
Property assets classified as held for sale
Gain on disposal of fixed assets• Obligations under finance leases• Operating leases• Property provisions

5. Investments in the BBC’s commercial activities• Intangible assets• Goodwill

F43• Gain on sale and termination of operations• Interests in associates and joint ventures

6. Managing funding (including future costs)
•
•
•
•
•

F20

Analysis of net funds
Borrowings and borrowing facilities
Cash generated from operations
Trade and other receivables
Trade and other payables

F39

F48
• Provisions and contingent liabilities• Net financing income/(costs)• Long term commitments not reflectedin the balance sheet

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

1. WHERE THE BBC’S FUNDING COMES FROMThe Group generates its income from a number of key sources, each source funding different parts of the BBC’s activity.
The notes in this section provide information on the performance in the year for each segment of the BBC Group.
The distinction between the various income sources is important as the BBC may not cross-subsidise its commercial activities
through its UK PSB Group or Grant-in-Aid and grant funded activities. However, the performance of the Group’s commercial
activities generates profits which are distributed back to the BBC and contribute towards the funding of UK PSB Group activities.
The BBC Group’s operating segments are reported in a manner consistent with the internal reports provided to the BBC
Executive Board. Following a review of the segmental presentation during this financial year, the notes in this section have been
amended to present all intra-group eliminations, which were previously eliminated within the entity results. Consequently theprior year presentations have been adjusted to be consistent. The BBC Executive Board is responsible for making strategic
decisions, allocating resources and assessing performance of the operating segments.
Segmental information provided to the BBC Executive Board is aligned to the BBC Group’s income sources. The reportablesegments are:•

UK PSB Group – This primarily receives licence fee income and is responsible for the Group’s public sector activities. This includes
delivery of its obligations under the Service Licence Operating Framework issued by the BBC Trust.

•

BBC World Service and BBC Monitoring – These are funded by Grant-in-aid from the Foreign and Commonwealth Office andthe Cabinet Office respectively.

•

BBC Worldwide – These generate revenue from exploiting the various assets of the BBC,for example licencing formats, selling international rights, merchandising and production facilities.

The BBC’s other commercial activities have been aggregated for reporting purposes as they meet the conditions set out in IFRS 8,
Operating Segments.
The prices charged for services provided by one segment of the BBC Group to another are determined on an arm’s length basis
in accordance with the BBC’s Fair Trading policy. More information on the BBC’s fair trading requirements and policies can befound in the ‘Managing the Business’ section in Part Two of the ‘BBC Annual Report and Accounts 2012’.
For additional information on the relevant accounting policies applied in this section please see section 8 Basis of preparation of
the financial statements and other accounting policies (page F79).

F21

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHERE THE BBC’S FUNDING COMES FROM CONTINUED
1a Income and operating results

2012

Note

Licence fee income
1b
Other revenue
Intra-group trading
Grant-in-aid and other grantincomeRoyalties
Rental income
Other income
Total income
Restructuring costs
3c
Depreciation andamortisation
Pension deficit reduction
payment
Other operating costs
Total operating costs
2c, 2dGroup operating surplus
Gain on sale and terminationof operations
5c
Gain on disposalof fixed assets
4d
Share of results of associates
and joint ventures
5d
Operating segment result
Financing income
6i
Financing costs
6i
Net financing income
6i
Surplus before taxation
Taxation
7b i
Surplus for the year*

F22

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments*
£m

Group
£m

3,606.3
88.4
157.2

–
7.0
0.5

–
946.2
11.9

–
86.3
36.5

–
–
(206.1)

3,606.3
1,127.9
–

2.3
13.5
10.5
271.9
3,878.2(100.6)

277.1
–
0.1
284.7
284.7
3.3

–
48.1
0.3
1,006.5
1,006.5
(5.4)

–
0.4
–
123.2
123.2
(0.7)

–
–
–
(206.1)(206.1)
–

279.4
62.0
10.9
1,480.2
5,086.5(103.4)(136.4)(23.2)(109.1)(3.8)–(272.5)(89.1)(3,523.7)(3,849.8)
28.4(13.9)(243.9)(277.7)7.0(4.3)(785.4)(904.2)
102.3

(2.7)
(114.8)(122.0)
1.2

110.0
235.3
345.3
139.2

–
(4,432.5)(4,808.4)
278.1

–

–

95.0

–

–

95.0

4.8

–

–

–

–

4.8

(2.1)
31.1

–
7.0

23.4
220.7

–
1.2

–
139.2

21.3
399.2
655.8
(631.4)24.4
423.6(34.5)
389.1

Group adjustments include costs of £138.7million for the defined benefit pension scheme, of this balance £45.0million relates to a gain on
settlements and curtailments. The remaining adjustments relate to intra-group trading.

Additional
information on
total operating
costs for UK
PSB can befound in note
2c and note 2dfor theCommercial
and Grant in
aid funded
activities. Total
operating costs
for the Groupare also
analysedfurther innote 2a.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHERE THE BBC’S FUNDING COMES FROM CONTINUED
1a Income and operating results continued

2011

Note

Licence fee income
1b
Other revenue
Intra-group trading
Grant-in-aid and other grantincomeRoyalties
Rental income
Other income
Total income
Restructuring costs
3c
Depreciation andamortisation
Other operating costs
Total operating costs
2c, 2dGroup operating
surplus/(deficit)
Gain on sale and terminationof operations
5c
Share of results of associates
and joint ventures
5d
Operating segment result
Financing income
6i
Financing costs
6i
Net financing income
6i
Surplus before taxation
Taxation
7b i
Surplus for the year*

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments*
£m

Group
£m

3,513.4
86.0
151.5

–
6.3
0.7

–
942.3
11.6

–
83.0
49.0

–
–
(212.8)3,513.4
1,117.6
–

5.1
2.9
10.7
256.2
3,769.6(29.6)

289.8
–
–
296.8
296.8
(23.7)–
52.9
0.3
1,007.1
1,007.1
(1.8)

–
0.3
–
132.3
132.3
(8.2)

–
–
–
(212.8)(212.8)
–

294.9
56.1
11.0
1,479.6
4,993.0(63.3)(109.8)(3,546.1)(3,685.5)(28.0)(262.1)(313.8)(95.2)(820.4)(917.4)(3.2)(113.2)(124.6)

–
439.0
439.0

(236.2)(4,302.8)(4,602.3)

84.1(17.0)

89.7

7.7

226.2

390.7

–

–

96.4

–

–

96.4

(1.0)
83.1

–
(17.0)

27.6
213.7

–
7.7

–
226.2

26.6
513.7
613.6
(606.8)6.8
520.5(37.6)
482.9

Additional
information
on total
operating costs
for UK PSB
can be foundin note 2c andnote 2d for theCommercial
and Grant
in aid funded
activities.
Total operating
costs for theGroup arealso analysedfurther innote 2a.

Group adjustments include income of £306.7million for the defined benefit pension scheme, of this balance £250.4million relates to a gain
on settlements and curtailments. The remaining adjustments relate to intra-group trading.

F23

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHERE THE BBC’S FUNDING COMES FROM CONTINUED
1b Licence fee income
Licence fee
2012£

Colour
Monochrome
Concessionary
Over 75s
Quarterly payment scheme premium
Digital switchover help scheme under-spend (note 2f)
Total licence fee income

145.50
49.00
7.50
–

Licencesin force
2012
Number‘000

21,30612
182
4,206
25,706

Total
income2012£m

Licencefee
2011£

Licences inforce 2011
Number‘000

Total
income2011£m3,090.9
0.6
1.4
588.4
3,681.3
16.9(91.9)
3,606.3

145.50
49.00
7.50
–

21,23515
188
4,156
25,5943,080.2
1.0
1.4
579.4
3,662.0
17.1(165.7)3,513.4

During the year 3.4 million (2011: 3.4 million) colour licences were issued under the quarterly payment scheme at a premiumof £5 each (2011: £5).
Households in which one or more persons over the age of 75 reside, as their primary residence, are entitled to a free licence.
The BBC is reimbursed for these free licences by the relevant Government department.

1c Contribution of commercial operations
In the year ended 31 March 2012, a dividend of £145.2million (2011: £113.9million) was primarily generated by BBC
Worldwide and paid/proposed to UK PSB Group. The dividends paid by BBC Worldwide are not identifiable in the
consolidated primary statements as the amounts paid by BBC Worldwide and received by UK PSB Group are eliminatedduring the consolidation process.

F24

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

2. HOW THE BBC SPENDS THE FUNDS
This section analyses the total operating costs incurred by the BBC Group. It also analyses the UK PSB Group’s expenditure byservice licence as required to be reported to the BBC Trust.
In accordance with the Charter, service licences are used by the BBC Trust to regulate the BBC’s licence fee-funded services andensure that each service provides public value and contributes to delivering the BBC’s public purposes.
The Trust’s annual assessment of performance against service licences compares actual costs for content against an agreed andauthorised baseline budget. Actual costs may vary by up to 10% of the baseline budget to permit management flexibility in its
commissioning decisions. When a service licence budget is breached by more than the threshold, the matter is referred to the
BBC Trust.
BBC 1 Xtra, BBC 4 Extra, Radio 5 Live and HD TV costs were under the baseline budget by more than the 10% tolerance due
to early delivery of efficiency savings under the BBC’s Delivering Quality First strategy. The decision to defer the transmissionof some commissions for editorial reasons to 2012/13, combined with efficiencies from the relocation to Salford resulted in the
BBC Red Button service also ending the year under the baseline budget by more than 10%.
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. The table presented in note 2c sets out the UK PSB Group content expenditure by service.
Where a programme is broadcast on more than one channel, the full cost of the programme is recognised as a cost of thechannel where the programme is first broadcast. Where a programme is commissioned by two channels however, the costof the programme is recognised as a cost of the primary channel irrespective of the channel holding the first transmission.
For BBC HD, BBC Online and BBC Red Button, the licence reflects only the incremental costs of getting content to air unlessthe content is specifically commissioned for one of these three services.
This means the costs reported against individual service licences are not necessarily equivalent to the costs which would beincurred by such a service on a stand-alone basis.
The Group has also been granted specific funds to cover the costs of the Digital Switchover. These funds are ring-fenced fromthe licence fee with underspend against the budgeted cost being repayable to the Department of Culture, Media and Sport(DCMS). Included within this note are disclosures on the costs incurred to date against these ring-fenced amounts.
For additional information on the relevant accounting policies applied in this section please see section 8 Basis of preparationof the financial statements and other accounting policies (page F80).

F25

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSHOW THE BBC SPENDS THE FUNDS CONTINUED
2a Total operating costs
Total operating costs have been arrived at after charging the following items:
Intangible fixed assets, property, plant and equipment and otherinvestments
Depreciation– owned assets– leased assets
Impairment/write off of property, plant and equipment
Amortisation of intangible fixed assets
Impairment of goodwill

Note

2012
£m

2011
£m

4a
4a
4a
5a
5a

115.5
35.0
3.7
122.0
16.1

103.2
27.4
4.0
105.6
33.8

9.2

10.0

59.7
38.9
19.0
(5.1)
2.1
73.3
8.0
0.2
0.4
2.0
0.7
2.3
1,324.6(45.0)

61.6
42.9
17.0
(0.7)
4.0
69.2
7.1
0.2
(5.1)
2.4
(1.3)
2.3
1,332.1(250.4)Inventories
Write-downs of programme-related assets recognised as an expense
Other operating costs
Payments under operating leases– land and buildings– plant and machinery– other
Profit on disposal of tangible fixed assets*
Loss on disposal of tangible fixed assets*
Research costs
Audit and non-audit fees paid to KPMG (see below)
Fair trading auditor’s remuneration (Deloitte LLP)Net exchange differences on settled transactions
Impairment of trade debtors
Fair value loss/(gains) on embedded derivatives
Fair value losses on open forward foreign currency contracts
Staff costs
Exceptional pension income (defined benefit)
*

3b
3b

The (profit)/loss on disposal of tangible fixed assets represent adjustments to depreciation on disposals in the ordinary course of business. Exceptional profit
on disposals is disclosed separately in note 4d.

2b Auditor remuneration
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– services relating to information technology– valuation and actuarial advice*– all other services
Other services provided to the BBC Pension Scheme
Total
*

F26

The actuarial services provided relate primarily to advice regarding the changes to the BBC Pension Scheme announced during 2011.

2012
£m

2011
£m

0.6

0.6

1.0
0.2
1.0
0.2
4.2
0.8
8.0
–
8.0

0.9
0.4
0.6
–
3.5
1.0
7.0
0.1
7.1

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSHOW THE BBC SPENDS THE FUNDS CONTINUED
2c UK PSB Group expenditure
2c i UK PSB Group expenditure by service
Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

1,041.1
416.6
83.8
49.2
81.9
29.2
1.2
5.0
42.4
2.1
13.5
1,766.0
38.4
47.2
37.8
88.1
51.1
2.6
7.2
7.8
5.0
8.5
112.7
23.2
3.6
13.0
11.4
17.3
474.9
115.3
115.3
2,356.2

54.8
19.3
4.4
3.5
3.6
3.9
15.0
1.7
6.9
5.8
18.3
137.2
4.6
4.6
4.7
8.6
5.8
1.2
1.3
1.3
1.3
1.5
8.1
3.0
1.4
1.5
1.6
2.0
52.5
18.7
18.7
208.4

241.7
101.2
24.7
15.1
21.8
9.3
1.6
1.3
8.2
1.4
5.4
431.7
7.6
8.7
10.0
19.2
12.4
1.5
2.6
2.6
1.9
3.0
25.7
5.9
1.0
3.2
2.9
4.5
112.7
52.8
52.8
597.2

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

1,337.6
537.1
112.9
67.8
107.3
42.4
17.8
8.0
57.5
9.3
37.2
2,334.9
50.6
60.5
52.5
115.9
69.3
5.3
11.1
11.7
8.2
13.0
146.5
32.1
6.0
17.7
15.9
23.8
640.1
186.8
186.8
3,161.8

Licence fee collection costs
Orchestras and performing groups
S4C
Research and development spend
UK PSB Group pension deficit reduction payment
Costs incurred to generate intra-group income
Costs incurred to generate third party income
Other content related spent
Restructuring costs

–
23.6
23.2
42.7
–
–
–
89.5
–

–
–
–
–
–
–
–
–
–

–
5.4
6.0
9.8
–
–
–
21.2
–

126.1
–
–
–
89.1
156.8
55.9
427.9
100.6

126.1
29.0
29.2
52.5
89.1
156.8
55.9
538.6
100.6

Total UK public services content expenditure

2,445.7

208.4

618.4

528.5

3,801.0

Digital switchover (Digital UK Limited)
Digital switchover (DSHS Limited)
Total UK PSB Group expenditure––
2,445.7

–
–
208.4

–
–
618.4

40.8
89.7
659.0

40.8
89.7
3,931.5

Lease reclassification***UK PSB Group expenditure–
2,445.7

–
208.4

–
618.4

(81.7)
577.3(81.7)
3,849.8

2012 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 5 LiveBBC Radio 5 Live Sports Extra
BBC 1Xtra
BBC 6MusicBBC 4 Extra
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

F27

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSHOW THE BBC SPENDS THE FUNDS CONTINUED
2c i UK PSB Group expenditure by service continued
Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

1,130.9
421.0
84.7
50.8
78.3
28.5
2.1
5.0
47.1
2.0
14.9
1,865.3
36.7
46.7
37.3
92.8
55.4
2.5
7.4
7.3
5.3
8.6
114.8
23.8
3.8
13.0
11.8
16.2
483.4
125.8
125.8
2,474.5

50.8
21.0
3.9
2.9
3.2
3.3
8.2
1.5
6.2
4.7
19.5
125.2
4.8
4.9
4.9
9.9
6.2
1.1
1.2
1.2
1.1
1.4
10.1
3.3
1.4
1.2
1.6
1.8
56.1
21.1
21.1
202.4

219.1
85.4
21.4
13.3
17.7
7.9
1.5
1.1
7.7
1.3
5.1
381.5
6.6
7.5
8.5
17.0
11.2
1.3
2.4
2.2
1.8
2.6
22.4
5.2
0.9
2.8
2.6
3.6
98.6
47.0
47.0
527.1

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

1,400.8
527.4
110.0
67.0
99.2
39.7
11.8
7.6
61.0
8.0
39.5
2,372.0
48.1
59.1
50.7
119.7
72.8
4.9
11.0
10.7
8.2
12.6
147.3
32.3
6.1
17.0
16.0
21.6
638.1
193.9
193.9
3,204.0

–
20.2
26.9
27.6
–
–
74.7
–

–
–
–
–
–
–
–
–

–
3.8
5.3
5.2
–
–
14.3
–

123.6
–
–
–
152.6
64.6
340.8
29.6

123.6
24.0
32.2
32.8
152.6
64.6
429.8
29.6

Total UK public services content expenditure

2,549.2

202.4

541.4

370.4

3,663.4

Digital switchover (Digital UK Limited)
Digital switchover (DSHS Limited)
Total UK PSB Group expenditure––
2,549.2

–
–
202.4

–
–
541.4

25.0
55.3
450.7

25.0
55.3
3,743.7

Lease reclassification***UK PSB Group expenditure–
2,549.2

–
202.4

–
541.4

(58.2)
392.5(58.2)
3,685.5

2011 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 5 LiveBBC Radio 5 Live Sports Extra
BBC 1Xtra
BBC 6MusicBBC 4 Extra
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
Licence fee collection costs
Orchestras and performing groups
S4C
Research and development spend
Costs incurred to generate intra-group income
Costs incurred to generate third party income
Other content related spend
Restructuring costs

F28

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSHOW THE BBC SPENDS THE FUNDS CONTINUED
2c i UK PSB Group expenditure by service continued*

Included within BBC News channel are production costs of £26.1million, newsgathering costs of £16.1million and other costs of £0.2million(2011: production costs of £29.8million, newsgathering costs of £17.1million and other costs of £0.2million).

**

BBC Online spend is monitored by annexe (relating to editorial areas of the service). Non-annexe spend covers costs relating to central editorial activities
such as the BBC Homepage, technologies which operate across the service, and overheads. The spend for each was: News, Sport & Weather £47.7million(2011: £49.2million), Childrens £9.5million (2011: £10.5million), Knowledge & Learning £21.5million (2011: £24.9million), TV & iPlayer £15.3million(2011: £16.1million), Audio & Music £15.3million (2011: £15.5million), giving a total annexe spend of £109.3million (2011: £116.2million). Non-annexe
spend was £6.0million (2011: £9.6million). Prior year balances have been amended to reflect the change how the BBC Online service is managed.

***

In order to reflect the full cost of UK PSB Group expenditure by service, finance lease interest is included, although it is not included in the Group
operating expenditure.

2c ii UK PSB Group infrastructure/support costs
Infrastructure/support costs include the following:

Property
HR and training
Policy and strategy
Finance and business
Marketing, audiences and communication
Executive Unit
Total central costs
Technology
Libraries, learning support and community events
Divisional running costs
BBC Trust Unit (excluding restructuring)
Other
Total infrastructure/support costs

2012
£m

2011
£m

186.9
46.2
9.6
56.8
72.0
2.7
374.2
128.0
36.1
63.7
11.9
4.5
618.4

150.0
48.8
10.8
61.3
70.5
4.4
345.8
85.8
38.6
63.3
13.3
(5.4)
541.4

2d Analysis of total operating costs by activity
2d i Commercial activities
BBC Worldwide
2012
£m
Note

BBC Worldwide
2011
£m

Other
Commercials
2012
£m

Other
Commercials
2011
£m

Total
Commercials
2012
£m

Total
Commercials
2011
£m

588.8
142.4
173.0
904.2

571.5
136.5
209.4
917.4

110.3
–
11.7
122.0

112.7
–
11.9
124.6

699.1
142.4
184.7
1,026.2

684.2
136.5
221.3
1,042.0

Note

2012
£m

2011
£m

1a

1.3
35.8
240.6
277.7

1.3
37.2
275.3
313.8

Cost of sales
Distribution costs
Administrative expenses
Total operating costs

1a2d ii Grant in Aid funded activities
BBC World Service and BBC Monitoring

Cost of sales
Distribution costs
Administrative expenses
Total operating costs

F29

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSHOW THE BBC SPENDS THE FUNDS CONTINUED
2e Programme-related assets and other inventories
The main output of the BBC Group is the production of programmes for broadcast and the sale of rights for others to broadcast.
This note discloses the amounts for those programmes that are in production, completed programmes that are ready forbroadcast, but not yet aired, and rights secured to broadcast programmes produced independently of the BBC Group. Other
inventory, such as books and magazines for our Commercial activities, are also contained in this note.
Originated programmes are stated at the lower of cost and net realisable value, and the full value is written off on firsttransmission. The costs of acquired programmes and films are also written off on first transmission except to the extent thatthe numbers of further showings are contractually agreed, when it is written off according to its expected transmission profile.
Programme-related assets– Rights to broadcast acquired programmes and films– Prepayments to acquire future programme-related rights– Completed originated programmes– Programmes in production
Total programme-related assets
Other inventories
Total programme-related assets and other inventories

2012
£m

2011
£m

125.3
293.8
72.8
165.5
657.4
34.3
691.7

118.0
241.1
67.8
153.3
580.2
39.0
619.2

Within other inventories is £3.1million (2011: £4.1million), relating to Lonely Planet, which is expected to be sold more than
12 months after the balance sheet date in accordance with the entity’s normal operating cycle.

2f

UK PSB ring-fenced expenditure

DCMS has ring-fenced the following amounts within the Charter and six-year licence fee settlement (2008 to 2013):

Digital Switchover

Help for the elderly and disabled (DSHS
LimitedDigital UK Limited
Total

Cumulative
spend to 2012£m

Outstanding
amountrepayable£m

Cumulative
amount repaid
to date£m

Total
to date
£m

201.1
136.6
337.7

83.1
61.4
144.5

245.0
–
245.0

529.2
198.0
727.2

Six-yearring-fenced
funding Remaining funding£mavailable

603.0
201.0
804.0

73.8
3.0
76.8

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 overthe six-year life of the licence fee settlement.
The Framework Agreement between the BBC and DCMS states that the BBC is committed to leading certain aspects of thedigital 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 amount is only part of the BBC’s annual contribution to Digital UK.
Digital underspend

At 1 April 2011
Underspend in the year
Repayment of underspend to DCMS
At 31 March 2012

Note

1b

2012

266.1
91.9
(213.5)144.5

The underspend which has yet to be repaid to DCMS will be repaid in the following amounts over the following periods:

F30

Anticipated Digital underspend repayment profile

Note

£m

2012/132013/14
Total

6g i
6g ii

91.9
52.6
144.5

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

3. WHAT THE BBC SPENDS ON ITS PEOPLE
The BBC Group is an employer to a significant number of people and it also provides pension benefits to both current and past
employees. This section is broken into two main sections; the first details employee numbers (excluding freelancers and agency
staff), costs and transactions with BBC Trust members and the BBC Executive Board. The second presents the key information
relating to the BBC Group’s pension plans.
The movement in the IAS 19 Employee Benefits estimate of the defined benefit scheme liability during the year, specifically the
BBC Pension Scheme, is the item which singularly most impacts the balance sheet position of the Group. The pension note inthis section explains in further detail the reasons behind the movements in the defined benefit pension liability in the year and its
degree of sensitivity to changes in the underlying assumptions used.
Further information on the analysis of the BBC Pension Scheme assets and the assumptions underlying the liabilities are set out
in note 7c.
For additional information on the relevant accounting policies applied in this section please see section 8 Basis of preparationof the financial statements and other accounting policies (page F81).

3a Persons employed
The average number of persons employed in the year was:Average for the year
2012
2011
NumberNumberUK PSB GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Group total

16,858
2,196
2,565
321
21,94017,242
2,525
2,689
443
22,899Within the averages above 2,800 (2011: 2,993) part-time employees have been included at their full-time equivalent of 1,616(2011: 1,726).
In addition to the above, the Group employed an average full-time equivalent of 640 (2011: 724) persons on a casual basis andthe BBC Orchestra and BBC Singers, employed on programme contracts, totalled 367 (2011: 377) full-time equivalents.

F31

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3b Employee remuneration
2012
£m

2011
£m

999.9
91.6

1,021.7
84.9

117.9(45.0)
11.8
103.4
1,279.6

157.9(250.4)4.3
63.3
1,081.7

1,024.4
71.6
196.0
20.7
(33.1)
1,279.6

961.2
119.0
196.8
37.9
(233.2)
1,081.7

Note

Salaries and wages
Social security costs
Pension costs– Main scheme excl. exceptional pension income(defined benefit)– Gain on settlements and curtailments (defined benefit)– Other schemes
Restructuring costs
Comprising:
UK PSB GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Group adjustments*
*

3gii
3giii
3c

Includes group adjustments for the BBC Pension Scheme.

The actual employer cash contributions to the defined benefit pension scheme are borne by each business.

3c Restructuring costs
UK PSB GroupBBC World Service and BBC Monitoring*
BBC Worldwide
Other commercial businesses
*

2012
£m

2011
£m

100.6
(3.3)
5.4
0.7
103.4

29.6
23.7
1.8
8.2
63.3

Relates to the release of a provision created in prior years.

UK PSB Group restructuring costs include the Delivering Quality First Programme, Continuous Improvement Programme andcosts resulting from our commitment to relocate and increase investment out of London.

3d Remuneration of the BBC Trust members and the BBC Executive Board
The total emoluments of the members of the BBC Executive Board and the BBC Trust are disclosed in the BBC Executive Board
Remuneration Report in part Two of the Annual Report and Accounts. The details of emoluments of the members of the BBC
Trust are disclosed in Part One of the Annual Report and Accounts.

F32

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3e Key management personnel compensation
Key management personnel are those people that have authority and responsibility for planning, directing
and controlling the activities of the BBC. This includes all members of the BBC Executive Board, including
the Non-Executive Directors (see BBC Executive remuneration report), the Trustees and the Director of
the Trust Unit (see Trustees’ remuneration report) and the Chief Executive Officer of BBC Worldwide
Limited (see BBC Worldwide Annual Report and Accounts).
Information about the BBC’s structure, senior staff salaries and expenses are published on the BBC’s
website. This unaudited information can be found at
http://www.bbc.co.uk/aboutthebbc/insidethebbc/managementstructure.

Key management
personnel
are the BBC Trustees,
members of the
Executive Board, theChief Executive Officer
of BBC Worldwide andthe Director of theTrust Unit.

Key management personnel compensation is as follows:
Short term employee benefits
Post-employment benefits
Other long term benefits
Loss of office

2012
£m

2011
£m

4.7
0.4
0.3
–
5.4

7.0
0.6
0.2
1.4
9.2

3f Related party transactions with key management personnel
Trustees:
Diane Coyle has a close family member employed by the BBC on standard terms and conditions.

Related parties
include key
management personnel,
their immediate families
and external entities
controlled by them.

F33

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3g Group pension plans
The following section includes the key notes relating to BBC Group pension plans and more specifically the
BBC Pension Scheme. Further supplementary notes relating to assumptions underpinning the value of the
BBC Pension Scheme asset and liability are disclosed in note 7c.
As the BBC Group has two defined benefit pension schemes, the BBC Pension Scheme and the unfunded
scheme, the information in this section first analyses the liability and income statement charge between thetwo schemes (note 3g). Separate analysis then follows in respect of the BBC Pension Scheme to highlightthe points outlined below (note 3h).
The defined benefit pension schemes give rise to liabilities which are included on the BBC Group balance
sheet as the BBC bears the risk on investment returns, life expectancy (mortality) and inflation related tomeeting future pension payments. The net liability consists of two component parts:•

Scheme liabilities: These are the present value of the future pension payments the BBC is required to pay inrespect of employees service performed up to the balance sheet date.

•

Scheme assets: These are the assets held by the pension fund, into which the BBC pays annual contributions.
The assets are used to fund the payments to retired members and to generate returns to fund future
pension payments.

The analysis provided in the following notes is based on the IAS 19 estimate of the Scheme’s assets andliabilities as at 31 March 2012. This is different to the actuarial valuation completed every 3 years (nextupdate 1 April 2013) that determines the contributions payable to the Scheme by the BBC.
The deficit of the BBC Pension Scheme can change significantly. In this section we provide information to
explain the following:•

why the pension liabilities on the balance sheet have changed from one year to another•what makes up the charge in the income statement in the year•

the amount of the scheme assets and liabilities making the net defined benefit pension liability on
balance sheet•

how sensitive the liabilities are to changes in key assumptions•

the steps being undertaken by the BBC to fund the defined benefit pension liability

The BBC Group’s defined contribution plans do not give rise to balance sheet pension assets/liabilities as
there is no ongoing liability for the employer from these plans once the contributions due for the year havebeen settled. The expenditure on the defined contribution scheme shown in these accounts represents the
BBC contributions payable in this financial year.

3g i Pension liabilities included in the balance sheet
The pension liabilities included in the BBC Group balance sheet comprises both the BBC Pension Schemeand the Unfunded Scheme are analysed below:
Pension liabilities
2012£m

BBC Pension Scheme
Unfunded Scheme
Total

F34

(1,172.0)(6.6)(1,178.6)

2011£m(920.5)(6.3)(926.8)On retirement,
members of theBBC’s defined benefit
pension scheme
are paid their pensions
from a fund which is
kept separate fromthe Group to which
the BBC makes cash
contributions.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3g ii Movement in deficit during the year

Deficit in scheme at the startof the year
Movement in the year:
Current service cost
Contributions (fromemployer)*
Past service costs
Gain on curtailments
Net finance income/(cost)
Actuarial (loss)/gain recognisedin the consolidated statementof comprehensive(loss)/income
Deficit in scheme at the endof the year*

BBC Pension
Scheme2012£mUnfundedscheme
2012
£m

Total
2012
£m

BBC Pension
Scheme2011£mUnfundedscheme
2011
£m

Total
2011
£m

(920.5)(6.3)(926.8)(1,640.9)(6.2)(1,647.1)(160.0)–(160.0)(192.8)–(192.8)

212.6
(4.8)
45.0
116.1

0.3
–
–
(0.3)

212.9
(4.8)
45.0
115.8

304.6
(19.3)
250.4
73.8

0.3
–
–
(0.3)

304.9
(19.3)
250.4
73.5(460.4)(0.3)(460.7)

303.7

(0.1)

303.6

(1,172.0)(6.6)(1,178.6)(920.5)(6.3)(926.8)The contribution shown for the unfunded scheme represents the pensions paid to members during the year.

The assumptions for pension plan liabilities of the unfunded scheme are the same as the BBC Pension
scheme. As the scheme is unfunded it holds no assets and hence no expected return on assets.
Following the changes to the defined benefit plan terms made in 2010/11, a curtailment gain of£250.4million was recognised for the expected reduction in the value of benefits for current employees
qualifying for reduced benefits. During 2011/12 the actual decisions made by employees were madeavailable and the curtailment calculation was recalculated. The actual curtailment gain was £295.4million,
therefore an additional gain of £45.0million has been recognised in 2011/12.

The current service
cost is the underlying
cost to the BBC ofpension rights earned
by employees during
the year.
The past service
charges arise fromchanges to the terms
and conditions relating
to members defined
retirement benefits,
resulting in a credit for
years of service alreadygiven.
Net finance income/(cost) is the difference
between the expected
return on assets andthe interest on theliabilities.
Actuarial gains andlosses which arise
from actual
performance being
different from thatpredicted giverise to gains and losses
in the statement ofcomprehensive income.

F35

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3g iii Pension (charges)/income in consolidated income statement
Defined benefit schemes
BBC Pension
Scheme£m

Unfunded
Scheme£m

Definedcontribution
scheme£m

All schemes£m2012
Current service cost
Past service costs
Gain on curtailments
Total operating charge*
Expected return on pension plan assets
Interest on pension plan liabilities
Net finance income/(cost) (see note 6i)
Net cost in consolidated loss statement(160.0)(4.8)
45.0(119.8)643.3(527.2)
116.1
(3.7)

–
–
–
–
–
(0.3)
(0.3)
(0.3)

(11.8)––(11.8)–––(11.8)(171.8)(4.8)
45.0(131.6)643.3(527.5)115.8(15.8)

2011
Current service cost
Past service costs
Gain on curtailments
Total operating income/(charge)*
Expected return on pension plan assets
Interest on pension plan liabilities
Net finance income/(cost) (see note 6i)
Net income/(cost) in consolidated loss statement(192.8)(19.3)
250.4
38.3
603.4
(529.6)
73.8
112.1

–
–
–
–
–
(0.3)
(0.3)
(0.3)

(4.3)
–
–
(4.3)
–
–
–
(4.3)

(197.1)(19.3)
250.4
34.0
603.4
(529.9)
73.5
107.5

*

Of the total net operating charge of £119.8million for 2012 (2011 net income £38.3million), £46.9million (2011 £54.2million
expense) was recognised as an expense in earlier years as part of redundancy costs in accordance with IAS 37. The remaining
loss of £72.9million (2011: income £92.5million) was recognised in the current year.

3h BBC Pension Scheme
The BBC Pension Scheme, a defined benefit scheme, is now closed to new entrants. This plan provides
pensionable salary related benefits on a defined benefit basis funded from assets held in separate trusteeadministered funds.
The pension scheme trustees manage the plan in the short, medium and long term. They make funding
decisions based on valuations which take a longer-term view of the assets required to fund the scheme’s
liabilities.
Valuations of the scheme are performed by Towers Watson, consulting actuaries. Formal valuations areundertaken at least every three years.

F36

The estimate of
expected return on
pension plan assets
is based on predictionsof future performanceand economic
conditions.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3h i Scheme financial position
IAS 19 valuation

Note

2012
£m

2011
£m

2010
£m

2009
£m

2008
£m

Scheme assets*
Scheme liabilities(Deficit)/Surplus

7c ii
9,198.57c i . (10,370.5)(1,172.0)

8,835.8(9,756.3)(920.5)

8,154.8(9,795.7)(1,640.9)

6,454.0(6,592.6)(138.6)

8,042.0(7,513.6)
528.4

89%

91%

83%

98%

107%

Percentage by which scheme
assets cover liabilities*

The IAS 19
valuation takes assets
at their market value
and discounts theaccrued liabilities byreference to thediscount rate of an AA
rated corporate bond.

Excluding Additional Voluntary Contribution (AVC) funds.

Key movements in the year are shown above in note 3g ii.
A deferred tax asset or liability in relation to the scheme does not arise for the BBC Group because most of
the BBC Group’s public service activity is not subject to taxation.
The sensitivities of the scheme's liabilities to changes in the principal assumptions are set out below:

Movement

Impact on
Schemeliabilities%

Impact on
Schemeliabilities£m

5.2%
Decrease 0.1%
5.2%
Increase 0.1%
3.5% Increase/(decrease) 0.1%
See note 7c vi Increase/(decrease) 1 year

2.0
1.6
1.8
3.0

(205)
166
187/(186)
315/(316)

Assumption used

Discount rate
Discount rate
Retail price inflation rate
Mortality rate

3h ii Funding the Scheme
The 2010 actuarial valuation by Towers Watson of the pension scheme showed a funding shortfall of£1,131million. Consequently a recovery plan was agreed between the BBC and the pension scheme
Trustees where additional contributions totalling £905million will be paid by the BBC over an 11 year
period commencing in 2011. It was also agreed that employer contributions would decrease from 18.15%
to 15.5% on 1 April 2011 and then to 14.5% from 1 January 2012. Employee contributions for Old and
New Benefit members are 7.5%, employee contributions for the Career Average Benefit 2006 members are
4% and for the Career Average Benefit 2011 members are 6%.
The contributions to the scheme by members are mainly paid via a salary sacrifice arrangement. These havebeen treated as employer contributions.
The next formal actuarial valuation is expected to be performed as at 1 April 2013.
Contribution rates

Employer**
Employee (Old and New Benefits)
Employee (Career Average Benefits 2006)
Employee (Career Average Benefits 2011)*

Projections
2013
%

2012
%

2011*
%

2010 *
%

14.5
7.5
4.0
6.0

14.5/15.5
7.5
4.0
6.0

18.15
7.5
4.0
–

18.9 19.1/19.65
6.75
6.0
4.0
4.0
–
–

2009*
%

Restated to include BBC AVC plus contributions.

** Includes an allowance for BBC AVC matching contributions of 0.1%/0.3% (2011: 0.3%) but excludes the cost effectively paid forby the employee via the salary sacrifice arrangement.

On the basis of pension assumptions made above, contributions totalling £136.8million are expected to be
paid in 2012/13.

F37

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

WHAT THE BBC SPENDS ON ITS PEOPLE CONTINUED
3h iii Scheme cash flows (day-to-day liquidity)
Below are the cash flows of the BBC Pension Scheme (not included in the Group results). The second additional contribution of£60million was paid in March 2012 (2011: £110million) to address the funding shortfall identified in the 2010 actuarial valuation
by Towers Watson. Allowing for the reduction in this payment from the prior year, the net cash inflow saw a decrease of£44million compared to 2011. This fall is generated by the reduction in the employer’s contribution percentage during the year
and the closing of the scheme to new entrants (as members retire, there are no new entrants to replace the reduction in
employee and employer contributions).
Contributions including additional voluntary (employer and employee)
Investment income
Cash inflows
Payments of pensions and transfers out
Expenses
Net cash inflow

F38

2012
£m

2011
£m

218.6
216.7
435.3
(334.6)(41.7)
59.0

317.4
214.8
532.2
(326.1)(53.0)
153.1

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

4. THE PROPERTY, TECHNOLOGY AND EQUIPMENT USEDBY THE BBC TO MAKE ITS PROGRAMMESThe BBC Group uses a significant amount of assets in its operations. This section sets out those assets which includes those the
BBC Group intends to continue to use, those which it is in the course of disposing and any disposals which have been completed
in the year.
Certain assets which are held on balance sheet are not legally owned by the BBC Group, but instead are leased under financeleases. Under such arrangements, the BBC Group obtains substantially all the risks and benefits of ownership and therefore
records such assets as if they were legally owned. This section also deals with the financing costs and obligations associated withsuch assets.
The BBC Group has certain obligations to restore leased properties to their original condition at the end of the lease term.
The BBC Group makes certain provisions for the cost of such restoration works. The amounts provided are included within
this section of the notes.
For additional information on the relevant accounting policies applied in this section please see section 8 Basis of preparationof the financial statements and other accounting policies (page F82).

4a Property, plant and equipment
Cost or valuation
At 1 April 2010
Additions
Brought into service
Disposals
Written off
Assets held for saleExchange movements
At 31 March 2011
Additions
Brought into service
Disposals
Assets held for saleExchange movements
At 31 March 2012Land and buildings£mPlant andmachinery£m

Furniture andfittings£m

Assets underconstruction
£m

Total
£m

858.3
387.7
9.1
(5.7)
–
(11.2)(0.1)
1,238.1
1.5
17.1
(8.0)
(92.3)–
1,156.4

1,004.9
10.3
38.0(15.5)–(4.4)
0.4
1,033.7
19.4
115.7(35.5)(69.3)(0.2)
1,063.8

167.5
4.8
2.1
(4.1)
–
(0.4)
0.4
170.3
2.1
28.9
(2.3)
(31.4)
(0.4)
167.2

76.3
128.8
(49.2)
(1.5)
(4.0)
–
–
150.4
151.7
(161.7)
(2.0)
–
–
138.4

2,107.0
531.6–(26.8)(4.0)(16.0)
0.7
2,592.5
174.7–(47.8)(193.0)(0.6)
2,525.8

Depreciation
At 1 April 2010
Charge for the year
Disposals
Assets held for saleExchange adjustments
At 31 March 2011
Charge for the year
Disposals
Impairment
Assets held for saleExchange adjustments
At 31 March 2012
Net book value
At 31 March 2012

229.4
33.1
(2.3)
(5.6)
(0.1)
254.5
41.0
(8.0)
–
(42.5)
–
245.0

650.9
81.2
(14.1)
(3.2)
0.2
715.0
93.7
(34.1)
3.7(47.3)
(0.1)
730.9

95.4
16.3
(2.5)
(0.4)
0.3
109.1
15.8
(1.6)
–
(25.0)
(0.2)
98.1

–
–
–
–
–
–
–
–
–
–
–
–

975.7
130.6
(18.9)(9.2)
0.4
1,078.6
150.5(43.7)
3.7(114.8)(0.3)
1,074.0

911.4

332.9

69.1

138.4

1,451.8

At 31 March 2011

983.6

318.7

61.2

150.4

1,513.9

F39

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

THE PROPERTY, TECHNOLOGY AND EQUIPMENT USEDBY THE BBC TO MAKE ITS PROGRAMMES CONTINUED
4b Assets available for trading
Cost or valuation
At 1 April
Additions*Interest income on assets available for trading
Fair value gains transferred to equity
At 31 March
Provision
At 1 April and 31 March
Net Book Value
*

2012
£m

2011
£m

80.9
0.6
5.1
18.3
104.9

4.0
–
–
76.9
80.9

4.0

4.0

100.9

76.9

Relates to other investments acquired by BBC Worldwide.

The BBC Group holds an asset available for trading of £100.3million (£2011: £76.9million) relating to
Daunus Limited that is carried at fair value. The principle activity of Daunus Limited is property
development, see note 7d iii for further information.

4c Property assets classified as held for saleNon-current assets:
Property, plant and equipment

2012
£m

2011
£m

79.0

7.1

In June 2011, the BBC announced that BBC Television Centre was being marketed for sale. Negotiations
with interested parties are ongoing and the BBC Group was in dialogue with a range of bidders at the dateof approval of the financial statements. The property is expected to be sold within 12 months and thehistorical cost has been classified as held for sale and presented separately in the balance sheet. No
impairment losses have been recognised on the classification of this property as held for sale.

4d Gain on disposal of fixed assets
Disposal of properties

2012
£m

2011
£m

4.8

–

The Group disposed of its Oxford Road, Manchester property during the year.
Gains or losses on the disposal of property, plant and equipment in the ordinary course of business, that
represent an adjustment to depreciation, are recognised within operating surplus and disclosed in aggregate
in note 2a.

F40

Assets available fortrading are interests inentities in which the
BBC has neither control
nor a significant
interest.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

THE PROPERTY, TECHNOLOGY AND EQUIPMENT USEDBY THE BBC TO MAKE ITS PROGRAMMES CONTINUED
4e Obligations under finance leases

2012
£m

2011
£m

6.0

2.5

883.0

894.9

889.0

897.4

Minimum
lease
payments£m

Interest£mPrincipal
£m

89.0
351.6
1,778.0
2,218.6

83.0
316.3
930.3
1,329.6

6.0
35.3
847.7
889.0

84.9
351.7
1,890.4
2,327.0

82.4
322.4
1,024.8
1,429.6

2.5
29.3
865.6
897.4

Due within one year
Due after more than one year
See note 6c for full analysis of borrowing, including obligations under finance leases.
Finance lease liabilities are payable as follows:

2012
Not later than one year
Later than one year but not later than five years
Later than five years
2011
Not later than one year
Later than one year but not later than five years
Later than five years

A finance lease is alease where the lessee
has substantially takenon the risks andrewards of ownershipand operating the asset.
As such, both the asset
and future liability arerecognised on thebalance sheet.

Under the terms of the leasing agreements, the BBC has the right to share in the residual value of its key
finance lease properties (Broadcasting House, Pacific Quay and White City). This share will be passed to
the BBC as either a cash flow at the end of the lease arrangement, or a reduction in rentals if the leaseagreement is extended for a further term. In addition, the BBC has the right to repurchase each property
at the end of the respective lease agreement.
The recognition of finance lease assets and liabilities requires certain judgements to be made. A key
judgement relates to the treatment of any uplifts in annual rental payments due to the number used for RPI.
Where this has a material impact on the amounts recognised, the BBC has included an estimate of RPI indetermining the minimum lease payments.
Interest rates are fixed at the contract date. Leases with a carrying value of £852.4million (2011:£851.6million) have contingent elements included within their contracts and result in contingent rentsof £5.6million (2011: £13.2million) being reflected in operating costs.
Included within the carrying amounts of assets in note 4a are amounts held under finance leases. In the caseof a property lease, the BBC considers that leased assets and liabilities should be recognised in accordancewith its occupancy of the site unless there is significant evidence to suggest that the right to use the asset
has passed at an earlier date. Set out below is the analysis of the carrying amount of assets held underfinance leases by asset category:Land and buildings£mPlant andmachinery
£m

Total
£m

At 31 March 2012

782.6

22.4

805.0

At 31 March 2011

809.3

24.3

833.6

Net book value

4f

Financing costs of leasing arrangements

Interest costs relating to the finance lease obligation are recognised in the income statement at a constantrate over the term of the lease.
Net financing costs of leasing arrangements

2012
£m

2011
£m

(81.7)(58.5)F41

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

THE PROPERTY, TECHNOLOGY AND EQUIPMENT USEDBY THE BBC TO MAKE ITS PROGRAMMES CONTINUED
4g Operating leases
The total future minimum lease payments under non-cancellable operating leases are payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years

2012
£m

2011
£m

107.3
251.2
541.8
900.3

114.4
300.8
613.7
1,028.9

The BBC Group’s operating lease agreements primarily relate to office space, land, computers and otherIT equipment. Certain contracts include renewal options, stepped rents or annual RPI uplifts (which areaccounted for on a straight line basis) or periodic rent reviews. All leases have been entered into oncommercial terms.
The BBC Group has entered into a number of sublease arrangements. The total future minimum sublease
income expected to be received under non-cancellable subleases at 31 March 2012 are:Due within one year
Due after one year and not later than five years
Due after more than five years

2012
£m

2011
£m

9.1
24.9
6.5
40.5

9.4
32.0
10.5
51.9

4h Property provisions
Property provisions relate to the cost of returning leasehold properties (accounted for as operating leases)to their original condition at the end of the lease. The average life of these leases is 12 years, and the actual
amount payable will depend on the extent of leasehold improvements made over the remainder of thelease. For full analysis of provisions and contingent liabilities see note 6h.

2012
2011

F42

At
1 April£m

Charge forthe year£m

Utilisedduringthe year£m

Released during
the year£m

Transferred to
accruals£m

At
31 March
£m

20.4
21.4

5.4
1.3

(0.8)
(2.2)

(0.6)
(0.1)

(4.1)
–

20.3
20.4

An operating lease isa lease where the lessee
has not taken on therisks and rewards ofowning and operating
the asset. The lessee(the BBC) is hiring
rather than buying an
asset.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

5. INVESTMENTS IN THE BBC’S COMMERCIAL ACTIVITIESThe following section is primarily driven by the commercial activities of the BBC Group and includes information on what assets
are used to generate economic benefits for the BBC Group. The section includes intangible assets such as goodwill andprogramme acquisitions, balances held to represent the BBC’s interests in joint ventures and associates and the results of any
sale of operations that have occurred. Intangible assets do not have a physical substance (e.g. software licences).
For additional information on the relevant accounting policies applied in this section please see section 8 Basis of preparationof the financial statements and other accounting policies (page F84).

F43

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSINVESTMENTS IN THE BBC’S COMMERCIAL ACTIVITIESCONTINUED

5a Intangible assets
Goodwill£m

Programmerights£m

Residualprogrammerights£m

Otherintangibles
£m

Total
£m

Cost
At 1 April 2010
AdditionsElimination of fully amortised programme rights
Disposals
Classified as held for saleExchange differences
At 31 March 2011
AdditionsElimination of fully amortised programme rights
Disposals
Programme rights reclassified*Classified as held for saleExchange differences
At 31 March 2012

120.3
0.1
–
–
(5.1)
4.6
119.9
–
–
–
–
–
6.4
126.3

60.2
21.6
(2.2)
–
–
(0.2)
79.4
14.8
–
–
–
–
0.1
94.3

172.2
64.5
(55.1)
–
(1.5)
(3.2)
176.9
97.6
(41.1)
(0.8)
(8.1)
(5.3)
(3.6)
215.6

180.1
29.0
–
(2.8)
(2.2)
4.1
208.2
55.7
–
(1.5)
–
–
(0.4)
262.0

532.8
115.2
(57.3)
(2.8)
(8.8)
5.3
584.4
168.1
(41.1)
(2.3)
(8.1)
(5.3)
2.5
698.2

Amortisation and impairment
At 1 April 2010
Charge for the year
Elimination of fully amortised programme rights
Disposals
Impairment
Classified as held for saleExchange differences
At 1 April 2011
Charge for the year
Elimination of fully amortised programme rights
Disposals
Impairment
Classified as held for saleExchange differences
At 31 March 2012

17.5
–
–
–
33.8
–
(1.1)
50.2
–
–
–
16.1
–
1.8
68.1

48.4
13.1
(2.2)
–
–
–
–
59.3
9.1
–
–
–
–
(0.1)
68.3

92.2
60.9
(55.1)
–
–
(0.6)
(3.2)
94.2
78.5
(41.1)
(0.4)
–
(3.3)
(3.5)
124.4

84.7
31.6
–
(2.1)
–
(0.7)
1.6
115.1
34.4
–
(1.4)
–
–
(0.1)
148.0

242.8
105.6
(57.3)
(2.1)
33.8
(1.3)
(2.7)
318.8
122.0
(41.1)
(1.8)
16.1
(3.3)
(1.9)
408.8

Net book value
At 31 March 2012

58.2

26.0

91.2

114.0

289.4

At 31 March 2011

69.7

20.1

82.7

93.1

265.6

*

Where content in the course of production is funded by a commissioning broadcaster or co-production partner, this is separately presented withinprogrammes in production within current assets.

Other intangibles include:

Net book value
SoftwareAcquired masthead
Acquired carrier agreements
Other

F44

2012
£m

2011
£m

79.4
25.6
8.5
0.5
114.0

54.7
27.0
9.3
2.1
93.1

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSINVESTMENTS IN THE BBC’S COMMERCIAL ACTIVITIESCONTINUED
5b Goodwill
All goodwill is recognised in BBC Worldwide.
Goodwill, allocated by cash generating unit (CGU), is analysed as follows:
Goodwill by cash generating unit

Lonely Planet
DVD Distribution business
Other CGUs

2012
£m

2011
£m

22.6
25.4
10.2
58.2

34.5
25.3
9.9
69.7

Cash generating units
are the smallest groupof assets that can
independently generatecash flows.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions
used for these calculations are those regarding discount rates and growth rates. Management estimates
discount rates using pre-tax rates that reflect current market assessments of the time value of money andthe risks specific to each CGU.
BBC Worldwide tests goodwill for impairment in the accounting period in which a business combination
takes place, thereafter annually or more frequently, if there are indications that goodwill might be impaired.

Lonely Planet
The goodwill in this CGU arose as a result of the acquisition of Lonely Planet on 1 October 2007. Following
the impairment review performed during the year to 31 March 2012, the carrying value of this CGU has
been written down to its recoverable amount, resulting in a charge to the income statement of£16.1million.
Despite solid underlying performance, the strength of the Australian dollar continues to prove challenging
for the Lonely Planet business, which incurs the majority of its costs in its home country of Australia, butearns the majority of its revenue streams in sterling, Euros and US dollars. Had foreign exchange rates at thedate of the BBC Group’s impairment tests remained unchanged since the prior year, no impairment would
have been recorded in respect of the Lonely Planet business.
During the year, the BBC Group began to implement changes to the Lonely Planet business which
management believes will help to secure its long-term viability and reduce the impact of further currency
appreciation. This includes reducing the Australian cost base, relocation of its digital business from Australia
to the UK and exploitation of the Lonely Planet brand through online travel booking services.
Key assumptions for the value in use calculations are those regarding growth rates, foreign exchange rates
and discount rates.
The future cash flows used by management in determining the value in use are based on the most recent
financial budgets approved by management and cover a period of 10 years from the balance sheet date.
This period reflects the transition of the business away from its more mature print activities towards mobile
and online content, including travel booking services, where growth assumptions are linked to web trafficand conversion rates. Beyond this period, forecast cash flows have been extrapolated based on an
estimated growth rate of 3% (2011: 3%). This growth rate does not exceed the average long-term growthrate for the markets in which the Lonely Planet business operates.
Forecast foreign exchange rates have been based on spot rates at the date of impairment testing.
Any appreciation or devaluation of the Australian dollar during the forecast period would result in acorresponding reduction or increase in the value in use, respectively.
The rate used to discount forecast cash flows is 13.0% (2011: 13.4%).

DVD distribution business
The goodwill in this CGU arose as a result of the acquisition of 2 entertain on 6 August 2009. The cash
flow projections used in determining value in use are based on the current business plan approved bymanagement, which covers a five year period after which cash flows have been extrapolated using an
expected growth rate of 2% (2011: 2%).
A discount rate of 11.4% (2011: 12.4%) has been applied to the cash flows.
Management are of the view that any reasonably possible change in key assumptions would not cause thecarrying amount to exceed its recoverable amount.

F45

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSINVESTMENTS IN THE BBC’S COMMERCIAL ACTIVITIESCONTINUED

5c Gain on sale and termination of operations
As part of the normal course of business, the commercial entities may decide to sell or terminate aparticular part of their operations. This note shows the impact of such a decision on the income statement.
A gain is recognised when the fair value of consideration received/receivable is greater than the carrying
value of the assets of that operation, at the point of sale.
Magazines business
Animal Planet Europe and People & Arts
Gain on sale and termination of operations

2012
£m

2011
£m

95.0
–
95.0

–
96.4
96.4

On 31 October 2011, BBC Worldwide disposed of a number of subsidiaries and investments which
comprised its Magazines business. The BBC Group had classified these investments as assets held for sale asat 31 March 2011 and has not therefore equity accounted for joint ventures and associates included within
the disposal group during the year to 31 March 2012.
The BBC Group disposed of its 50% interests in Animal Planet Europe and People & Arts on 12 November
2010 to its joint venture partner, Discovery Communications. Cash consideration of £97.9million wasreceived, giving rise to a gain on disposal of £96.4million.

5d Interests in associates and joint ventures
This note details the BBC Group’s share of net assets in joint ventures and associates, along with the impactthat they have on the income statement. Details of significant joint ventures and associates along withprincipal subsidiary undertakings, including their activities, are provided in note 7e.

F46

2012
£m

2011
£m

Interest in joint ventures
Interest in associates
Total interest in joint ventures and associates

14.2
17.1
31.3

21.7
14.8
36.5

Share of results of joint ventures
Share of results of associates
Total share of results of joint ventures and associates

19.9
1.4
21.3

24.6
2.0
26.6

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSINVESTMENTS IN THE BBC’S COMMERCIAL ACTIVITIESCONTINUED

5d Interests in associates and joint ventures continued
The following table represents the BBC Group's aggregate share of joint ventures:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Adjustment to reflect effective obligation
Provision for unrealised profit
Goodwill
Total net book value
The net book value is presented within:
Interest in associates and joint ventures
Provisions

IncomeProfit after tax
Adjustment to reflect effective obligation

2012
£m

2011
£m

109.3
8.5
117.8
(82.1)(55.2)(137.3)
28.1
(5.7)
0.2
3.1

100.0
21.6
121.6
(73.2)(60.1)(133.3)
20.9
–
–
9.2

14.2
(11.1)
3.1

21.7(12.5)
9.2

154.4
21.7
(1.8)
19.9

161.2
24.6
–
24.6

A joint venture iswhere the BBC Grouphas joint control over anentity with anotherpartner(s).

Where the BBC has an
obligation to settle anindividual net liabilityof a joint venture, thisis reflected withinprovisions.

The following table presents summarised financial information for associates, including the BBC Group’s
share of the results:
2012
£m

2011
£m

Total assets
Total liabilities
Net assets/(liabilities)

85.2(72.3)
12.9

129.3(133.5)(4.2)

Group share of net assets
Provision for unrealised profit
Goodwill
Total net book value

4.9
(0.9)
13.1
17.1

3.9
–
10.9
14.8

IncomeProfit after tax
Adjustment to reflect effective obligation
Group share of results

150.0
6.4
–
1.4

20.1
1.5
0.5
2.0

An associate is anentity that the BBCGroup has significant
influence over, but that
does not meet thedefinition of a joint
venture or subsidiary.

F47

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

6. MANAGING FUNDING (INCLUDING FUTURE COSTS)
This section contains the notes to the balance sheet that detail the funding of the BBC Group as well as theassets and liabilities that are primarily used in the day-to-day trading transactions of the BBC Group.
It also sets out the external borrowings of the BBC Group. The BBC Group is subject to three specificconstraints on its borrowing levels as set out below:•

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.

•

Digital Switchover Help Scheme – £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).

•

Under a direction granted by the Secretary of State for the DCMS a borrowing limit of £350million has been
set for the BBC commercial group.

Included within this section are certain disclosures required to be provided to DCMS in respect of theabove borrowing thresholds.
For additional information on the relevant accounting policies applied in this section please see section 8
Basis of preparation of the financial statements and other accounting policies (page F86).

6a Analysis of net funds for DCMS borrowing ceilings

Total cash and cash equivalents
Less restricted cash*
Bank overdrafts
Loans and loan notes
Derivatives associated with loans
Finance leases

At 1 April
2011
£m

Cash
flows
£m

Non-cashchanges£m

Exchange£m

At 31 March
2012
£m

513.4
(34.0)(0.3)
479.1(214.9)(7.2)(897.4)(640.4)(105.2)32.0
0.3(72.9)
14.9–(101.2)(159.2)

–
–
–
–
(0.3)
1.6
109.6
110.9

(0.9)
–
–
(0.9)
(0.4)
–
–
(1.3)

407.3
(2.0)
–
405.3
(200.7)(5.6)(889.0)(690.0)

Leases not included in DCMS
borrowing limits
Net funds

853.6
213.2

849.9
159.9

Made up of:
UK PSB Group
Centre House Productions
BBC Worldwide
Other commercial businesses
Net funds

375.0
(8.3)
(56.3)(97.2)
213.2

338.9
(5.9)
(2.7)
(170.4)
159.9*

Restricted cash represents licence fee funds collected on behalf of HM Treasury.

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

F48

The DCMS definitionof ‘borrowings’
excludes leases which
would be classified as
operating under UK
GAAP, but which areclassified as financeleases under IFRS at thedate of transition to
IFRS. These leases are
therefore excluded
when comparing net
debt/funds to DCMS
borrowing ceilings.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6b Reconciliation of net funds to the DCMS borrowing ceilings
Commercial
Businesses

Public Services
Capital or
current
expenditure£mCurrent
expenditure on
DigitalSwitchover
Help Scheme*
£m

**
£m

338.9
(200.0)538.9–(25.0)
25.0(173.1)(350.0)176.9

Net funds/(debt)
Borrowing ceiling

375.0(200.0)–(25.0)(153.5)(350.0)

Headroom

575.0

25.0

196.5

2012
Net funds/(debt)
Borrowing ceiling
Headroom

Public Services inthis context represent
the UK PSB Group(excluding Centre
House Productions
Limited – see note7dii), BBC World
Service and BBC
Monitoring.

2011

*

£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).

** Under the terms of the DCMS agreement, BBC Commercial Holdings Limited must satisfy two financial covenants. Thesecovenants are required to be met at 31 March each year. As at 31 March 2012 and 31 March 2011, BBC Commercial Holdings
Limited was in compliance with both of these covenants.

As at 31 March 2012, 31 March 2011, and throughout both financial years, the BBC Group did not breachthe borrowing ceilings.

6c Borrowings
6c i Borrowings due within one year
Bank loan
Overdraft
Obligations under finance leases
Total

6c ii Borrowings due after more than one year
Bank loan
Obligations under finance leases
Total

2012
£m

2011
£m

30.8
–
6.0
36.8

20.4
0.3
2.5
23.2

2012
£m

2011
£m

169.9
883.0
1,052.9

194.5
894.9
1,089.4

Analysis of the BBC Group’s borrowing facilities is set out in note 6d.

F49

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6d Borrowing facilities

Facility

UK PSB Group
Sterling revolving
credit facility
agreement
Uncommitted money
market lines (shortterm borrowings)
GBP overdraft

Total
available
31 March
2012
£m

Drawn
down at
31 March
2012
£m

Total
available
31 March
2011
£m

Drawn
down at
31 March
2011£mExpiryor review
date

200

–

200

–

June 2013

Margin of between 0.125% and 0.5%
over LIBOR

5

–

25

–

Reviewed
annually

Bank base rates plus 1.5%

5

–

5

–

5

–

5

–

Reviewed
annually
Reviewed
annually

380**

185

–

–

July 2016

–

–

350**

190

Expired

20

–

20

–

Reviewed
annually

30

30

50

50 May 2012***Interest rate

Loan – margin of 0.45%

Multicurrency
Banks short term offered rates for the
overdraft
relevant currency plus 1%
BBC Commercial Holdings Limited
Multicurrency,
LIBOR* plus 0.8% rising to LIBOR* plus
revolving credit facility 0.2% on utilisations over 1/3 and a further
agreement for loans
0.2% on utilisations over 2/3.
and letters of credit
Letter of credit fee is the same as thebank lending margin, but does not include
LIBOR.
LIBOR* plus 0.275% rising to LIBOR*
Multicurrency,
revolving credit facility plus 0.325% when the facility is moreagreement for loans
than 50% utilised.
and letters of credit
Letter of credit fee is the same as thebank lending margin, but does not include
LIBOR.
Overdraft or money
Money market line – margin of 1.0%
market lines(2011: 0.45%)
Overdraft – bank base rates plus 1.5%
(2011: 1%)
BBC Worldwide
European Investment Bank’s own funding
Loan with European
cost plus a margin of 0.032% (2011:
Investment Bank
(50% secured by
0.09%) on unsecured loans
letters of credit)*

The base rate used varies according to the currency drawn. At 31 March 2012 £64.9million (2011: £64.5million) was drawn down in AUS$ and consequently
linked to BBSW rather than LIBOR. All other amounts drawn are in sterling and consequently linked to LIBOR.

** Of this amount, up to £26.6million (2011: £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 2012, the total drawn on this facility was £185.3million which consisted of cash drawings of £169.9million (2011:£164.5million) and £15.4million (2011: £25.6million) utilised by way of letters of credit.
*** Balance repaid in May 2012.

There have been no defaults or breaches of covenants on the facilities above during the year (2011: none).
In addition to the facilities above the BBC Group has other smaller facilities of which nothing was drawn at the year end (2011:£nil), used to manage working capital.

F50

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6e Cash generated from operations
Group surplus before taxation
Depreciation, amortisation and impairment
Difference between pension charge and cash contribution
Fair value impact of derivatives associated with loans
Fair value impact of other derivatives
Profit on disposal of tangible fixed assets
Loss on disposal of tangible fixed assets
Gain on sale and termination of operations
Share of results of associates and joint ventures
Financing income
Financing costs(Increase)/decrease in stocks
Increase in debtors(Decrease)/increase in creditors
Increase in provisions
Cash generated from operations

6f

2012
£m

2011
£m

423.6
293.6
(93.1)
(1.6)
3.0
(4.8)
3.1
(95.0)(21.3)(655.8)631.4(64.5)(11.6)(111.2)
4.0
299.8

520.5
276.1
(343.2)
(1.1)
1.5
–
8.6
(96.4)(26.6)(613.6)606.8
61.6(16.0)
111.7
16.5
506.4

Trade and other receivables

This note discloses the balances that are owed to the BBC Group by third parties and balances that have been pre-paid by the
BBC Group.

6f i Other receivables due after more than one year
Other prepayments and receivables
Amounts owed by associates and joint ventures
Total

2012
£m

2011
£m

27.8
2.8
30.6

23.4
2.5
25.9

F51

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6f ii Trade and other receivables due within one year
Trade receivables
Licence fee debtors
Amounts owed by associates and joint ventures
VAT recoverable
Other receivables
Prepayments and other assets
Total

2012
£m

2011
£m

217.9
410.4
37.9
33.2
30.1
145.7
875.2

228.9
413.0
47.4
29.7
27.3
115.2
861.5

Included in the BBC Group’s trade and other receivables at 31 March 2012, are balances of £44.5million (2011: £34.9million)
which are past due at the reporting date but not impaired. The aged analysis of these balances is as follows:
Trade receivables past due but not impaired

Up to 3 months
3 to 6 months
Over 6 months

2012
£m

2011
£m

31.8
7.2
5.5
44.5

26.1
5.0
3.8
34.9

In determining the recoverability (likelihood of receiving payment) of a trade receivable the Group considers any change in thecredit quality of the trade receivable from the date credit was initially granted up to the reporting date. Trade receivables areprovided for based on estimated irrecoverable amounts, determined by reference to past default experience of the counterparty
and an analysis of the counterparty’s financial situation.
There are no significant impairment provisions relating to balance of any individual debtor. Amounts charged to the impairment
provision are written off when there is no expectation of recovery. Subsequent recoveries of amounts previously written off are
credited to the Income Statement. The impairment provision stands at £5.5million at 31 March 2012 (2011: £5.6million).
The movement in the allowance for doubtful debts is set out below:
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectible
Amounts recovered during the year
Exchange differences on revaluation
Balance at the year of the year
No significant amount has been provided for items that are not yet due for payment.

F52

2012
£m

2011
£m

5.6
2.0
(1.1)
(1.0)
–
5.5

9.1
2.4
(4.0)
(1.8)
(0.1)
5.6

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6g Trade and other payables
This note details the amounts payable to third parties within working capital by the BBC Group.

6g i Trade and other payables due within one year
Note

Trade and employment related payables
Amounts owed to associates and joint ventures
Other taxation and social security
Other payables
Accruals and deferred income (including licence fee payables)
Cash balance payable to DCMS
Cash balance payable to the Consolidated Fund
Licence savings stamp deposits and direct debit instalments
Total

2f

2012
£m

2011
£m

449.8
16.4
27.2
133.5
331.9
91.9
2.0
65.6
1,118.3

420.7
17.3
26.1
124.5
175.6
266.1
34.0
66.3
1,130.6

2012
£m

2011
£m

21.0
52.6
73.6

197.2
–
197.2

6g ii Other payables due after more than one year
Note

Other payables
Amounts repayable to DCMS
Total

2f

It is the BBC’s policy to comply with the Better Payment Practice Code in relation to the payment of suppliers, provided that the
supplier is complying with the relevant terms and conditions of their contracts. The BBC monitors compliance against the termsof this code. Payments for programme acquisitions are made in accordance with contractual terms. The Group’s number of days
outstanding in respect of other trade payables at 31 March 2012 was 29 days (2011: 28 days).

F53

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED

6h Provisions and contingent liabilities

Restructuring
Litigation and insurance
Property
Share of joint ventures net
liabilities
Other
Total

Note

At
1 April
2011£m

Charge forthe year*£m

Utilisedduringthe year£m

Released during
the year£m

Transferredto accruals£mAt
31 March
2012
£m

4h

97.0
17.4
20.4

111.7
3.1
5.4

(87.8)(5.4)(0.8)(13.5)
(3.3)
(0.6)

–
–
(4.1)

107.4
11.8
20.3

12.5
2.1
149.4

0.1
2.3
122.6

–
(0.9)
(94.9)(1.5)–(18.9)

–
–
(4.1)

11.1
3.5
154.1

5d

Included in current liabilities
Included in non-current liabilities
Total

Restructuring
Litigation and insurance
Property
Share of joint ventures net
liabilities
Other
Total
Included in current liabilities
Included in non-current liabilities
Total
*

86.1
68.0
154.1

103.7
45.7
149.4

4h
5d

At
1 April
2010£m

Charge forthe year*£m

Utilisedduringthe year£m

Released during
the year£m

Transferredto accruals£mAt
31 March
2011
£m

81.1
13.1
21.4

67.1
10.9
1.3

(47.9)
(4.3)
(2.2)

(3.3)
(2.3)
(0.1)

–
–
–

97.0
17.4
20.4

14.2
4.6
134.4

2.0
2.0
83.3

(3.7)
(1.3)
(59.4)

–
(3.2)
(8.9)

–
–
–

12.5
2.1
149.4

59.3
75.1
134.4

103.7
45.7
149.4

The charge for the year includes £0.2million charge (2011: £0.5million) interest cost relating to the unwind of the discount rate in amounts provided.

The restructuring charge for the year mainly relates to the restructuring programmes within UK PSB Group, BBC World Service
and Studios and Post Production. The balance at 31 March 2012 predominantly relates to the Delivering Quality First strategy
which is due to complete in 2016/17.
Litigation and insurance provisions relate to on-going legal and insurance claims. The BBC Group has a number of contingent
liabilities arising from litigation. The BBC makes specific provision for its best estimate of any damages and costs which may
be awarded. A provision is only made to the extent that the BBC Group consider it probable that there will be an outflow
of economic benefits and the amount can be reliably estimated. There are currently no known individually material
outstanding litigations.
Other provisions consist of a number of items arising across the BBC Group in the normal course of business, none material
in themselves.
BBC World Service has assets in various locations overseas which are used in short wave transmission of our output. If these sites
are taken out of use because of the reduction in short wave radio listening for instance, the BBC Group will be liable for the costof decommissioning these sites if no other user takes them over. World Service continues to revise its estimate of thedecommissioning liability each year, reflecting the impact of any decision to close the sites.
There were no significant contingent liabilities known at the year end (2011: no significant).

F54

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED
6i

Net financing income/(costs)

Set out below is analysis of the finance income and expenses incurred in the year. These amounts include
interest relating to finance lease liabilities (see note 4f) and defined benefit pension schemes (see note 3g).
Note

Financing income
Interest income
Expected return on pension plan assets
Investment income on assets available for trading
Fair value gains on interest rate swaps and caps
Financing costs
Interest expense
Interest on obligations under finance leases
Fair value movement on financial liabilities
Unwinding of discount on provisions
Interest cost on pension plan liabilities
Net financing income

3g iii
4b

4f

6h
3g iii

2012
£m

2011
£m

5.8
643.3
5.1
1.6
655.8

9.1
603.4
–
1.1
613.6

(15.5)(81.7)(6.5)(103.7)(0.2)(527.5)(631.4)24.4(13.9)(58.5)(4.0)(76.4)(0.5)(529.9)(606.8)
6.8

2012
£m

2011
£m

(81.7)
115.8
(9.7)
24.4

(58.5)
73.5
(8.2)
6.8

The expected returnon pension plan
assets is a predictionof the return for theyear.

The interest cost on
pension plan
liabilities represents
the increase during theyear in the value of theplan liabilities because
the benefits are one
year closer tosettlement.

The net impact of financing can be analysed as follows:

Net financing costs of leasing arrangements
Net financing income related to pension obligations
Net financing costs related to loans and financial instruments

F55

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSMANAGING FUNDING (INCLUDING FUTURE COSTS)CONTINUED
6j

Long term commitments not reflected in the balance sheet – contracts placed for future expenditureThis note shows amounts to which the BBC Group is contractually committed, but which do not meet the criteria for inclusion in
the balance sheet. We have chosen to include fixed (but not variable) payments due under outsourcing contracts for the life of
those contracts, as this matches our interpretation of the requirements of s.410A of the Companies Act 2006. To better reflect
the interpretation of the Companies Act requirement the comparatives have been amended.
Functions covered by these long term outsourcing contracts include IT support, content distribution and transmission, facilities
management, and elements of finance support.
Fixed asset additions
Programme acquisitions and sports rights
Independent programmes
Other fixed payments on long term outsourcing arrangements

F56

2012
£m

2011
£m

32.3
948.0
201.2
2,454.6
3,636.1

72.8
866.6
195.4
3,010.4
4,145.2

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

7. OTHER

For additional information on the relevant accounting policies applied in this section please see section 8
Basis of preparation of the financial statements and other accounting policies (page F87).

7a Assets and liabilities held for saleNon-current assets (and assets and liabilities of a group earmarked for disposal) are classified as held for sale
if their carrying amount (amount held on the balance sheet) will be recovered principally through sale rather
than continuing use, they are available for immediate sale and the sale is highly probable, normally within thenext 12 months.
When non-current assets or disposal groups are re-categorised to this note, they are stated at the lower of
their previous carrying amount and fair value less costs to sell. No amortisation or depreciation is charged
on non-current assets (including those in disposal groups) classified as held for sale.
Note

Non-current assets:
Intangible assets
Property, plant and equipment
Interests in associates and joint ventures
Current assets:
Programme-related assets and other inventories
Trade and other receivables due within one year
Total assets classified as held for sale5a4cTrade and other payables
Total liabilities classified as held for sale

2012
£m

2011
£m

2.0
79.0
9.9

7.5
7.1
6.1

–
–
90.9

1.4
28.2
50.3

2012
£m

2011
£m

–
–

(36.5)(36.5)The major classes of assets and liabilities comprising the operations classified as held for sale in the current
year relate to the property, plant and equipment as per note 4c and the BBC Group’s investment in the
Ragdoll joint venture.
The prior year amount primarily comprised of the assets and liabilities relating to Magazines operations(disposed in November 2011) and the Oxford Road, Manchester property (sale completed June 2012).

7b Taxation
7b i Recognised in the income statement
The charge for the year, based on the rate of corporation tax of 26% (2011: 28%) comprised:
2012
£m

2011
£m

21.8
(5.1)
16.7
15.9
32.6

30.2
(4.9)
25.3
12.2
37.5

7b iv

0.8
1.0
0.1
1.9

–
0.3
(0.2)
0.1

7b ii

34.5

37.6

Note

Current tax
UK corporation tax
Adjustments in respect of prior years
Foreign tax
Total current tax
Deferred tax
Origination and reversal of timing differences
Tax rate increase
Adjustments in respect of prior years
Total deferred tax
Total taxation expense in the consolidated income
statement

Deferred tax is
corporation tax whichis expected to bepayable (or receivable)in the future as a resultof differences between
the carrying amounts ofassets and liabilities, forfinancial reporting
purposes, and thecorresponding tax
bases used to calculate
the corporation tax
currently payable.

F57

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7b ii Reconciliation of taxation expense
The BBC Group is only liable to taxation on those activities carried out with a view to making a profit and on rent, 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
Share of joint venture and associates
Surplus before tax multiplied by standard rate of corporation
tax in the UK of 26% (2011: 28%)
Effects of

2012
£m

2011
£m

423.6
8.2
431.8

520.5
9.2
529.7

112.3

148.3

6.2
(57.5)

7.2(90.0)

5.6(24.7)
3.9
0.9
1.0
(5.0)
42.7
(8.2)
34.5

13.5
(27.7)
0.5
(0.2)
0.3
(5.1)
46.8
(9.2)
37.6

Public Services activities
Public services taxable external income
Non-taxable public service activities

Commercial activities
Disallowed expenditure (including goodwill impairment)
Tax exempt investment saleTax differential on overseas earnings
Tax differential in joint ventures and associates
Tax rate increase
Adjustments in respect of prior years
Total tax charge for the year
Share of tax of joint venture and associate
7b i

There is no capital gains tax arising on the sale of property referred to in note 4d due to the availability of indexation allowance.
The increase in tax differential on wholly owned overseas earnings is primarily due to the higher rates of tax in overseas
jurisdictions. The lower effective tax rate (total tax charge for the year as a percentage of Group profit excluding tax) arises fromthe sale of investments that are exempt from capital gains tax.

7b iii Factors that may affect future tax charges
For this year, the rate is 26% and further annual reductions of 1% will follow, reducing the rate finally to 22% with effect from
1 April 2014. The impact of the future rate reductions will be accounted for in future periods, to the extent that they areenacted at the balance sheet date; however it is estimated that this will not have a material effect on the BBC Group.

F58

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7b iv Deferred tax assets/(liabilities)

At 1 April 2011
Net charge to income statement
Exchange differences
Other
At 31 March 2012
Deferred tax asset/(liability) presented within:

Non-current assets
Non-current liabilities

Fixed asset
temporarydifferences£m

Provisions£mFinancial
instruments
£m

Other
£m

Net deferred
tax asset/(liability)
£m

(3.6)
1.1
(0.1)
0.5
(2.1)

5.6
1.0
(0.1)
(0.3)
6.2

(0.7)
(0.5)
–
–
(1.2)

7.7
(3.5)
0.3
–
4.5

9.0
(1.9)
0.1
0.2
7.4

2012
£m

2011
£m

13.4
(6.0)
7.4

25.9
(16.9)
9.0

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit
through future taxable profit is probable. The BBC Group has unrecognised deferred tax assets arising on capital losses totalling£20.4million (2011: £22.9million). These assets are not recognised on the basis that there is insufficient certainty that capital or
operating gains will arise against which the BBC Group can utilise these losses.

F59

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7c Pension plans
Note 7c sets out the additional detailed disclosures related to the BBC Pension Scheme which were notincluded in note 3g or 3h.

7c i Changes in the fair value of plan liabilities
The table below illustrates the movement on the scheme liabilities during the year. The key drivers of thischange are pension benefits earned (and employee contributions made), any gains or losses relating toparticipants leaving the pension scheme, changes in assumptions made and benefits paid out during the year.
Opening present value of plan liabilities
Current service cost
Past service cost
Gains on curtailments
Interest on pension plan liabilities
Experience losses/(gains) arising on plan liabilities
Changes in assumptions underlying plan liabilities
Contributions by plan participants
Benefits paid and expenses
Closing present value of plan liabilities

2012
£m

2011
£m

9,756.3160.0
4.8(45.0)
527.2
113.3
189.3
1.8
(337.2)
10,370.5

9,795.7
192.8
19.3(250.4)529.6(71.7)(138.9)7.1(327.2)9,756.3

The plan liability
represents the
expected amount ofmoney that will beneeded in the future to
pay employees for theircurrent and futureservice to the company
Changes inassumptions
underlying plan
liabilities represent
the changes in
estimates used to value
the future liability. Key
assumptions include thediscount rate andmortality.

7c ii Changes in the fair value of plan assets
The table below illustrates the movement on the plan assets during the year. The key drivers of this change
are contributions made, changes in the value of the pension plan assets (including the investment return)and benefits paid during the year.
The employee contributions to the scheme by members are mainly paid via a salary sacrifice arrangement.
These have been treated as employer contributions.
Opening fair value of plan assets*
Expected rate of return on plan assets
Actuarial (losses)/gains on plan assets
Contributions by employer
Contributions by plan participants
Benefits paid and expenses
Closing present value of plan assets**

F60

Excluding AVC funds

2012
£m

2011
£m

8,835.8
643.3(157.8)212.6
1.8(337.2)
9,198.5

8,154.8
603.4
93.1
304.6
7.1
(327.2)
8,835.8

Actuarial
gains/losses on plan
assets represent theamount by which theassets held by thescheme (such as
equities, bonds andproperty) have
performed better orworse than the
expected prior year
value.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7c iii Plan assets
The allocation of assets by the Pension Trust Trustees is governed by the need to manage risk against thedesire for high returns and any liquidity needs. A high percentage of assets are held in equities which theTrustees expect will produce higher returns in the long term. The target allocation, based on market values,for equities is 42.5%, private markets 16.0%, absolute returns 8.5%, return seeking bonds 13.0% and liability
matching bonds 20.0%. For more information on the Scheme see http://www.bbc.co.uk/mypension.
Type of asset

Equities
Bonds
Property
Alternatives*
Cash
Total assets
Actual return on pension
plan assets**
*

2012
£m

4,101
2,369
1,077
1,494
158
9,199
486

%

45
25
12
16
2
100

2011
£m

4,480
1,938
1,080
1,324
14
8,836

%

51
22
12
15
–
100

697

Alternatives include private equity, debt and currency.

** This constitutes realised gains from the receipt of investment income (e.g. dividends and rent), transactions where assets are soldand unrealised fair value changes.

7c iv BBC Pension Scheme (losses)/gains in consolidated statement of comprehensive(loss)/income
Actual return less expected return on pension plan assets
Experience (losses)/gains arising on plan liabilities
Changes in assumptions underlying the present value of plan liabilities
Net (loss)/gain recognised in the consolidated statement of comprehensive(loss)/income
Cumulative loss recognised in the consolidated statement of comprehensive(loss)/income

2012
£m

2011
£m

(157.8)(113.3)(189.3)

93.1
71.7
138.9

(460.4)303.7(4,552.0)(4,091.6)

These gains andlosses arise from
actual performance
being different fromthat predicted. Only
defined benefit
schemes giverise to gains and losses
in the statement ofcomprehensive income.

F61

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7c v History of experience gains and losses
Experience adjustments on plan assets:
Amount (£million)
Percentage of plan assets
Experience adjustments on plan liabilities:
Amount (£million)
Percentage of plan liabilities
Total actuarial (loss)/gain recognised in consolidated
statement of comprehensive loss
Amount (£million)
Percentage of plan liabilities

2012

2011

2010

2009

2008

(157.8)
1.7%

93.1
1.1%

1,363.0
16.7%(2,094.0)
32.4%(584.6)
7.3%(113.3)
1.1%

71.7
0.7%

33.2
0.3%

171.3
2.6%

(149.1)2.0%(460.4)
4.4%

303.7
3.1%

(1,869.9)
19.1%(784.6)
11.9%

52.3
0.7%

7c vi Principal actuarial assumptions
The calculation of the scheme liabilities and pension charges, for IAS 19 purposes, requires a number offinancial and demographic assumptions to be made. The principal assumptions used by the actuaries, at thebalance sheet date were:Principal financial assumptions

Rate of increase in salaries
Rate of increase in pension payments:
Old Benefits
New Benefits
Career Average Benefits (2006)
Career Average Benefits (2011)
Inflation assumption (RPI)
Inflation assumption (CPI)
Expected take up rate*
Discount rate
*

2012
%

2011
%

1.0

1.0

3.5
3.3
2.4
2.4
3.5
2.5
–
5.2

3.7
3.5
2.4
2.7
3.7
2.9
40.0
5.5

Assumption required in the previous financial year to reflect the proportion of members that were assumed to transfer into either
the CAB 2011 or defined contribution plans following the changes made to the pension plans. As members have transferred during
2011/12, no assumption is required in the current year.

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

Retiring today:
Male
FemaleRetiring in 20 years:
Male
Female2012
Number of
years

2011
Number of
years

27.9
28.5

27.8
28.4

30.3
30.2

30.2
30.1

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 (‘S1’ series of tables,
published by the CMI) which reflect recent research into mortality experience in the UK with a long-term
rate of improvement of 1.5% per annum for males and 1.0% per annum for females.

F62

The discount rate
for the IAS 19
valuation is taken as
the rate for an AA
rated corporate bond.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7c vi Principal actuarial assumptions continued
Expected long-term rate of return (per annum)*

2012
%

2011
%

Equities
Bonds and gilts
Property
Alternatives
CashTotal expected rate of return

8.4
4.4
6.4
8.4
3.5
7.1

8.6
4.2
6.4
8.6
3.7
7.4

*

As at the beginning of the financial year.

The expected return on plan assets for the next year is determined by considering the expected returns
available on the major asset classes held by the Scheme at the end of each reporting period. Expected
returns on bonds are determined by reference to the redemption yield on Government bonds of long
duration. Expected returns on equity investments and other assets reflect long-term real rates of return
expected by the market. The expected rate of return adopted for property investments is chosen to be
mid-way between the return on equities and the return on bonds.

7c vii Scheme membership analysis and maturity profile
Contributors
Pensioners
Dependants
Deferred pensioners

2012
Number

2011
Number15,647
18,884
4,028
28,31318,03218,805
3,971
19,591

The total number of Scheme beneficiaries as at 31 March 2012 was 57,186 (2011: 58,009). Membershipnumbers in the table above are higher as members can hold more than one record. For example,
contributing members who have transferred to the Career Average Benefits 2011 section from anothersection of the Scheme may have a deferred pensioner record for their benefits built up in the Old Benefits,
New Benefits or Career Average Benefits 2006 sections and a contributing record for their Career Average
Benefits 2011 benefits.

The maturity of ascheme provides anindication of the cash
requirements of thescheme and the likely
attitude of the Trustees
to risk within theirinvestment policy. The
more mature a scheme,
the more likely that
Trustees will favour low
risk investments.

F63

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d Financial instruments
This section details the financial instruments held by the BBC Group. A financial instrument is a contract that
results in one entity recording a financial asset (a contractual right to receive financial assets e.g. cash) in theiraccounts and another entity recording a financial liability.
The BBC Group’s financial instruments, other than those used for treasury risk management purposes,
comprise cash and cash equivalents, borrowings and various items such as trade receivables and payables
that arise directly from its operations.

7d i Financial risk management
The BBC Group’s financial risk management operations are carried out by a BBC Group Treasury function,
within parameters defined formally within the policies and procedures manual agreed by the BBC Executive
Board. BBC Group Treasury’s activity is routinely reported and is subject to review by internal and external
auditors.
BBC 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 Group, both UK PSB Group 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 meet foreseeableliquidity requirements.

The BBC Group takes a risk averse approach to the management of foreign currency trading and has
implemented a clear economic hedging policy to minimise volatility in the financial results. A small numberof the forward foreign currency contracts entered into by the BBC Group were designated as hedging
instruments in effective cash flow hedges. Hedge accounting is only applied where there is appropriate
designation and documentation.
The BBC Group is exposed to the following areas of risk arising from financial instruments:

F64•

Market risk, principally currency and interest rate risk;•

Liquidity risk; and•Credit risk. The largest element is the licence fee debtor, £410.4million (2011: £413.0million), the amountof income that the BBC receives is directly related to the amount of licence fee collected from households
in the UK.

Credit risk is the riskof financial loss to theGroup if a customer
or counterparty to afinancial instrument fails
to meet its contractual
obligation.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d i Financial risk management continued
The material risks to the BBC Group are:

Currency risk: The BBC Group is principally a domestic organisation with the majority of transactions,assets and liabilities arising in the UK and being sterling based. However, the BBC Group undertakes sometransactions in currencies other than sterling. Due to movements in exchange rates over time, the amountthe BBC Group expects to receive or pay when it enters into a transaction may differ from the amount thatit actually receives or pays when it settles the transaction.
The most significant currency exposure by total value of transactions is to US dollars. Due to the relative
size of this exposure in comparison to the BBC Group’s sterling-denominated business, the BBC does notconsider this to be significant for the BBC Group. The BBC Group does, however, generally enter into
forward currency contracts to manage, or hedge, this currency risk, which allows the BBC Group to settle
transactions at known exchange rates, reducing 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, therecognition of the fair value of the forward currency contracts results in timing gains/losses in each financial
year. These timing gains/losses are therefore a result of market conditions and not variances in underlying
contract value.
As a result of this certainty of cash flows the BBC Group has mitigated its underlying sensitivity to currency
fluctuations and therefore has not presented sensitivity analysis as any potential variation is insignificant.
At 31 March 2012 the BBC Group had entered into a net commitment to sell foreign currencies amounting
to £220.1million (2011: net commitment to sell £161.5million) that mature in the period through to 2015 inorder to fix the sterling cost of commitments through this period (mainly Euros and US dollars). These
forward foreign exchange contracts mean the BBC Group had no significant currency exposure.

Interest rate risk: The BBC Group’s main exposure to interest rate fluctuations arises on externalborrowings. Since March 2003 the BBC Group has been borrowing at floating rates of interest and thenusing interest rate swaps, caps and collars to manage the BBC Group’s exposure to interest rate fluctuations
and provide 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. The effect of taking out the interest rate
swaps, caps and collars is that in the longer term the BBC Group has no significant exposure to interest
rate fluctuations and hence no sensitivity analysis is presented.
Sterling fixed rate borrowings 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 May 2013. In total,£195.3million (2011: £226.3million) of swaps and £84.0million (2011: £177.8million) of caps and collars
were entered. All swaps and caps were effective at 31 March 2012 to ensure borrowings are suitably
covered for the foreseeable future. The coverage is £79.5million higher (2011: £189.6million higher) thanthe current level of borrowings of £199.6million (2011: £214.5million).
Fair value movements in respect of interest rate swaps and interest rate options are recorded through theincome statement within financing income/financing costs.

Liquidity risk
Liquidity risk is the risk that the BBC Group will not be able to meet its financial obligations as they falldue. 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 6a). In order to comply with these ceilings together
with the terms of any individual debt instruments the BBC’s Group Treasury manages the BBC Group’s
borrowings by continuously monitoring BBC Group cash flow forecasts. The BBC holds its surplus liquidity
in term deposit accounts with highly rated financial institutions.

F65

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d ii Fair values of financial instruments
The following table shows the fair value and carrying value of the BBC Group’s financial instruments, in categories according
to how the financial instrument is measured. It also shows the maturity profile for each category of financial asset and liability.
Amountsdue inless than
one year£m

Amountsdue between
two andfive years£mAmounts
due after
more than
five years
£m

Total
£m

3.4

2.3

–

5.7

Loans and receivables
Trade and other receivables

628.6

–

7.8

636.4

Cash and cash equivalents

407.3

–

–

407.3

–

–

100.9

100.9

Financial liabilities at fair value throughincome and expenditure
Derivative financial instruments
Trade and other payables(4.2)(14.0)

(5.9)
–

–
–

(10.1)(14.0)

Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases(30.8)(376.5)(6.0)(169.9)–(35.3)––(847.7)(200.7)(376.5)(889.0)2012 – Carrying value and fair value
Financial assets at fair value throughincome and expenditure
Derivative financial instruments

Available-for-sale financial assets
Other investments

F66

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d ii Fair values of financial instruments continued
Amounts
Amountsdue in due between
less than
two andone yearfive years£m£m

Amounts
due after
more than
five years
£m

Total
£m

2011 – Carrying value and fair value
Financial assets at fair value throughincome and expenditure
Derivative financial instruments

8.0

1.9

–

9.9

Loans and receivables
Trade and other receivables

642.3

–

6.6

648.9

Cash and cash equivalents

513.4

–

–

513.4

–

–

76.9

76.9

(5.8)
–

(7.6)
(7.5)

–
–

(13.4)(7.5)(20.7)(372.4)(2.5)(194.5)–(29.3)––(865.6)(215.2)(372.4)(897.4)

Available-for-sale financial assets
Other investments
Financial liabilities at fair value throughincome and expenditure
Derivative financial instruments
Trade and other payables
Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases

As at 31 March 2012 there are no differences (2011: no differences) between the fair value and carrying
value of any of the BBC Group’s financial instruments.
The finance leases include £7.0million (2011: £9.5million) 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 by defeasancedeposits which may only be used to settle the finance lease liabilities and therefore do not represent
separate assets and liabilities. The BBC has a right of offset which meets the criteria as set out in IAS 32(Financial Instruments Presentation); therefore, the finance lease creditor is presented net of defeasancedeposits to arrive at the net unmatched liability at the year end. These defeasance deposits, £125.3million
at 31 March 2012 (2011: £153.1million), 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.

Defeasancedeposits are amounts
deposited with banks
which earn the exact
amount of interest
needed to cover thecapital repayment andinterest element ofeach of the financeleases. The defeasancedeposits are ‘ringfenced’ and therefore
cannot be used for any
transactions apart fromthe agreed capital andinterest payments.

F67

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d iii Derivative financial instruments
When calculating the fair value of the BBC Group’s financial instruments (subsequent to the initial recognition), the techniqueused in each calculation has to be allocated to the relevant level of hierarchy in the table below. This disclosure helps to show
the level of judgement that the BBC Group has used in calculating fair values, subsequent to the initial recognition.
Categorisation into the following headings is based on the inputs used for the valuation technique as opposed to thetechnique itself:•

Level 1 fair value measurements are those derived from quoted market prices (unadjusted) in active markets (where transactions
occur on a frequent basis and in sufficient volumes for the pricing information to be available on an ongoing basis). The prices are
therefore available to the general public for identical instruments and occur on a regular basis, thus ensuring they are continually up
to date;•Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observablefor the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Instruments that would typically fall into
this category include those where quoted prices are available for similar, but not identical instruments and instruments where aquoted price is available, but in a non-active market i.e. the price may be out of date and therefore require some limited
adjustments; and•Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs). This can include methods such as project future cash flows and occur
where there is little, or no, market activity.

At 31 March 2012 and 31 March 2011 there are no material differences between the fair value and carrying value of any of the
BBC Group’s other financial instruments.

F68

Fair value
hierarchy level

Assets£m

Liabilities£m

2012
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Assets available for trading

2
2
2
3

2.1
–
0.2
100.9
103.2

(1.3)
(3.8)
(0.8)
–
(5.9)

Less than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Other payables

2
2
2
3

3.4
–
–
–
3.4

(2.3)
(1.8)
(0.1)
(14.0)(18.2)

2011
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Assets available for trading
Other payables

2
2
2
3
3

1.7
–
0.2
76.9
–
78.8

(1.2)
(6.3)
(0.1)
–
(7.5)
(15.1)

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

2
2
2

8.0
–
–
8.0

(4.8)
(0.9)
(0.1)
(5.8)

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d iii Derivative financial instruments continued
Level 3 financial assets recorded at fair value and included within available for sale investments include£100.3million (2011: £76.9million) for the shares held in Daunus Limited, the entity that is redeveloping
Broadcasting House. The BBC holds a 10% share of the issued share capital of that company which it classes
as an available for sale investment, due to mature in 2033. The estimated interest rate used (linked to RPI)
was 5.0% and the rate used to discount the future cash flows was 3.2% (2011: 4.15%).
Level 3 financial liabilities recorded at fair value and included within other payables relate to written put
options issued to non-controlling interests in the BBC Group’s subsidiaries. The fair value of such instruments
is calculated based on the strike price of the options and management's best estimate of the date at which
options will be exercised. Where the strike price of an option is based on the fair value of the underlying
business, this has been estimated based on forecasts of future cash flows prepared by management.

A put option is acontract that gives theholder the right, but not
the obligation, to sell an
asset at a specific point
in time.
The strike price is theprice the option will sell.
Exercise is the point
at which the rights inthe option are
implemented or acted
upon.

The change in fair value of Level 3 financial instruments is reconciled as follows:

Note

Opening balance
Additions
Settlements
Unwinding of discount recorded within finance expense
Unwinding of discount recorded within finance income
Change in fair value
Foreign exchange translation gains and losses

4b
4b

2012
£m
Financial
Financialassetsliabilities

76.9
0.6
–
–
5.1
18.3
–
100.9

(7.5)
–
–
–
–
(6.5)
–
(14.0)

2011£m
Financial
Financialassetsliabilities

–
76.9
–
–
–
–
–
76.9

(41.3)
–
41.7
(2.8)
–
(4.0)
(1.1)
(7.5)

All remaining put options over minority share in the Group’s subsidiary, Lonely Planet, were acquired by the
BBC Group on 14 February 2011. In accordance with IAS 27 (2008) Consolidated and Separate Financial
Statements, the exercise of the Lonely Planet put option was treated as an equity transaction.
Options outstanding at 31 March 2012 were exercised in April 2012 and will be settled in the year ending
March 2013.

F69

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7d iii Derivative financial instruments continued
The following table details the BBC Group’s remaining contractual maturity for its non-derivative financial liabilities (including
obligations under finance leases) but excludes trade and other payables that were settled in the normal course of business andare due within one year. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on theearliest date on which the BBC Group can be required to pay:
2012
Variable interest rate instruments
Not later than one year
Fixed interest rate instruments
Not later than one year
Later than one year but not later than five years
Later than five years
2011
Variable interest rate instruments
Not later than one year
Later than one year but not later than five years
Fixed interest rate instruments
Not later than one year
Later than one year but not later than five years
Later than five years

F70

Cash flow£mInterest£mPrincipal
£m

202.6

1.9

200.7

89.0
351.6
1,778.0
2,421.2

83.0
316.3
930.3
1,331.5

6.0
35.3
847.7
1,089.7

186.1
30.1

0.9
0.1

185.2
30.0

84.9
351.7
1,890.4
2,543.2

82.4
322.4
1,024.8
1,430.6

2.5
29.3
865.6
1,112.6

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7e Interests in joint ventures, associates and subsidiaries
The BBC 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 andregistered in England and Wales. A full list of joint ventures, associates and subsidiaries is available on
request from the General Counsel and Secretary, BBC, White City Building, 201 Wood Lane, London
W12 7TS.

7e i Significant joint ventures and their activities
The BBC 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

Commercial joint ventures:
UK Gold Holdings Limited
UK Channel Management Limited
Ragdoll Worldwide Limited

7e ii Significant associates and their activities

YouView Limited
3sixtymedia Limited*

Holding company
TV channel operator
Content creation
Holdingof issued
ordinaryshares%Activity

14.3
10*

Multiplatform broadcasting
Production

Joint ventures arebusinesses the BBC
jointly controls withother parties.

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

The BBC holds 10% holding of the total share capital of 3sixtymedia Limited but 20% of the Class A ordinary shares which gives us
significant influence.

F71

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7e iii Subsidiary undertakings
Name of entity

Activity

Commercial Subsidiaries: (All 100% owned unless stated)
BBC Commercial Holdings Limited*
BBC Worldwide Limited
BBC World News Limited
BBC Ventures Group Limited

**
**
**

BBC Studios and Post Production Limited
Lonely Planet Publications Pty Limited(incorporated in Australia)
2entertain Limited
BBC Worldwide Australia Pty Limited(incorporated in Australia)
BBC Worldwide Americas Inc. (incorporated in the USA)
BBC World Distribution Limited
Subsidiaries incorporated to act on behalf of UK PSB:
BBC Property Limited
BBC Property Development Limited
Centre House Productions Limited
Digital UK Limited***DSHS Limited**

Holding company
Publishing, channels andprogramme distribution
Broadcaster
Holding company
Programme making facilities andservices****

Travel Guides Publisher
DVD/video publisher

**
**
**

Investment company
Holding company
Programme distribution

*
*
*
*
*

Property
Property
Production financing
Digital switchover
Digital switchover*

Directly owned.

** Indirectly owned.
*** The BBC controls 58.02% 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 11.4%, Channel Four Television Corporation 11.4%, Channel Five Broadcasting Limited
9.07%, Arqiva Services Limited 6.48% and SDN Limited 3.63%.

7f

Reserves

7f i Operating reserve
At 31 March 2012, the cumulative goodwill written off to reserves on acquisitions prior to 1999 amounted
to £6.8million. This amount is unchanged on prior year and remained in equity upon transition to IFRS as
permitted by IFRS1 First time adoption of IFRS.

7f ii Available-for-sale reserve
The balance as at 31 March 2012 relates to the fair value of the BBC’s investment in Daunus Limited (seenote 4b).

7g Post balance sheet events
There are no material events after the balance sheet date to disclose.

F72

Subsidiary
undertakings arebusinesses the BBC
controls.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7h Related party transactions
Transactions with related parties excluding key management personnel
Joint ventures, associates and otherinvestments
2012
2011
£m
£m

70.3
(21.5)–
18.8
67.6

Rendering of services
Receiving of services
Pension contributions
Dividends received

75.4(21.1)–
43.8
98.1

BBC Pension Scheme
2012
£m

–
–
212.6
–
212.6

2011
£m

–
–
304.6
–
304.6

Transactions during the year also include £54.3million (2011: £43.3m) of payments made to joint ventures in respect of financeleases.
Amounts owed by related parties
2012
2011
£m
£m

BBC Pension Scheme
Joint ventures, associates and other investments

–
40.7
40.7

–
52.6
52.6

Amounts owed to related parties
2012
2011
£m
£m

(0.7)
(16.4)(17.1)(14.1)(17.3)(31.4)In all transactions, the terms of trade were negotiated on an arm’s length basis.
The BBC Group also enters into various transactions with government and local authorities on an arm’s length basis.
These transactions include council tax agreements and corporation tax payments.
Related party transaction with key management personnel are disclosed in note 3f.

F73

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSOTHER CONTINUED
7i

Segment reporting

Geographical location of income and non-current assets

2012

Non-current assets excluding deferred tax
and financial instruments:
UK
Rest of world
Additions included in fixed assets and investments
External income:UK
Rest of world2011

Non-current assets excluding deferred tax
and financial instruments:
UK
Rest of world
Additions included in fixed assets and investments
External income:UK
Rest of world

F74

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

1,460.7
1.7
1,462.4

70.6
79.5
150.1

200.7
100.8
301.5

101.7
0.1
101.8

(111.8)–(111.8)

1,721.9
182.1
1,904.0

176.6

27.0

138.9

2.8

–

345.3

3,877.2
1.0
3,878.2

279.3
5.4
284.7

325.7
680.8
1,006.5

53.9
69.3
123.2

(206.1)–(206.1)4,330.0
756.5
5,086.5

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

1,471.8
1.9
1,473.7

55.6
95.9
151.5

196.3
115.9
312.2

101.3
–
101.3

(119.9)–(119.9)1,705.1
213.7
1,918.8

514.3

19.5

112.4

4.3

–

650.5

3,769.6–
3,769.6

292.3
4.5
296.8

389.2
617.9
1,007.1

64.1
68.2
132.3

(212.8)–(212.8)4,302.4
690.6
4,993.0

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTS

8. BASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESThe BBC is incorporated in the United Kingdom under the Charter.

Statement of accounting policies
The BBC Group is required to select and apply accounting policies for each type of transaction enteredinto throughout the year and in the preceding year. An accounting policy will specify the timing forrecognising and derecognising assets, liabilities, income and expenditure, how those items willsubsequently be measured and where they are presented in the statement of total income andexpenditure, balance sheet and statement of cash flows.
For ease of reference, the accounting policies are grouped below into the section headings used above
for the notes to the accounts.

Use of estimates and judgement
The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires the BBC Executive Board to exercise judgement in applying the
BBC Group’s accounting policies. These areas involve a higher degree of judgement or complexity, or
areas where assumptions or estimates are significant to the consolidated financial statements. We havepresented such estimates or judgements alongside the related accounting policy within the relevant
section of the notes.

Basis of preparation
These consolidated financial statements for the BBC Group have been prepared in accordance withEU (IFRS).
The financial statements are principally prepared on the historical cost basis, meaning that after initialrecognition, the carrying amount of assets and liabilities are determined by reference to their originalcost. Areas where other bases are applied are identified in the accounting policies within the relevant
section of the notes.
Where items are sufficiently significant by virtue of their size or nature, they are disclosed separately inthe financial statements in order to aid the reader’s understanding of the BBC Group’s financial positionand performance.

F75

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Adoption of new and revised accounting standards
In the current year, the following revised Standards have been adopted and have been applied sinceApril 2011:
IAS 24 (2009)

Related party disclosures

IFRIC 14 (2009)

The Limit on a Defined Benefit Asset, Minimum Funding Requirements andtheir Interaction

IFRIC 19

Extinguishing Financial Liabilities with Equity Instruments

Improvements to IFRSs (May 2010)
There were no material impacts on the financial statements of the BBC Group following the
introduction of these revised standards. No changes have been made to the BBC Group’s accounting
policies during the year either.

Going concern
The financial statements are prepared on a going concern basis. The Directors have prepared cash flow
forecasts for a period in excess of a year from the date of approval of these financial statements. In the
Directors’ judgement, the key factors in these forecasts are: the continuity of the Charter and licencefee (the quantum of which has been agreed until 2016), the BBC Pension Scheme deficit and theresultant deficit recovery payments agreed with the pension scheme Trustees and the realisation ofplanned cost savings under the ‘Continuous Improvement’ and ‘Delivering Quality First’ programmes.
The Charter and licence fee give the BBC Group a guaranteed source of income, however, the timingof cash flows is an important factor in the consideration of going concern, given the relatively small
borrowing restrictions imposed by the DCMS on both UK PSB Group (£200million) and thecommercial operations of the BBC (£350million).
The BBC Group has external funding available, including a £200million Sterling revolving credit facility
which is in place until June 2013 and which is currently unutilised, and a £380million multicurrency
revolving credit facility available to the BBC commercial operations in place until July 2016, of which£185million was drawn down at 31 March 2012 (2011: £190million).
The Directors of the BBC Group have reviewed these forecasts taking all above factors into
consideration, together with the sensitivities and mitigating factors in the context of available funds andexpect the BBC Group to be able to meet its debts as they fall due for the foreseeable future.
As a result, the Directors are satisfied that the going concern basis is appropriate for the preparationof these the annual financial statements.

F76

The directors are
required to make astatement that the BBC
is a going concern
which means it can meetits debts for a period of
12 months from the dateon which these financial
statements were signed.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Basis of consolidation
The BBC Group accounts include the results of the BBC and all businesses controlled by the
BBC (subsidiaries) together with the BBC’s share of the results of businesses over which the BBC
has significant influence but not control (associates) and those which the BBC jointly controls(joint ventures).
The BBC Group accounts for its interests in joint ventures and associates using the equity method. The
equity method means that the BBC presents its interest in the joint venture or associate as a single line
item in the balance sheet, measured at cost of investment plus share of net results, less dividends
received. The equity accounted result for the year is presented as a single line item in the statementof income and expenditure.
Changes in the BBC Group's interests in subsidiaries that do not result in a loss of control areaccounted for as equity transactions, being movements between reserves attributable to the BBC andnon-controlling interests. A non-controlling interest is the interest in a subsidiary that is not owned,
directly or indirectly, by the BBC. The non-controlling interest reflects the amount of the net result for
the year and the net assets /(liabilities) which is not attributable to the BBC. The carrying amounts of
non-controlling interests are adjusted to reflect any changes in their, and the BBC Group's, relativeinterests in the subsidiaries. Any difference between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or received is recognised directly in equity andattributed to the BBC.
When the BBC Group loses control of a subsidiary, the profit or loss on disposal is calculated as thedifference between (i) the aggregate of the fair value of the consideration received and the fair valueof any retained interest and (ii) the previous carrying amount of the net assets of the subsidiary(including attributable goodwill) and any non-controlling interests. Amounts previously recognised inother comprehensive income in relation to the subsidiary are reclassified to the income statement ortransferred directly to retained earnings as appropriate. The fair value of any interest retained in theformer subsidiary at the date when control is lost is regarded as the cost on initial recognition of aninvestment in a joint venture or associate.

Use of estimates and judgement – Basis of consolidation
Judgement is required in determining whether certain entities in which the BBC Group has an
economic interest should be considered to be subsidiaries or joint ventures. In such circumstances, the
BBC Group has assessed its ability to control or influence those entities. Control has been assessedwith reference to the ability of the BBC Group to direct, unilaterally, key policies of the entity. Where
such policies are reserved such that an economic partner has the power to veto key strategic financial
and operating decisions, the entity is considered to be a joint venture.

A subsidiary is anentity that is directly or
indirectly controlled by
the Group. Control
exists where the Group
has the power to govern
the financial andoperating policies of theentity so as to obtainbenefits from its
activities. In assessing
control, potential voting
rights that are currently
exercisable orconvertible are taken
into account.
An associate isan entity other thana subsidiary or joint
venture, over which theGroup has significant
influence. Significant
influence is the power toparticipate in the financial
and operating decisionsof an entity but is notcontrol or joint control
over those policies.
A joint venture isan entity in which theGroup holds an interest
under a contractual
arrangement where
the Group and one
or more other parties
undertake an economic
activity that is subject tojoint control.

F77

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition
is measured at the aggregate of the fair values, at the date of exchange, of assets given by the BBCGroup in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities andcontingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fairvalue at the acquisition date. Subsequent adjustments to the fair values of net assets acquired are madewithin 12 months of the acquisition date where original fair values were determined provisionally. These
adjustments are accounted for from the date of acquisition. Transaction costs that the BBC Group
incurs in connection with a business combination, such as legal fees, due diligence fees and otherprofessional and consulting fees, are expensed as incurred. The BBC Group, on an acquisition
recognises any non-controlling interest either at fair value or at the non-controlling interest’s
proportionate share of net assets.
When control is obtained in successive share purchases (a ‘step acquisition’) it is accounted for using
the acquisition method at the acquisition date. The previously held interest is remeasured to fair value
at the acquisition date and a gain or loss is recognised in the income statement.

Foreign currency transactions
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 at the balance sheet date aretranslated into sterling at the rate of exchange ruling at that date. Foreign currency gains or losses
arising from the translation of assets and liabilities at these rates of exchange, together with exchange
differences arising from transactions settled during the year, are included in the income statement. Nonmonetary assets and liabilities measured at historical cost are translated into sterling at the rate ofexchange on the date of initial recognition.

Financial statements of foreign operations
The assets and liabilities of foreign operations are translated into sterling at the rate of exchangeruling at the balance sheet date. The income and expenses of foreign operations are translated into
sterling at average monthly rates of exchange ruling during the financial period, which is a good
approximation for the actual rate. Exchange differences arising on translation are recognised directlyin the translation reserve.
On disposal of an investment in a foreign operation the associated translation reserve balance isreleased to the income statement.

F78

As these financial
statements are preparedin sterling,
the BBC’s foreign
currencytransactions andbalances mustbe translated, atappropriate exchange
rates, into sterling.
This means thatvariations in exchange
rates can cause thevaluation of investments
to fluctuate, even when
there has been nochange in the health of
the underlying business.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 1

Licence fee income
Income from television licences is treated as an amount due from the relevant Government department,
principally the DCMS. This represents the value of licences issued in the year, less a deduction for refunds
and cancellations.
Where an element of the licence fee income has been ring-fenced by the Government for a specificpurpose, that income is recognised when it is due, except if it becomes virtually certain that the BBC’s
expenditure on the ring-fenced purposes will be less than the ring-fenced income already received. In thiscase, the relevant amount of licence fee income, as agreed with the Government, will be repayable andrecognised as such in the year the obligation to repay arises.

Other income
Other income arises from activities such as the sale of goods, provision of services and granting oflicences. Revenue is measured after deductions for value added tax, any other sales taxes, trade discounts
and sales between BBC Group companies.
• Sale of goods
Revenue is recognised once the significant risks and rewards of ownership of the goods have been passed
to the customer and the BBC has released all managerial involvement surrounding the goods. Sales ofgoods are stated after deduction of the sales value of actual and estimated returned goods. Examplesof goods sold include magazines, books and DVDs.
• Sale of services
Revenue is recognised at the point the service has been delivered and the receipt of the income isprobable. Where the delivery is over a period of time, the revenue is recognised on a straight line basis.
Examples of services sold include advertising and commercial licences for specific rights associated with
TV programmes.
• Royalties
Royalty income is recognised on an accruals basis in accordance with the detail of the relevant
agreements.
• Rental income
Rental income is recognised on a straight line basis over the term of the lease.
• Grants from Government departments
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 drawn down to meet estimatedexpenditure in the year but unspent amounts do not have to be repaid, as long as they fall withinpredetermined limits. The grants are recognised as income in the financial year that they relate to.
• Grants from other public bodies
Grants from other public bodies are recognised as income consistently with the related costs, provided
that there is reasonable assurance that the BBC will comply with any conditions attached to the grant andthat the grant will be received.

F79

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 2

Completed originated programmes, programmes in production and prepayments
to acquire future programme-related rights
Completed originated programmes and programmes in production are held at cost.
Cost includes all direct costs, production overheads and a proportion of other attributable overheads.
The proportion of programmes necessarily taking a substantial period of time to produce is small andas such no borrowing costs are included in cost.
Where, exceptionally, a programme is unable to be broadcast, as soon as it is virtually certain that thisis the case, the full value of the programme will be written off to the income statement.
Programme development costs are expensed to the income statement until such time as there is astrong indication that the development work will result in a commissioned programme, when any further
costs are recognised as programme-related assets.
Originated programmes that are still in production at the balance sheet date are recognised asprogrammes in production, except that prepayments to acquire future programme-related rights
are shown separately where the BBC has made payments to independent producers, or the holdersof certain rights (for example, rights to broadcast sporting events), to receive the programmeon completion.

Rights to broadcast acquired programmes and films
The rights to broadcast acquired programmes and films are recognised at cost. The costs of acquired
programmes and films are written off on first transmission except to the extent that the numbers offurther showings are contractually agreed, when it is written off according to its expected transmission
profile. Assets and liabilities relating to acquired programmes are recognised at the point of payment orcommencement of the licence period, whichever is earlier. Agreements for the future purchase of rights
whose licence period has not commenced and where there has been no payment by the balance sheet
date are disclosed as purchase commitments.
Where the BBC has invested in independent productions, in addition to broadcasting rights the BBC may
obtain rights to future royalties from the sale of rights associated with the production. These residualinterests are recognised initially at cost subject to amortisation as royalties are received and impairment
if anticipated royalties do not materialise.

Other inventories
Raw materials and other physical inventory, including finished goods, are stated at the lower of cost and
net realisable value.

F80

Originatedprogrammes areprogrammes produced
internally by the BBCGroup forbroadcasting and/orsale of the rights tobroadcast.
A commissioned
programme iswhere an agreement
has been made for the
programme to be
produced forbroadcast.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 3

Other employee benefits
Other short and long term employee benefits, including holiday pay and long service leave, arerecognised as an expense over the period in which they accrue.

Termination benefits
Termination benefits are a component of restructuring provisions and are payable when employment
is terminated before the normal retirement date. They are recognised as an expense when the groupis demonstrably committed to termination being when there is a detailed formal plan to terminate
employment without possibility of withdrawal.

Defined contribution plans
The amounts charged as expenditure for the defined contribution plans represent the contributions
payable by the BBC for the accounting period.

Defined benefit plans
The defined benefit plans, of which the majority of staff are members, provide benefits based on
pensionable pay. The assets of the BBC’s pension scheme are held separately from those of the
BBC Group.
Pension scheme assets are measured at fair value. Pension scheme liabilities are measured using a
projected unit credit method. The present value of scheme liabilities is calculated by discounting
estimated future cash out flows at the current rate of return on a high quality corporate bond ofequivalent term and currency to the liabilities.
The difference between the fair value of the pension scheme assets and the present value of the pension
scheme liabilities is a surplus or a deficit. A pension scheme surplus is recognised to the extent that it isrecoverable 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 comprehensive
income, actuarial gains and losses. Generally, amounts are charged to operating expenditure on the basisof the current service cost of the present employees that are members of the BBC Pension Scheme.
The BBC Group recognises a curtailment when it is demonstrably committed to a significant reductionin employees covered by the scheme or amends the scheme's terms such that a significant element of
future service will qualify for no or reduced benefits. Curtailment gains and losses are recognised in theincome statement.

Use of estimates and judgement – Post-retirement benefits
The pension costs and obligations of the BBC Group’s defined benefit schemes are calculated on thebasis of a range of assumptions, including the discount rate, inflation rate, salary growth and mortality.
Differences arising as a result of actual experience differing from the assumptions, or future changes in theassumptions will be reflected in subsequent periods. A small change in assumptions can have a significant
impact on the valuation of the liabilities. Further analysis on the sensitivity of pension assumptions is given
in note 3h i.

F81

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 4

Owned assets
Other than as noted below, items of property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.

Leased assets
Assets held under finance leases are capitalised within property, plant and equipment and depreciation isprovided as appropriate. On initial recognition the asset is measured at the lower of its fair value and thepresent value of the minimum lease payments.

Depreciation
Depreciation is provided to write off the cost of each item of property, plant and equipment, less its
estimated residual value, on a straight line basis over its estimated useful life. The major categories ofproperty, plant and equipment are depreciated as follows:• 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
Depreciation methods, estimated useful lives and residual values are reviewed at each reporting date.

Lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis
over the lease term.
Payments made under finance leases are apportioned between financing costs and the reduction of theoutstanding liability. The financing costs are allocated to each period so as to produce a constant periodic
rate of interest on the remaining balance of the liability.

Use of estimates and judgement – Leases
In assessing whether a lease is an operating lease or a finance lease, judgement needs to be exercised indetermining whether or not substantially all the risks and rewards of ownership of the leased asset areheld by the BBC Group. Given that finance leases are recognised as liabilities, and operating leases are
not, this can have a significant effect on the reported financial position of the BBC. Other key judgements
include the determination of the commencement date of a lease and the estimate of RPI to be includedin the minimum lease payments.
When determining the accounting for a finance lease, the BBC has assessed whether it has the right touse the leased asset at the inception of the lease, or whether this right passes at a later date (‘thecommencement date’).
Where a significant site is being redeveloped, occupation may occur in distinct phases; consequently, theleased asset and liabilities are recognised based on the proportion of the site occupied at eachcommencement date.

F82

A finance lease isa lease that transfers
substantially all therisks and rewards ofownership of theleased asset to thelessee, which isaccounted for as
if it were an assetof the lessee. As such,
both the asset andfuture liability arerecognised on thebalance sheet.
An operating leaseis a lease in which thelessee has not taken
on substantially all therisks and rewardsof ownership of theleased asset.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 4 continued

Non-current assets held for saleNon-current assets (and disposal groups comprising assets and liabilities) are classified as held for sale if
their carrying amount will be recovered principally through sale rather than continuing use, they areavailable for immediate sale and sale is highly probable.
On initial classification as held for sale, non-current assets or disposal groups are measured at the lowerof their previous carrying amount and fair value less costs to sell. No amortisation or depreciation ischarged on non-current assets (including those in disposal groups) classified as held for sale.

Investments in equity securities
Investments in equity securities held by the Group are classified as being available-for-sale and are stated
at fair value, with any resultant gain or loss being recognised in the statement of comprehensive income,
except for impairment losses. When these investments are derecognised the cumulative gain or loss
previously recognised in the statement of comprehensive income is recognised in the income statement.

F83

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 5

Programme-related intangible assets
Programme-related intangible assets, which include programme rights and residual programme rights,
are stated at cost, after writing off the costs of programmes that are considered irrecoverable, lessaccumulated amortisation. The cost and accumulated amortisation of programme-related intangible
assets are reduced by programmes which are fully written off.

Research and development expenditure – internally-generated intangible assets
Expenditure on research activities is written off in the income statement when incurred.
Expenditure on development activities is included on the balance sheet as an asset only if all of thefollowing conditions are met:•

It is probable that the asset will generate future economic benefits; and•The development costs of the asset can be measured reliably.

•

The assets are measured at cost less accumulated amortisation and any accumulated impairment losses

For UK PSB Group it is generally unlikely that future economic benefits in the form of cash inflows will
be received, and as a result, other than assets created for use by the business in delivering its public
purposes, development costs are only capitalised by the BBC Group’s commercial businesses.

Programme rights
are rights held by the
BBC that permit a
future transmission of aparticular programmeor event.
Research anddevelopment costs
are incurred to explore
ideas for new
programmes or assets,such as the BBC
iPlayer. Research costs
are where the ideas
are generated, some ofwhich are thendeveloped further intoa plan or design where
the costs are thencategorised as
development.

Other intangible assets
Other intangible assets acquired separately by the BBC Group are stated at cost less accumulated
amortisation and any accumulated impairment losses. The identifiable intangible assets acquired as partof a business combination are shown at fair value at the date of acquisition (in accordance with IFRS 3
Business combinations) less accumulated amortisation and any accumulated impairment losses.

Amortisation
Amortisation is charged to the income statement on a systematic basis over the estimated useful lives ofintangible assets, from the date that they are available for use, unless such lives are indefinite. The useful
lives and amortisation methods for each major class of intangible asset are as follows:•

Programme rights and residual programme rights – charged to the income statement to match theaverage revenue profile of the programme genre over the estimated average marketable life, generally
between 2 and 10 years•

Other intangibles:– Lonely Planet masthead

Straight line

20 years– UK.TV carrier agreements

Straight line

unexpired term of agreement– Software

Straight line2 – 5 years– Other

Straight line

3 – 8 years

Amortisation methods, useful lives and residual values are reviewed at each balance sheet date andadjusted if appropriate.

F84

Amortisation is the
reduction reflected in
the carrying value ofthe asset as aconsequence of theregular use of that
asset by theorganisation.
Useful economic
life is the period overwhich the BBC Groupwill be utilising theasset.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 5 continued

Impairment: Non-financial assets
At each balance sheet date, the BBC Group reviews the carrying amount (net amount held on thebalance sheet) of those assets that are subject to amortisation to determine whether there is anindication that any of those assets has suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of any impairment loss.

An impairment
occurs when the
carrying value of anasset is higher than theamount that isrecoverable from its
use or sale.

For goodwill the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset is the higher of fair value less costs to sell and value in use. For the
purposes of impairment testing, assets are grouped at the lowest level at which they generate separately
identifiable cash flows (cash-generating units). In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimatesof future cash flows have not been adjusted.
An impairment loss is recognised in the income statement for the amount by which the asset’s carrying
amount exceeds is recoverable amount. Where a cash-generating unit is impaired the impairment loss
will first be allocated to reduce goodwill and then to the other assets of the cash-generating unit on a
pro rata basis, except that the carrying amount of any individual asset will not be reduced below its
separately identifiable recoverable amount.

The fair value of anasset is the amount for
which the asset could
be exchanged
betweenknowledgeable, willing
parties in an arm’s
length transaction.

Impairment losses in respect of goodwill are not reversed. In respect of assets other than goodwill,
an impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss has been recognised.

Goodwill
Goodwill is recorded in the balance sheet as the difference between the fair value of the considerationtransferred by the BBC and the recognised amount of non-controlling interests in the acquiree comparedto the fair value of the identifiable assets and liabilities acquired. These are all measured at the date ofacquisition. Where the consideration is less than the net assets acquired, the difference is recognised
immediately in the income statement
Acquisitions prior to 1 April 2007 – as part of the adoption of IFRS, in accordance with IFRS 1 ‘First-time
adoption of IFRS’, the Group elected to restate only those business combinations that occurred on orafter 1 April 2007. In respect of acquisitions prior to 1 April 2007, goodwill is recognised at deemed cost
being the amount previously recognised under UK accounting standards, subject to being tested for
impairment at that date. Goodwill arising in periods up to 1 April 1998 remains offset against theoperating reserve, as was permitted by UK GAAP at the time.
Goodwill arising on the acquisition of joint ventures and associates is included in the carrying amountof the joint venture or associate and is tested for impairment as part of the overall balance.
Subsequent measurement of separately recognised goodwill – goodwill is tested annually for impairment
and is measured at cost less any accumulated impairment losses. For the purposes of impairment testing
the goodwill is allocated to cash-generating units on the basis of those expected to benefit from therelevant business combination.

Use of estimates and judgement – Goodwill
The determination of whether goodwill is impaired requires an estimation of the value in use of the cash
generating units to which goodwill has been allocated. The value in use calculation requires the entity toestimate the future cash flows expected to arise from the cash-generating unit and a suitable discountrate that reflects current market assessments of the risks specific to the asset and the time value ofmoney, in order to calculate present value.

Goodwill is thedifference between thevalue paid for abusiness and the fairvalue of its net assets.
It represents thepremium thepurchaser is preparedto pay for the business.
Consideration, in thiscontext, is themonetary valuetransferred in
exchange for the sharein ownership ofanother entity.
Where the BBC does
not own an entity
outright, the othershareholders are
known/ disclosed as
non-controllinginterests.

F85

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 6

Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at fair value less anallowance for estimated impairment. The allowance is based on objective evidence that the BBC Groupwill not be able to recover all amounts due.
Changes in the carrying amount of the allowance are recognised in the income statement.

Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.

Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(those necessarily taking a substantial period of time to get ready for their intended use) are added tothe cost of those assets, until such time as the assets are ready for their intended use.
Originated programmes can be qualifying assets, but those necessarily taking a substantial period of timeto get ready for broadcast are a small proportion of overall programme investment. Any borrowing
costs that could be attributed to those programmes are not significant and, therefore, no borrowing
costs are capitalised.
All finance income and other borrowing costs are recognised in income and expense in the period inwhich they are incurred.

Provisions
Judgement and estimation techniques are employed in the calculation of the best estimate of the amountrequired to settle obligations, including determining how likely it is that expenditure will be required by
the BBC. This can be very complex, especially when there is a wide range of possible outcomes.
The BBC Group recognises decommissioning liabilities as part of the initial cost of the asset, discounted
to present value. The group reassesses whether there has been a change in this liability based on thefacts and circumstances at each balance sheet date.

F86

Amortised cost is
the initial value of thetransaction that has
been amended for
subsequent payments,
the time value ofmoney and any
impairment that may
be required.

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 7

Taxation
The tax charge for the period comprises both tax currently payable and deferred tax. Taxation isrecognised in the income statement except to the extent that it relates to items recognised directly inreserves, in which case it is recognised in reserves.
Current tax is the expected tax payable for the year, using tax rates that are enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. In
respect of tax currently payable:•

The BBC (UK PSB Group, 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 is fully
liable for corporation tax on capital gains and on all its other external income. Expenditure on capital
assets is not eligible for capital allowances giving rise to temporary differences that would lead to deferred
tax assets or liabilities. Movements of fair value adjustments in the income statement give rise to deferred
tax balances.

•

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

Deferred tax is provided using the balance sheet liability method on any temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used fortaxation purposes. The amount of deferred tax provided is based on the tax rates expected to apply inthe period when the liability is settled or the asset is realised using tax rates enacted or substantively
enacted at the balance sheet date.

Deferred tax is
corporation tax whichis expected to bepayable (or receivable)in the future as a resultof differences between
the carrying amountsof assets and liabilities,
for financial reporting
purposes, and thecorresponding tax
bases used to calculate
the corporation tax
currently payable.

Deferred tax assets and liabilities are disclosed net to the extent that they relate to taxes levied by thesame authority and the BBC Group has the right of set off.

Financial instruments
The BBC Group holds various derivative and non-derivative financial instruments (including assets such as
trade investments and liabilities such as borrowings). The accounting policy for the major categories offinancial instruments is set out below.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of less than threemonths. Cash and cash equivalents also includes licence fee funds collected on behalf of HM Treasury,
which are excluded from the group’s net funds and in respect of which a separate creditor is recognized.

A derivative is anasset or liability that isdependent on, orderives its value from,another asset or
liability and is to besettled in the future.

F87

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 7 continued

Derivative financial instruments
The BBC Group does not enter into speculative derivative contracts. However some derivative financial
instruments are used to manage the BBC’s exposure to fluctuations in interest rates (interest rate swaps,
caps and collars) and foreign currency exchange rates (foreign currency forwards contracts, currency
options).
Derivative financial instruments, excluding derivatives held as qualifying hedges are initially recognised atfair value and are subsequently remeasured to fair value at the balance sheet date with movements
recorded in the income statement.
The fair value of interest rate swaps, caps and collars is the estimated amount that the BBC 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 rates
at the balance sheet date.

Put option
Equity put options held by non-controlling interest holders are recognised as financial liabilities at thepresent value of the fair value of amounts payable on their exercise. The Group continues to recognise
non-controlling interests in respect of these equity investments where the risks and rewards of ownershipare deemed to have been retained by the non-controlling interest holders.

Hedge accounting
The BBC Group designates certain derivatives as cash flow hedges by documenting the relationshipbetween the hedging instrument and the hedged item along with the risk management objectives and its
strategy for undertaking various hedge transactions. Where the hedge is deemed to have been effective,the effective portion of any changes in the fair value the derivatives that are designated in the hedge arerecognised in other comprehensive income. Any ineffective portion is recognised immediately in theincome statement.

Embedded derivatives
These derivatives are found embedded within other financial instruments or other host contracts. Once
identified they are treated as derivatives in their own right if their risks and characteristics are not closely
related to those of the host contract and the host contract is not carried at fair value.
Embedded derivatives are carried on the balance sheet at fair value from inception of the host contract.
Unrealised changes in fair value are recognised as gains/losses within the income statement during theperiod in which they arise.

Under forward
exchange contracts
you buy or sell acurrency at a fixedexchange rate withdelivery made on agiven date or dates
in the future.
Interest rate caps
protect against interest
rates rising, by setting
an upper limit (cap)on the floating interest
rate, while still allowing
the benefit of fallinginterest rates.
Interest rate
collars are the sameas interest rate caps
except that there isalso a lower limit set
to the floating interest
rate.
Interest rate swaps
effectively swap afloating rate loan into
a fixed rate loan, or
vice versa.
A put option issued
by the BBC provides
the holder the right,
but not the obligation
to require the BBC tobuy shares at a futuredate and pricedetermined by the
option agreement
Inception is the point
at which a contract isconfirmed, this isnormally the point at
which the contract issigned.
Unrealised changes
are those changes that
occur to the value ofthe embedded
derivative prior to thepoint at which thederivative is exercised

F88

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

Accounting policies relevant to section 7 continued

Impairment of financial assets
Financial assets are assessed at each balance sheet date to determine whether there is any objective
evidence of impairment. Factors considered in determining whether there is objective evidence of an
impairment include significant financial difficulty of the counterparty and breach of contract. Individuallysignificant financial assets are tested for impairment on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit risk characteristics.

An effective
interest rate is therate used to discountfuture cash flows overthe life of the contract
back to present value.

The amount of the loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows discounted at the financial asset’s original effective interest
rate. All impairment losses are recognised in the income statement.

Reserves
The operating reserve is the accumulated surplus to date.
Other reserves include the value of put options exercisable by non-controlling shareholders andavailable-for-sale reserve includes fair value gains and losses on available-for-sale financial assets.
The hedging reserve is used to record the effective portion of the cumulative net change in the fair valueof cash flow hedging instruments related to hedged transactions that have not yet occurred (net of tax).
The translation reserve is used to record exchange differences arising from the retranslation of the net
assets and results of overseas subsidiaries.

F89

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

NOTES TO THE ACCOUNTSBASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS AND OTHER ACCOUNTING POLICIESCONTINUED

New standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective.
Endorsed by the EU:
IFRS 7 (Revised)

Financial instruments: disclosure

Not yet endorsed by the EU:
IFRS 9Financial instruments

IFRS 10

Consolidated financial statements

IFRS 11

Joint arrangements

IFRS 12Disclosures of interests in other entities

IFRS 13

Fair value measurement

IAS 1 (Revised)

Financial Statement presentation

IAS 12 (Revised)

Income Taxes

IAS 19 (Revised)

Employee Benefits

IAS 27 (Revised 2011)

Separate financial statements

IAS 28 (Revised 2011)

Associates and joint ventures

IAS 32 (Revised)

Financial instruments: presentation

The BBC Group currently does not expect that the adoption of these Standards and Interpretations in future periods will have amaterial impact on the financial statements of the BBC Group, except as follows:•

IFRS 9 will impact both the measurement and disclosures of Financial instruments; and•IFRS 12 will impact the disclosure of interest the BBC Group has in other entities.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed
review has been completed.

F90

Statement of Executive Board responsibilities inrespect of the Annual Report and Accounts
The Charter requires the BBC to prepare an audited annual
report and statement of accounts .
The Trustees’ responsibilities are detailed in Part One of theAnnual Report and Accounts.
The Executive Board has accepted its responsibility for the
preparation of an operating and financial review, statementsof compliance with applicable codes and regulations (including
the Executive Board Remuneration Report) and the statementof accounts which are intended by them to give a true and fairview of the state of affairs of the BBC and its subsidiaries (the‘Group’) and of the income and expenditure for that period.
The Executive Board has prepared the accounts in accordancewith International Financial Reporting Standards (IFRSs) as
adopted by the EU. The Executive Board must not approve
the statement of accounts (or ‘financial statements’) unless it issatisfied that they give a true and fair view of the assets, liabilities
and financial position of the Group and of the surplus or deficit
for that period.
In preparing the financial statements the Executive Board has:
• Selected suitable accounting policies and applied themconsistently.
• Made judgements and estimates that are reasonable
and prudent.
• Stated whether they have been prepared in accordancewith IFRS as adopted by the EU.
• Prepared the financial statements on the going concern basis
as they believe that the BBC will continue in business.
The Executive Board is responsible for keeping properaccounting records that are sufficient to show and explain the
BBC’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and enable them toensure that the financial statements and the Executive Board
Remuneration Report comply with the Charter. It also has ageneral responsibility for taking such steps as are reasonably
open to it to safeguard the assets of the BBC and to preventand detect fraud and other irregularities.
The Executive Board is responsible for the maintenance andintegrity of the BBC’s website. Legislation in the UK governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Executive Board members who held office at the dateof approval of the Annual Report and Accounts, whose names
and functions are listed in the Governance section of Part Twoof the Annual Report and Accounts, confirm that, to the bestof each of their knowledge and belief:• The financial statements, prepared in accordance with IFRS
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and surplus of the Group; and• The operating and financial review includes a fair reviewof the development and performance of the businessand the position of the Group, together with a descriptionof the principal risks and uncertainties that it faces.

Statement of disclosure of information to auditors
The Executive Board members who held office at the dateof 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 are unaware; andeach Executive Board member has taken all the steps that theyought to have taken as an Executive Board member to makethemselves aware of any relevant audit information and toestablish that the BBC’s auditors are aware of that information.
Going concern
The directors have prepared cash flow forecasts for a period
in excess of a year from the date of approval of these financial
statements, and have reviewed these forecasts, together withthe sensitivities and mitigating factors in the context of available
funds. The directors are satisfied that the BBC is well placed
to manage the risks 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 thefinancial statements.
This statement was approved by the Executive Board.

Mark Thompson
Director-General
21 June 2012

F91

British Broadcasting Corporation
Broadcasting House
London W1A 1AA
bbc.co.uk© BBC 2012