Full financial andgovernance statements
2009/10

F01
Financial overview
F09	Independent auditor’s report
Group financial statements and Notes
F10
F79	UK Gaap Accounting Standards Reconciliation
Governance
F89

Financial statements
Governance

Financial overview“We must continually manage ourbusiness so that we meet our public
purposes, and satisfy our licence fee
payers of a job well done.”zarin Patel
Chief Financial Officer

KPIs
Efficiency• More than £550million saved since the start of ourcurrent efficiency programme in April 2008, including£316million this year.
• On target to achieve our 3% annual savings target –equivalent to nearly £2billion (£1.8billion net), to be
re-invested in content, infrastructure and services.

Gross efficiency savings £mProjected

2,000

548

2bn

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

Total

1,500

480

1,000

404
316

500

0

LICENCE FEE COLLECTION• Cost of collection and evasion maintained at 8.7% of thelicence fee for third consecutive year.
• More people are paying for their television licence online,
by direct debit and by telephone.

BBC WORLDWIDE Profit• Despite the global economic crisis, BBC Worldwide
increased its sales year-on-year by 7%, and its statutory
profit was up to a record £145million with operating
margins up from 11% to 14%.
• BBC Worldwide has returned £837million in dividends
and programme investments since 2004.

237

Licence fee collection/evasion %
07/08
08/09
09/10

8.7
8.7
8.7

BBC Worldwide statutory profit before
specific items, interest and tax £m
07/08
118
106
08/09
145*
09/10
2007/08 figures are uK gaap. other years are iFrs.
* specific items are significant items which are highlighted by virtueof their size or importance to enable a full understanding of bbc
worldwide’s performance.

F01

OUR CONTINUING FOCUS IS ON DELIVERING THE BEST POSSIBLE
VALUE FOR LICENCE FEE PAYERS. THAT’S OUR BOTTOM LINE,AND IT MEANS FOCUSING ON IMPROVING EFFICIENCY AND
GENERATING MAXIMUM RETURNS ON OUR ASSETS.
By 2013, we will have delivered efficiency savings
totalling nearly £2billion, meeting our 3% annual
savings target.

We are now two years into our five-year efficiency
programme. By 2013, the work we have already done will
generate efficiency savings of £1,453million, which is equivalent
to 73% of our total savings target. Plans are now in place todeliver a further £0.5billion.
We have succeeded in reducing licence fee evasion to just
5.2% of income, a 0.1% improvement on 2008/09. This is
despite a very tough economic environment, and slower than
expected growth in the number of new households (0.5%
growth compared to budgeted 0.8%).
Our financial statements show a surplus of £478million(2009: £244million), including an exceptional one-off benefitof £334million resulting from actions taken to reduce future
pension costs through the changes to early retirement provision.
BBC Worldwide has achieved a significant increase inprofitability this year from £106million to £145million*, bygrowing its new businesses areas. This improved performance
will benefit the BBC through increased returns to invest in
original programming. Exchange gains have helped offset the
impact of difficult economic conditions, which particularly
impacted UK businesses.
The BBC’s Strategy Review, Putting Quality First, re-enforces
our commitment to making the licence fee work harder. We
are looking ahead to ensure that we have robust financial
management, enabling us to continue to place quality andaudience value at the heart of our agenda.
The BBC has a unique funding structure, with Public Service
Broadcasting financed by the licence fee, dividends fromthe BBC’s commercial activities, and grant-in-aid funding tosupport the World Service.

We have a number of core objectives and metrics that allow us
to measure our performance and efficiency. These are more
important indicators for us than profitability and growth targets.
Like most other public sector organisations, the BBC has
adopted IFRS for the first time in 2009/10. While this does
not impact our cash flows or underlying performance,
the adoption of IFRS changes the way we recognise andmeasure some of our property leases and long-term,
outsourced service contracts. Our financial statements
include a reconciliation between IFRS and UK GAAP.
EFFICIENCY• Maximising our income by collecting the licence fee
as efficiently as we can
Our income is affected by the number of new households,
the level of licence fee evasion, and by the level of the licence
fee itself. Gross income is up £85million or 2% this year,
reflecting the increased value of the licence fee (£76million)
and household growth (£9million). The number of newhouseholds was lower than anticipated due to the recession,
with growth of just 0.5%, compared to a budget of 0.8%.
We have been able to mitigate the contraction in household
growth by holding down our costs, maintaining the total costof collection and evasion at 8.7%. The total cost has reduced
by 40% in relative terms, from 14.4% in 2000, to just 8.7%
in 2010.

F02

Financial statements
Financial overview continued

The current economic environment is tough for everybody.
In these difficult circumstances, we have tried to make iteasier for people to pay their licence fee. Collection is more
flexible now than ever before, and is supported by a new,more customer-friendly website, and active communication
programmes like the ‘push a little button’ campaign to raise
public awareness. This has helped reduce evasion to 5.2%,
whilst the level of complaints has fallen slightly from 0.14%
to 0.12% of television licences.
The launch of the new website means that every licence fee
payer can now see their licence online, as well as pay for theirlicence and change their details. As a result, the number ofself-serve transactions has increased again this year from 35%
to 44%. The level of direct debit payments has also increased
again, to 68%.

• Making the BBC as efficient as possible, and providing
good value for money
We have now completed the first two years of our fiveyear efficiency programme, delivering cumulative savings of£553million so far, with one-off costs of £85million. By 2013,
the work we have already done will ultimately generate
efficiency savings of £1,453million, equivalent to 73% of our
total target. Over the next three years, we will implement
further initiatives, which will generate an additional £0.5billionof savings so that by 2013, we will deliver total cumulative
efficiency savings of nearly £2billion (£1.8billion net).
This is a significant achievement given the internal and external
challenges we have faced, including a subdued commercial
property market, which has meant we have had to adapt
our efficiency plans to respond.

Table 1

Continuous Improvement programme – efficiency savings by category% of totalsavings

Savings category

People13%

We have reduced the number of people in the organisation, focusing staff on
editorial priorities that audiences really value. We have also committed to reduce
our spending on top talent and on senior managers. For the fourth consecutive
year, our paybill has increased by less than inflation.

Production and process
improvement29%

We are making the most of new technology to improve our programmes, cut
our costs, and improve the skills of our people. New approaches have helped
us become more efficient in everything we do, from scheduling to shooting. For
example, our Multimedia Newsroom has helped us deliver output more efficiently
across TV, radio and online.

Procurement and contracts

23%

We are freeing up funds for production, making savings from bulk buying,outsourcing, and renegotiating contracts. We have renegotiated contracts to deliver
savings without damaging quality, including our major transmission contracts, andsubtitling and sign language services.

Property and technology

7%

Major projects like the Digital Media Initiative are helping us transform the way wework. For example, our move to tapeless digital production allows us to create
content more efficiently than ever before. We will see increased savings as we
realise the full benefits of our property and technology modernisation programme.

Focusing on content quality

28%

We are shifting our focus to the kind of output that our audiences really appreciate.
We have spent less on programmes that deliver lower value, and directed money
towards programmes that deliver the highest quality and maximum audience
impact, such as A History of the World in 100 Objects and The Seven Ages of Britain.

Chart 1

Income £m

UK GAAP 07/08
IFRS 08/09
IFRS 09/10
Licence fee

4,415
4,661
4,790
Other

Income• Licence fee income has grown £85million as a result of the£3 increase per licence, lower evasion rates and an increasein the number of licences issued.
• It is now clear that the overall costs of digital switchover willbe less than anticipated and the BBC will repay £132millionof underspend to the Government.
• Adjusting for this repayment, licence fee income, overall, showsa decline, as the underspend is not recognised as income.
• Other Income is up £177million to £1,344million, due primarily
to BBC Worldwide growth.

F03

We have been running pan-BBC efficiency programmes since
2000, and this is now an integral part of the way we run thebusiness. Our current Continuous Improvement programme
is looking at a number of new ways of saving money. These
include adapting the way we make programmes, making
greater use of new technology, and changing the way we work
as an organisation. The latter requires behavioural changes,
which are by nature more complex, but which will deliver
sustainable, long-term financial and creative benefits.
The new BBC Scotland headquarters in Pacific Quay is a good
example. It’s a more efficient building, which is cheaper to run,but it has also allowed us to pioneer technological advances liketapeless production, and reduced the number of people weneed, as they can now work across TV, radio, and online.
These changes in workflow and technology will help BBC
Scotland deliver efficiencies of approximately 30% over five
years. Most importantly, these efficiencies are sustainable, anddemonstrate the difference that a more effective working
environment can make to a creative organisation. We werealso able to take a more innovative approach to the fundingof the building, which avoided a large capital outlay upfront
and reduced risks associated with construction and technicalfit-out.
Pacific Quay is an example of efficiency and innovation on a
grand scale, but smaller scale changes are just as important,from better utilisation of our production facilities, to more
efficient production schedules. Every efficiency saving allows
us to invest more in the quality of our content. Examples thisyear include increasing our investment in HD and spending£25.5million more in Children’s programming by 2013.
MAXIMISING THE IMPACT OF THE LICENCE FEE• Maximising the returns we make on programmes paid
for by the licence fee
Our main commercial subsidiary, BBC Worldwide, wascreated to generate the maximum return on programmes
paid for by licence fee payers. To achieve this, it sells BBC
programmes, formats, and merchandise across the world.
BBC Worldwide has had a challenging but successful year,with revenues (including intra-group transactions and share
Chart 2

Operating expenditure £m

UK GAAP 07/08
IFRS 08/09
IFRS 09/10
Public Services Broadcasting Content
Public Services Broadcasting Other

4,477
4,510
4,268
Infrastructure and support
Otherof joint venture income) up by 7% to £1,074million, andstatutory profit before specific items, interest and tax also
increasing by 36% to £145million this year. Operating margins
are up from 11% to 14%.
This performance has allowed BBC Worldwide to provide
significant returns to the BBC, including £78million invested
in BBC programmes, and £32million returned to the BBC
through dividends. BBC Worldwide has also declared afurther dividend for 2009/10, which will take total dividends
to £74million, a year-on-year increase of £5million. Since
2004, this means that BBC Worldwide has now returned£837million to the BBC in dividends and investment in
BBC programmes.
BBC Worldwide achieved revenue growth throughgeographical expansion, including channel launches inAustralasia, Africa, Scandinavia, and Latin America; focusing
on leading brands like Lonely Planet and Top Gear; andmaximising sales from its production investments, including
Dancing with the Stars, the international version of the BBC’s
Strictly Come Dancing. Improved performance in the DigitalMedia business, and other cost cutting measures have helped
increase profitability. During the year, BBC Worldwide took
full ownership of 2entertain (the DVD operation formerly
40%-owned by Woolworths Group plc) for £17million,
thereby securing distribution of BBC and other quality
UK content.
Whilst the effect of the UK economic downturn was mostacutely felt in advertising and retail based businesses, BBC
Worldwide’s overseas operations benefited from theweakness of Sterling. This generated exchange gains, which
helped offset difficult trading conditions. However, theweakness of Sterling against the Australian Dollar has required
BBC Worldwide to reduce the carrying value of Lonely
Planet, its travel information business, despite strong operating
performance. If the exchange rates at 28 February 2010,
when the impairment testing was performed, had remained
consistent with those at 31 March 2009, the recoverable value
would have exceeded the carrying value and no impairment
charge would have been recorded.
Operating expenditure• The BBC’s Continuous Improvement programme has
been effective in delivering cumulative efficiency savings of£316million in the year, and £553million to date.
• UK PSB content spend is regulated by the BBC Trust throughservice licences.
• Two service licence budgets (2009: two) were outside the
10% tolerance this year (BBC Radio 3 and BBC HD).

F04

Financial statements
Financial overview continued

BBC Worldwide will continue to focus on international
activities, brands and online operations, so that it can continue
providing value to the BBC and licence fee payers.
BBC World News also suffered a fall in advertising sales, partly
offset by increased subscription income from cable and satellite
providers, with total revenue dropping just 2% to £62.9million(including intra-group income). Trading losses were more thanoffset by foreign exchange gains, resulting in statutory PBIT of£3.6million. World News achieved record revenues in March
2010, and has recently implemented cost-cutting measures toreverse trading losses.
BBC Studios and Post Production has also been affectedby the current downturn, and a rise in the number of
productions moving out of London. Despite this, the businesshas delivered revenues of £59.8million (including intra-group
income) and a statutory operating profit before restructuringof £0.4million, mainly as a result of tighter cost control.
• Spreading the benefit of the licence fee across thewhole of the UK
The BBC is for all licence fee payers, across absolutely every
corner of the UK, and we are committed to growing thewhole country’s creative industries and production talent.
That is why one of our key metrics is the proportion of money
we spend on network television outside of London. 50% of
our network television programming will be made outside
London by 2016, and the Nations will account for 12% of
our network spend by 2012, and 16% by 2016.
We are already on target to achieve this: as we reported
to Ofcom this year, total network television spend outside
London for the calendar year 2009 was 38% of our eligible
spend, up from 35% in 2008.
The increase was greatest in Scotland, where we increased thepercentage of eligible network output from 3.7% to 6.1% in2009, partly through landmark commissions, such as the Thisis Scotland season. A number of programme strands moved
from London during 2009/10, including The Review Show
(formerly Newsnight Review) to Glasgow.

Chart 3

Cash flows and net debt £m
300
200
100
0
-100
-200

07/08

08/09

09/10

Net debt for DCMS borrowing limit

Cash

In Northern Ireland, we doubled the level of programmes
commissioned to 1.2% of eligible network output, with titles
such as the multi-award-winning Five Minutes of Heaven on
BBC Two.
In Wales, we increased the proportion of eligible network
television commissioned from 3.5% to 4.4%. With the openingof our new Drama Village in Cardiff Bay, this trend is set tocontinue. Casualty is one of the major shows set to move
to Drama Village in 2011.
These are just a part of our clear long-term commitment to
spread the BBC’s investment in content more widely acrossthe whole country. With production areas like Children’s andSport moving to Salford from 2011/12, this will be the biggest
shift we have ever seen in the geographical presence of theBBC. As part of our move to Salford, BBC Radio 5 live will
relocate from London to its new home in the North. This isa key part of our commitment to increase the proportionof network radio commissioned outside of London to 38%
from 2012.
According to an independent study of our economic impact
by Deloitte, BBC activity now supports around 7,000 jobs
in Glasgow, Cardiff and Bristol. This generates around£200million of economic value every year.
• Ensuring the licence fee supports the wider
creative economy
The economic impact study has also endorsed the BBC’s
important role as an investor in the UK’s creative economy.
It shows that for every £1 of licence fee spent, we generate£2 of value to licence fee payers. Our Strategy Review
includes a commitment to maintaining this level of impact.
We invest significant sums every year in independent
production companies, artists and contributors, as well as
external facilities and buying programmes. The fact that we dothis is a particularly important stabilising factor in tough times,
when investment by the commercial sector is under pressure.
This has certainly been the case in the last 18 months, andduring that time we have maintained our own levels of spend.
In the last year we invested £1.1billion in the UK creative
economy, and commissioned 40% of our television content
Managing our resources• UK PSB borrowings are limited by the DCMS, but these limits
exclude certain property leases. After adjusting net debt to exclude
these leases, PSB continues to operate well within the DCMS
borrowing limit for debt.
• UK PSB had net funds of £168million (2009: £46million) available
for use at the year end, of which £132million is repayable under
the DSHS.
• The BBC, as a whole, has £575million of available borrowings
under its current banking facilities.
• The BBC’s cash position has increased from £124million in 2009to £264million in 2010, of which £132million is due for repayment.
Net debt has improved by £173million to £3million.

F05

from independents. This is up from 37% the year before.
We also commissioned 14% of our eligible network radio
content from independents, an increase of 0.5%. External
suppliers received 26% of eligible BBC Online spend, slightly
exceeding its 25% target.
The amount we spend on the indie sector is only one
aspect of our support for the UK creative economy. The
other important one is partnerships. Since the launch of ourpartnerships programme in 2008, we have been working in
partnership with ITV, Channel 4, five and commercial radio
to support UK public service broadcasting and the wider UK
media sector.
Financial strategy and risk
The BBC is focused first and foremost on delivering great
programmes for the whole of the UK. We structure ourbusiness to deliver maximum value from the licence fee, forexample through our Continuous Improvement efficiency
programme. We are also driving more of the licence fee into
programmes by minimising overhead and support costs.
One way we do this is by outsourcing some support services
to expert providers, and minimising how much of the licence
fee is spent on these activities.
We structure our supply deals in different ways, according to
the competitive environment. In some markets, this means wehave shorter-term deals, with contracts put out to tender every
three to four years. In other cases we can achieve better value
through longer-term deals, where partnership, shared savings,
and new ways of working can deliver the greatest value.
Taking this approach means we can minimise the risk to thelicence fee payer, and guarantee an efficient and effective
service. The savings we make can then be invested in quality
content. Across our largest contracts, we have saved morethan £350million.

Chart 4

Net assets/(liabilities) £m
1600
1200
800
400
0
-400
-800

07/08

08/09

09/10

Adoption of IFRSThe BBC has prepared its financial statements using
International Financial Reporting Standards (IFRS) for the firsttime in 2009/10. This is consistent with the adoption of IFRS
in the wider public sector, and for Whole of Government
Accounts (WGA). 1 April 2008 is the transition date for our
first IFRS balance sheet.
As reported in previous Annual Reports, the mostsignificant impact of adoption relates to the recognition andmeasurement of leases under IFRS. Certain property leases
are now treated as finance leases rather than operatingleases, resulting in significantly higher assets and lease liabilities
being recognised on the balance sheet. However, the net
asset impact of this is only £159million. In addition, changes todisclosure requirements relating to operating leases and othercommitments have changed how we show these very longterm commitments.
These leasing and contractual commitments are not new.
They result from the way we manage our business. We havechosen to outsource a number of services that are not core
to programming or content making, including for example,
transmission services. This strategy has allowed the BBC tofocus on core delivery, improve value for money, and reducerisk. Our property strategy has allowed us to release the valueof our assets, through sale and leaseback, giving us the up front
cash to invest in programmes and services.
Many of these contracts are very long-term in nature. This
allows us to secure a better price, and gives us and ourcontractual partners certainty, subject to performance criteria.
As a result, on an annual basis, we have capital commitmentsof only £116million, which represents less than 2.5% of
total income, and variable contract commitments totalling£557million per annum.
It is important to note that the finance lease obligations
recognised on the balance sheet as a result of the adoption of
IFRS are excluded from the DCMS definition of borrowings
and therefore do not impact our borrowing limits.
Note 27 in the extended outline financial statements gives
more detail on the impact of adopting IFRS.
Net assets/(liabilities)• The financial statements show the BBC has net liabilities. In fact,
the BBC has net assets of £1.1billion, excluding the pension
scheme deficit of £1.6billion. The deficit represents a longterm liability.
• In aiming to deliver value for money the BBC has outsourced
a number of services, including transmission services.
• The BBC’s on balance sheet commitments, extend over a long
period. Only £116million of the BBC’s commitments are duein the next year (less than 2.5% of annual income).
• Licence fee income, under the Charter, is guaranteed until
2013, and we expect it to be extended thereafter. As such,the BBC has substantial financial flexibility to meet its future
obligations, whilst continuing to focus on delivering against the
public purposes.
F06

Financial statements
Financial overview continued

Other current and future challenges
Pension obligations
Our 2008/09 Annual Report set out the need to continuallyreview our approach to pension provision, recognising that it
must remain affordable in the long-term.
Over the last 12 months, a combination of market uncertainty,
increased life expectancy, lower interest rates and anticipatedinflation rises have driven the accounting valuation of the BBC
Pension Scheme from a deficit of £0.1billion to a deficit of£1.6billion at 31 March 2010.
In order to value the pension, future pension payments(liabilities) are discounted back to today’s money using current
market interest yields on highly-rated corporate bonds. This
yield fell from 7.2% in 2009 to 5.5% in 2010, increasing pension
liabilities by £2.2billion. In addition, the inflation rate used
to determine the amount by which pensions grow each year
has increased from 2.9% in 2009 to 3.7% in 2010, which also
increases the value of pension liabilities by £0.9billion.
The value placed on the future pension payments is very
sensitive to the yield on corporate bonds and the assumed
inflation rate. For example, if the yield on corporate bonds had
been around 6.8% in 2010, the liabilities would have reduced
to a level that would have removed the deficit.
The increase in value of liabilities has cancelled out therecovery in the value of the Scheme’s assets and led to the£1.5billion increase in the deficit.
The accounting valuation is only a snapshot at a point in timeand is therefore impacted by relatively short-term market
fluctuations. In the long-term, the Scheme remains healthy, inthat it currently earns more from pension contributions andinvestment income than it pays out in pensions.

The BBC Pension Scheme is subject to a formal actuarial
valuation every three years, which is used to determine
the employer’s contributions. A formal valuation is being
undertaken as at 1 April 2010, and whilst the results will not
be known for some time, our estimate is for a deficit ofaround £1.5billion.
We began a programme of significant reform of our Scheme
in 2006, with the aim of containing costs and risks. The final
salary section of the Scheme was closed to new joiners, anda lower cost defined benefit, career-average section was
introduced. Employee contributions to the final salary sectionof the Scheme have been increasing steadily over recent years,
and rose to 7.5% from April 2010. The early payment terms
for the final salary section were also reviewed and amended
to reduce costs, giving an exceptional one-off increase inincome of £334million. Taken together, these changes havehelped make the Scheme more affordable for the BBC overthe long-term.
That said, we have a duty to safeguard the long-term health of
the Scheme. We have both a current deficit that needs to be
reduced and a longer term need to improve affordability of
the Scheme, which has been adversely affected by increasing
life expectancy and increased market volatility. Without
further reform, we predict that pension costs may continue
to rise, as people live longer and markets remain unstable.
We believe that it would be inappropriate to divert a higher
proportion of the licence fee to offset further pension cost
increases. Doing so would provide no guarantee that a similar
deficit would not occur in the future, and our income is notguaranteed in the longer-term, so it would be inappropriate
to take such a risk.
We have therefore announced a package of changes tothe benefits paid by the Scheme, with the aim of further
reducing risk and cost to the BBC. The changes are subject
to consultation, but we plan to include:

Chart 5

Movement in pension scheme deficit in the year £m
0
-500

(139)
Opening
net deficit

302

-1000

1,806

-1500

Gain
of assets

-2000

214
Contributions

Past service
income(558)
Interest and current
service cost

(1,641)
Closing
net deficit

-2500
-3000
-3500

(3,266)
Change inassumptions

F07• all sections of the defined benefit scheme will be closed to
new joiners and they will be offered membership of a new,defined contribution arrangement, where the BBC will
match employee contributions.
• current members of the Scheme will be offered a choiceof remaining within the Scheme, or joining the new defined
contribution arrangement. For members wishing to remain
within the Scheme, future salary increases for calculating
pension benefits will be capped at 1% per annum including
promotion increases.
Over the coming year, we will work closely with our staff,
the Trustees of the Scheme and trade unions to agree andimplement these reforms, which are needed to deliver
an affordable solution and safeguard the long-term healthof the Scheme for current and former employees.
Other matters
Treasury policies
Our Treasury function manages the BBC’s financial risk, andensures that we can meet our obligations when they fall due,and remain within our borrowing limits and covenants.
The majority of the BBC’s activities are funded from thelicence fee, and, as a result, our borrowing facilities are
relatively low in comparison to our total annual cash outflow(£200million for Public Service Broadcasting, and £350million
for the commercial businesses). These facilities were put inplace in 2007/08 to ensure we are fully funded to 2012/13.
The facilities are with a select group of counterparties, withstrong credit ratings. They can be used to finance majortransactions, but other financing routes can also be utilised
where appropriate. For example, the properties at the BBC
North base in Salford are being leased.
One of the other financial risks we need to consider is
exposure to fluctuations in exchange rates. We have arelatively low number of foreign currency transactions, but
we still seek to reduce or eliminate the risk of volatility bytaking out forward currency contracts. These effectively fix
the sterling price of these transactions.

Chart 5 continued

The movement on the deficit on the BBC’s defined benefit pension
scheme results from:• Changes in the assumptions used to calculate the pension liability:
The discount rate, based on AA corporate bond yields, has
fallen from 7.2% to 5.5%, increasing the deficit by £2.2billion.
In addition, the inflation rate applied to expected future pension
payments has increased from 3% to 3.7%, adding £0.9billion to
the deficit.
• Gain on assets: A benefit of £1.8billion overall due to plan assets
achieving higher returns than expected as world equity markets
recover year-on-year.

Critical accounting policies
Critical accounting policies are those areas where the greatest
judgement needs to be exercised. For the BBC these include:• Pension scheme assumptions – although the assumptions
for financial reporting are market based, there are still
important decisions to be made in determining how the
BBC Pension Scheme’s liabilities compare to market indices.
A small change in assumptions can have a significant impact
on the valuation of the liabilities. The discount rate used forvaluations is a good example.
• Provisions – considerable judgement is required inaccounting for provisions, including determining how likely
it is that expenditure will be required by the BBC, andcalculating a best estimate. This can be very complex,
especially when there is a wide range of possible outcomes.
• Leases and managed services – we have to determine
whether a lease or arrangement has effectively transferred
the rights and obligations associated with the assets to theBBC. Given that finance leases are recognised as liabilities,
and operating leases are not, this can have a significant effecton the reported financial position of the BBC. However,under IFRS the full value of operating lease payments is
also disclosed.
• Impairment – sometimes an asset or investment may bedeemed to be impaired, because the benefits to be generated
from it are less than its cost. This requires an estimation of the
cash flows that will be realised in the future, and judgement isrequired in modelling possible outcomes.

Zarin Patel
Chief Financial Officer
16 June 2010

• Past service income: an amendment to the early retirement
arrangements results in a £334million reduction in past
service cost (net £302million).
• Contributions: payments made into the scheme by employees
and the BBC.
• Interest and current service cost: Includes a year’s interest charge
on the full pension liability of £463million and the current service
cost of £128million, being the cost of pension rights earned by
employees in the year.

F08

Independent auditor’s report to the trusteesof the British Broadcasting corporation (BBC)We have audited the group financial statements (the ‘financial
statements’) of the BBC for the year ended 31 March 2010, which
comprise the Consolidated Income Statement, the Consolidated
Balance Sheet, the Consolidated Cash Flow Statement, theConsolidated Statement of Comprehensive Loss, the Consolidated
Statement of Changes in Equity and the related notes. These
financial statements have been prepared under the accounting
policies set out therein.
In addition to our audit of the financial statements, the Trustees
have engaged us to audit the information in the Trustees’
and Executive Board Remuneration Reports (together “theRemuneration Reports”) that is described as having been audited
and which the Trustees have decided to prepare (in addition to that
required to be prepared) as if the BBC were a quoted company
and hence required to comply with Schedule 8 to the Companies
Act 2006 The Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 (SI 2008 No. 410).
This report is made solely to the BBC’s Trustees as a body and, inrespect of the separate opinion in relation to the Remuneration
Reports and reporting on corporate governance, on terms thathave been agreed. Our audit work has been undertaken so that wemight state to the BBC’s Trustees those matters we are required tostate to them in an auditor’s report and, in respect of the separate
opinion in relation to the Remuneration Reports and reporting on
corporate governance, those matters that we have agreed to state
to them in our report, and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the BBC and the BBC’s Trustees as a body, for
our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Trustees, Executive
Board and Auditors
The Trustees’ and Executive Board’s responsibilities for preparing
the Annual Report, the Remuneration Reports and the financial
statements in accordance with applicable law and IFRS as adopted
by the EU are set out in the Statement of Executive Board
Responsibilities.
Our responsibility, in accordance with the terms of our appointment,
is to audit the financial statements in accordance with relevant legal
and regulatory requirements and International Standards on Auditing(UK and Ireland) and to audit the parts of the Remuneration
Reports that are described as having been audited.
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the parts of theRemuneration Reports to be audited have been properly preparedin accordance with the Companies Act. We also report to you if,
in our opinion, the BBC has not kept proper accounting records,
if we have not received all the information and explanations werequire for our audit, or if information specified by law regarding
Trustees and Executive Board remuneration and other transactions
is not disclosed.
In addition to our audit of the financial statements, the Trustees
have engaged us to review the Corporate Governance Statement
as if the BBC were required to comply with the Listing Rules of the
Financial Services Authority in relation to these matters. We review
whether the Corporate Governance Statement reflects the BBC’s
compliance with the nine provisions of the June 2008 Combined
Code specified for our review by those rules, and we report if it
does not. We are not required to consider whether the Trustees’
statements on internal control cover all risks and controls, or form

an opinion on the effectiveness of the BBC’s corporate governanceprocedures or its risk and control procedures.
We read specified parts of the Annual Report and Accounts,
and consider whether it is consistent with the audited financial
statements. This includes the Chairman’s Foreword and theTrustees’ performance review in Part One of the Annual
Report and Accounts, the Director-General’s Foreword, theExecutive Board’s performance review and financial overview,
the Corporate Governance Statement and the unaudited partsof the Remuneration Reports in Part Two of the Annual Reportand Accounts. We consider the implications for our report if
we become aware of any apparent misstatements or materialinconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevantto the amounts and disclosures in the financial statements and theparts of the Remuneration Reports to be audited. It also includes anassessment of the significant estimates and judgements made by the
Executive Board in the preparation of the financial statements, andof whether the accounting policies are appropriate to the Group’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the financial statements and the parts of theRemuneration Reports to be audited are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall adequacyof the presentation of information in the financial statements andthe parts of the Remuneration Reports to be audited.
OpinionIn our opinion:• the financial statements give a true and fair view in accordancewith IFRSs as adopted by the EU of the state of the Group’s affairs
at 31 March 2010 and of its surplus for the year then ended;• the parts of the Remuneration Reports which we were engaged
to audit have been properly prepared in accordance with
Schedule 8 of the Companies Act 2006, as if those requirements
were to apply to the BBC;• the information given in the Chairman’s Foreword and theTrustees’ performance review in Part One of the Annual
Report and Accounts, the Director-General’s Foreword, theExecutive Board’s performance review and financial overview,
the Corporate Governance Statement and the unaudited partsof the Remuneration Reports in Part Two of the Annual Reportand Accounts is consistent with the group financial statements.

Scott Cormack (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants, 8 Salisbury Square, London EC4Y 8BB
16 June 2010
F09

GROUP FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 2010
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/(loss) 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 (cost)/income
Surplus before taxation
Taxation
Surplus for the year

1a
1a
1a
4b
4c
3
5
6
11
7
7
7
8

Attributable to:BBC
Minority interests
Surplus for the year

2010
£m

2009
£m

3,446.8
1,343.6
4,790.4(4,540.5)
334.1(61.9)(4,268.3)
522.1
2.0
39.0
36.9
445.8
(533.5)(87.7)
512.3(34.7)
477.6

3,494.4
1,166.4
4,660.8(4,469.6)–(40.3)(4,509.9)
150.9
(2.9)
15.9
29.8
633.9
(576.3)
57.6
251.3
(7.5)
243.8

473.3
4.3
477.6

242.7
1.1
243.8

The surplus for the financial year is the amount found by deducting all items of expenditure recognised in the year from all
income receivable for the year. For the BBC group, as a public benefit entity, any surplus arising does not represent a ‘profit’
that can be returned to an entity’s funders, but a timing difference relating to past or future expenditure.

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSSFOR THE YEAR ENDED 31 MARCH 2010
Note

Group surplus for the year
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations
Cash flow hedges
Tax on items taken directly to equity
Actuarial loss on defined benefit pension schemes
Recognition of share of joint venture liabilities
Other comprehensive loss net of tax
Total comprehensive loss for the year
Attributable to:BBC
Minority interests
Total comprehensive loss for the year

23b
11

2010
£m

2009
£m

477.6

243.8

5.0
1.0
(0.3)
(1,871.4)–(1,865.7)(1,388.1)

23.3––(784.2)(19.4)(780.3)(536.5)(1,393.5)
5.4(1,388.1)(537.3)0.8(536.5)The effects of the changes in accounting policy that have been implemented as part of the adoption of IFRS are disclosed in
Note 27.
F10

GROUP FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETNote

31 March
2010£m

31 March2009£m

1 April2008*£m

Non-current assets
Intangible assets (including goodwill)
Property, plant and equipment
Interests in associates and joint ventures
Other receivables
Available for sale investments
Derivative financial instruments
Deferred tax asset
Pension asset

9
10
11
15a
12
24c
8d
23bi

290.0
1,157.1
57.8
25.7
–
6.7
21.5
–
1,558.8

255.9
1,188.2
83.7
430.9
–
12.2
27.1
–
1,998.0

219.4
1,211.9
71.3
399.4
2.7
2.6
15.3
528.4
2,451.0

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

14
15b
13
24c
2e

682.3
1,253.8
30.0
11.9
263.9
2,241.9

615.5
747.7
0.6
10.9
124.3
1,499.0

633.0
695.9
19.7
2.6
78.0
1,429.2

16a
17a
18
13
24c

(1,504.6)(7.4)(59.3)(8.4)(8.9)(12.8)(1,601.4)(877.4)(14.2)(87.0)–(22.5)(15.1)(1,016.2)(964.7)(66.9)(112.4)(5.1)(2.3)(12.7)(1,164.1)

16b
17b
18
24c
8d
23bi

(175.1)(814.6)(75.1)(13.3)(6.3)(1,647.1)(2,731.5)(532.2)(513.1)(877.5)(63.5)(21.8)(9.3)(143.3)(1,628.5)
852.3(514.7)(750.0)(40.6)(0.6)(16.0)(5.1)(1,327.0)
1,389.1(547.6)(36.3)
0.5
35.6(547.8)15.6(532.2)850.0(32.3)
–
23.6
841.3
11.0
852.3

1,409.1(31.0)––
1,378.1
11.0
1,389.1

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 liability
Net (liabilities)/assets
Attributable to the BBC:Operating reserve
Other reserve
Hedging reserve
Translation reserve
Minority interests
Total capital and reserves*

Date of IFRS transition.

The financial statements were approved by the Executive Board on 16 June 2010 and signed on its behalf by:

Mark Thompson Director-General

Zarin Patel Chief Financial Officer
F11

GROUP FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2010

At 1 April 2008
Total comprehensive (loss)/income
for the year
Recognised on acquisition of UK.TV
Dividends paid
Foreign exchange movement
At 31 March 2009
Total comprehensive (loss)/income
for the year
Adjustment on acquisition of
2entertain
Dividends paid
Adjustment in respect of put option
Transfer of foreign exchange
movement on put option
At 31 March 2010
Represented by:General Group reserves
BBC World Service and BBC
Monitoring reserves

Operatingreserve£m

Otherreserve£m

Hedging
reserve£m

Translation
reserve
£m

Total
£m

Minority
interests£m

Total
equity£m

1,409.1(31.0)––

1,378.1

11.0

1,389.1(560.9)
0.5
–
1.3
850.0

–
–
–
(1.3)
(32.3)

–
–
–
–
–

23.6
–
–
–
23.6

(537.3)
0.5
–
–
841.3

0.8
–
(0.8)
–
11.0

(536.5)
0.5
(0.8)
–
852.3

(1,398.1)

–

0.5

4.1

(1,393.5)

5.4(1,388.1)

0.5
–
–

–
–
3.9

–
–
–

–
–
–

0.5
–
3.9

–
(0.8)
–

0.5
(0.8)
3.9

–
(547.6)(7.9)(36.3)

–
0.5

7.9
35.6

–
(547.8)–15.6–(532.2)(712.2)(36.3)

0.5

35.6(712.4)

15.6(696.8)

164.6

–

–

–

164.6

–

164.6

UK Public Service Broadcasting, 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 and are restricted foruse solely on BBC World Service or BBC Monitoring activities.

F12

GROUP FINANCIAL STATEMENTSCONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2010
Note

Operating activities
Cash generated from operating activities*
Tax paid
Net cash from operating activities
Investing activities
Interest received
Dividends received from associates and joint ventures
Dividends paid to minority interests
Proceeds from sale of operations
Paid on termination of operations
Proceeds from disposal of property, plant and equipment
Acquisition of subsidiary net of cash acquired with subsidiary
Acquisition of interests in associates and joint ventures
Drawdown of loan to joint venture
Purchases of other intangible assets
Purchases of property, plant and equipment
Net cash used in investing activities
Financing activities
Interest paid
Proceeds from increase in borrowings
Repayments of borrowings
Payments of obligations under finance leases
Net cash used in financing activities
Net 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
Cash classified as held for sale
Cash and cash equivalents at the end of the year
*

21

5

10

2e

2e

2010
£m

2009
£m

474.9
(33.7)
441.2

249.9(23.1)
226.8

2.4
10.7
(0.8)
2.0
–
44.3
20.0
(0.7)
1.3
(100.8)(125.2)(146.8)

7.7
37.0
(0.8)
15.1
(0.9)
20.5
(13.2)(15.8)(0.4)(100.8)(147.5)(199.1)(14.3)
101.0(174.1)(57.4)(144.8)
149.6
124.3
(1.7)
(8.3)
263.9

(15.3)
223.1(144.4)(49.1)
14.3
42.0
78.0
4.3
–
124.3

See Note 21 for reconciliation of operating surplus to cash generated from operating activities.

F13

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
THE BBCThe BBC is incorporated in the United Kingdom under Royal Charter (the Charter).

STATEMENT OF ACCOUNTING POLICIESThis section explains the BBC’s main accounting policies, which have been applied consistently throughout
the year and in the preceding year.

BASIS OF PREPARATION
These consolidated financial statements for the BBC Group (the Group) have been prepared in accordancewith International Financial Reporting Standards issued by the International Accounting Standards Board(IASB) and interpretations issued by the International Financial Reporting Interpretations Committee of the
IASB as adopted by the EU (IFRS).
The financial statements are principally prepared on the historical cost basis. Areas where other bases areapplied are identified in the accounting policies below.
Where items are sufficiently significant by virtue of their size or nature, they are disclosed separately in thefinancial statements in order to aid the reader’s understanding of the Group’s financial performance.

ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDSFirst-time adoption of IFRSThe BBC has adopted
These are the Group’s first consolidated financial statements to be prepared under IFRS and the disclosuresrequired by IFRS 1 First-time adoption of International Financial Reporting Standards concerning the transition from IFRS for the first time.
It has therefore
UK GAAP to IFRS are given in Note 27.

IFRS 1 sets out the requirements for the first time adoption of IFRS. The Group is required to establish its
IFRS accounting policies for the year ended 31 March 2010 and, generally, apply those policies consistently inthe opening IFRS balance sheet as at 1 April 2008 (the date of transition) and thereafter, subject to a numberof optional exemptions permitted by IFRS 1.

restated all historicfinancial information as
if it had always applied
IFRS.

The Group has adopted the following approach to the key exemptions:•

Business combinations: the Group has chosen to apply IFRS 3 Business combinations (as issued in March
2004), and related standards, to business combinations that occurred after 1 April 2007; business combinations
occurring prior to this date have not been restated.

•

Fair value or revaluation as deemed cost: the Group has chosen to use the revalued amount less depreciation
for items of plant and equipment held by BBC World Service and BBC Monitoring as their deemed cost on
transition to IFRS. All other items of property, plant and equipment continue to be measured on the historicalcost basis.

•

Cumulative translation differences: only those translation differences arising since 1 April 2008 are presented asa separate component of reserves.

•

Leases: the Group has applied IFRIC 4 Determining whether an Arrangement contains a Lease from 1 April
2008 and therefore determined whether or not an arrangement contains a lease on the basis of facts andcircumstances existing at that date.

F14

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
Going Concern
The financial statements are prepared on a going concern basis, notwithstanding net liabilities of £532million
as at 31 March 2010. The directors believe this to be appropriate for the following reasons.
The net liability position results entirely from the recognition of an additional £1.5billion deficit on the BBC
pension scheme. The accounting valuation of the scheme as at 31 March 2010 showed a deficit of £1.6billion(31 March 2009: £0.1billion) primarily driven by a change to the discount rate, which is used to discount backthe future pension liability. The discount rate is determined by reference to market yields at the balance sheet
date on AA rated corporate bonds, which as a result of current market conditions, have fallen substantially.

The directors are
required to make astatement that the
BBC is a going
concern whichmeans it can meet its
debts for a period of
12 months from thedate of signing.

The triennial valuation as at 31 March 2010 is currently underway and it is not until this valuation is finalised
and agreement is reached with the pension fund trustees that definitive levels of future funding will be
determined.
The directors have prepared cash flow forecasts for a period in excess of a year from the date of approval ofthese financial statements. In the directors’ judgement, the key factors in these forecasts are: the continuity of
the Charter and licence fee (the quantum of which has been agreed until 2013), the anticipated results of thetriennial actuarial valuation of the BBC pension scheme and resultant negotiations with the pension scheme
Trustees impacting the level of future funding and the planned cost savings under the ‘Continuous
Improvement’ programme being realised.
The Charter and licence fee give the Group a guaranteed source of income, however, the timing of cash
flows is an important factor in the consideration of going concern, given the relatively small borrowing
restrictions imposed by the Department of Culture, Media and Sport (DCMS) on both UK Public Sector
Broadcasting (£200million) and the commercial operations of the BBC (£350million).
The group has funding available: including a £200million Sterling revolving credit facility which is in place until
June 2013 and which is currently unutilised, and a £350million multicurrency revolving credit facility available
to the BBC commercial operations, of which £161million was drawn down at 31 March 2010.
The directors of the Group have reviewed these forecasts taking all above factors into consideration, together
with the sensitivities and mitigating factors in the context of available funds and the pension deficit and expect
the 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 preparation of these
the annual financial statements.

BASIS OF CONSOLIDATIONThe 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 Group accounts for its interests in joint ventures and associates using the equity method.

BUSINESS COMBINATIONS
The acquisition of subsidiaries is accounted for using the purchase method. The cost of an acquisition ismeasured at the aggregate of the fair values, at the date of exchange, of assets given by the Group in
exchange for control of the acquiree plus costs that are directly attributable to the acquisition. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (asissued in March 2004) are recognised at their fair value at the acquisition date. When control is obtained insuccessive share purchases (a ‘step acquisition’), each significant transaction is accounted for separately andthe identifiable assets, liabilities and contingent liabilities acquired are stated at fair value when control is
obtained.

An associate isan entity other thana subsidiary or joint
venture, over which
the Group hassignificant influence.
Significant influenceis the power toparticipate in thefinancial and operating
decisions of an entity
but is not control orjoint control overthose policies.
A joint venture isan entity in which
the Group holds
an interest undera contractual
arrangement where
the Group andone or more otherparties undertake aneconomic activity
that is subject tojoint control.

F15

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDSEGMENTAL ANALYSISIn accordance with IFRS 8 Operating Segments, the Group’s operating segments are reported in a mannerconsistent with the internal reports provided to the chief operating decision maker (‘CODM’). The CODM,
who is responsible for allocating resources and assessing performance of the operating segments has been
identified as the BBC Executive Board. The Executive Board comprises executive and non-executive
Directors, and is responsible for making strategic decisions.

A subsidiary is anentity that is directly or
indirectly controlled by
the Group. Control
exists where theGroup has the power
to govern the financial
and operating policiesof the entity so as toobtain benefits fromits activities. In
assessing control,
potential voting rightsthat are currently
exercisable orconvertible are taken
into account.

FOREIGN CURRENCIES
Foreign currency transactions
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the date of thetransactions.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into
sterling at the rate of exchange ruling at that date. Foreign currency gains or losses arising from the translationof 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, except for differences arising on theretranslation of a financial liability designated as a hedge of the net investment in a foreign operation. Nonmonetary assets and liabilities measured at historical cost are translated into sterling at the rate of exchangeon the date of initial recognition.

As these financial
statements areprepared in sterling,
the BBC’s foreign
currencytransactions andbalances must betranslated, atappropriate exchange
rates, into sterling.

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

F16

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDINCOME
Income includes licence fee income, external revenue, other operating income (including government grants
and Grant-in-Aid) (together ‘total income’).

Licence fee income
Income derived from television licences is recognised as a receivable from the relevant Government
department, principally the Department for Culture, Media and Sport. This represents the value of licences
issued in the year, subject to deductions for refunds made and cancellations.
Where an element of the licence fee income has been ring-fenced by the Government for a specific purpose,that income is recognised when receivable, except that 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 therelevant amount of licence fee income, as agreed with the Government, will be repayable and recognised in
the year the obligation to repay arises.

Other income
Other income, or revenue, arises from activities such as the sale of goods, provision of services and grantingof licences. Revenue is measured after deductions for value added tax, any other sales taxes, trade discounts
and sales between Group companies.

The distinction
between the various
income sources isimportant. The BBC iscareful not to crosssubsidise commercial,
UK Public Service
Broadcasting or Grantin-Aid and grant
funded activities. Moreinformation on the
BBC’s fair trading
requirements andpolicies can be foundin the ‘Managing theBusiness’ section inPart Two of the BBC
Annual Report andAccounts 2009/10.

• 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. Examples ofgoods 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 unexpended amounts for the year, within predetermined limits, are not liable
to surrender. The grants are recognised as income in the financial year that they relate to.
• Grants from other Government organisations
Other grants from Government organisations are recognised as income consistently with the related
costs, provided that there is reasonable assurance that the BBC will comply with any conditions attachedto the grant and the grant will be received.

F17

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDLEASE PAYMENTS
Payments made under operating leases are recognised in the income statement on a straight-line basis overthe 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 rateof interest on the remaining balance of the liability.

BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (thosenecessarily taking a substantial period of time to get ready for their intended use) are added to the 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 time to
get ready for broadcast are a small proportion of overall programme investment and therefore any borrowing
costs that could be attributed to those programmes are not significant and no borrowing costs are capitalised.
All finance income and other borrowing costs are recognised in income and expense in the period in which
they are incurred.

An operating leaseis a lease in which thelessee has not takenon the substantially all
the risks and rewardsof ownership of theleased asset.
A finance lease isa lease that transfers
substantially all therisks and rewardsof ownership of theleased asset to thelessee, which isaccounted for as
if it were an assetof the lessee.

TAXATION
The tax charge for the period comprises both tax currently payable and deferred tax. Taxation is recognisedin the income statement except to the extent that it relates to items recognised directly in reserves, in whichcase it is recognised in reserves.
Current tax is the expected tax payable for the year, using tax rates in force for the year, and any adjustment
to tax payable in respect of previous years. In respect of tax currently payable:•

The BBC (UK Public Service Broadcasting, BBC World Service and BBC Monitoring) is not liable tocorporation 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. Expenditureon capital assets is not eligible for capital allowances giving rise to temporary differences that would lead todeferred tax assets or liabilities. Movements of fair value adjustments in the income statement give rise todeferred 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 for taxation
purposes. The amount of deferred tax provided is based on the tax rates expected to apply in the period
when the liability is settled or the asset is realised using tax rates enacted or substantively enacted at thebalance 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 the sameauthority and the Group has the right of set off.

F18

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDINTANGIBLE FIXED ASSETS
Goodwill
Acquisitions on or after 1 April 2007 – on initial recognition goodwill represents the difference between thecost of the acquisition and the fair value of the identifiable net assets acquired.
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 or after
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 the operating reserve, as
was permitted by UK GAAP at the time.

Goodwill is thedifference between
the value paid fora business and the fairvalue of its net assets.
It represents thepremium the purchaser
is prepared to pay forthe business.

Goodwill arising on the acquisition of joint ventures and associates – this is included in the carrying amount of
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 andis 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 the relevantbusiness combination.

Programme-related intangible assets
Programme-related intangible assets, which includes programme rights and residual programme rights, arestated at cost, after writing off the costs of programmes that are considered irrecoverable, less accumulated
amortisation. The cost and accumulated amortisation of programme-related intangible assets are reduced byprogrammes 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 capitalised only if all of the following conditions are met:•

An identifiable asset is created;•

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 bereceived, 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 Group’s commercial businesses.

Other intangible assets
Other intangible assets acquired separately by the Group are stated at cost less accumulated amortisation andany accumulated impairment losses. The identifiable intangible assets acquired as part of a business combination
are shown at fair value at the date of acquisition (in accordance with IFRS 3 Business combinations (as issued
in March 2004)) less accumulated amortisation and any accumulated impairment losses.

F19

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
Amortisation
Amortisation is charged to the income statement on a straight line 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 – estimated average marketable life of the programme genre,
generally between 2 and 10 years•

Other intangibles:– Lonely Planet masthead

Straight line

20 years– UK.TV carrier agreements

Straight line

17 years– Software

Straight line2 – 5 years

Straight line
3 – 8 years– Other
Amortisation methods, useful lives and residual values are reviewed at each balance sheet date and adjusted if
appropriate.

PROPERTY, PLANT AND EQUIPMENT
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.

F20

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDNON-CURRENT ASSETS HELD FOR SALE
Non-current assets (and disposal groups comprising assets and liabilities) are classified as held for sale if theircarrying amount will be recovered principally through sale rather than continuing use, they are available 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 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.

PROGRAMME-RELATED ASSETS AND EXPENDITURE, AND OTHER INVENTORY
Completed originated programmes, programmes in production and prepayments toacquire future programme-related rights
Originated programmes, excluding those commissioned from independent producers, are stated at the lowerof cost and net realisable value, and the full value is written off on first transmission.
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 and as such noborrowing costs are included in cost.
Net realisable value is based upon arm’s length contract prices negotiated between the channel controllers
and programme makers. Where, exceptionally, a programme is unable to be broadcast, as soon as it isvirtually certain that this is 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 a strong
indication that the development work will result in a commissioned programme, when any further costs arerecognised as programme-related assets.
Originated programmes that are still in production at the balance sheet date are recognised as programmes 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 holders of certain rights (for example, rights
to broadcast sporting events), to receive the programme on 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 of further
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 or commencement 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 aspurchase 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 residual interests
are recognised initially at cost subject to amortisation as royalties are received and impairment if anticipatedroyalties 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.

F21

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
TRADE AND OTHER RECEIVABLES
These are recognised initially and subsequently at fair value. For trade receivables this is after an allowance for
estimated impairment. The allowance is based on objective evidence that the Group will not be able torecover all amounts due, through a review of all accounts and prior experience collecting outstandingbalances. Changes in the carrying amount of the allowance are recognised in the Consolidated income
statement.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances, call deposits with maturity of less than or equal to threemonths.

IMPAIRMENT OF ASSETS
Non-financial assets
At each balance sheet date, the Group reviews the carrying amount of those assets that are subject toamortisation to determine whether there is an indication that any of those assets has suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine theextent of any impairment loss.
For goodwill the recoverable amount is estimated each year at the same time.

An impairment
occurs when an asset
would otherwise berecorded in thefinancial statements at
an amount less than isrecoverable from its
use or sale.

The recoverable amount of an asset or cash generating unit is the higher of fair value less costs to sell andvalue in use. 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 therisks specific to the asset for which the estimates of future cash flows have not been adjusted. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units).
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.
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 the recoverable
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 or amortisation, if no impairment
loss has been recognised.
Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately,
and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an
associate is tested for impairment as a single asset when there is objective evidence that the investment in an
associate may be impaired.

Financial assets
A financial asset is assessed at each balance sheet date to determine whether there is any objective evidence
that it is impaired. Individually significant 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.
All impairment losses are recognised in the income statement.

F22

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDFINANCIAL INSTRUMENTS

Financial

The Group’s non-derivative financial instruments (including assets such as trade investments and liabilities such instruments include
all contractual
as borrowings) are stated at amortised cost using the effective interest rate, less any impairment losses.

Derivative financial instruments
The Group does not enter into speculative derivative contracts. However some derivative financial
instruments are used with a view to managing the BBC’s exposure to fluctuations in interest rates (interest
rate swaps, caps and collars) and foreign currency exchange rates (foreign currency forwards contracts,
currency options).
Derivative financial instruments are initially recognised at fair value and are subsequently remeasured to fairvalue 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 Group would receiveor pay to terminate the swap, cap or collar at the balance sheet date, taking into account current interest
rates and the current creditworthiness of swap, cap or collar counterparties.
The fair value of foreign currency forward contract rates is determined by using forward exchange market
rates at the balance sheet date.

Hedge accounting
The fair value changes on hedging instruments (typically foreign exchange forwards) are recognised in therelevant period’s operating costs. However, where a financial instrument is designated and effective as a net
investment hedge of a foreign operation or a cash flow hedge of purchases or sales in a foreign currency any
exchange differences arising on the retranslation of the financial instrument will be recognised directly in the
consolidated statement of comprehensive income. Any ineffective portion is recognised immediately in theincome and expenditure account.

Embedded Derivatives

arrangements todeliver or receive cash.
Therefore they include
trade receivables andpayables and loans aswell as more complex
instruments such asderivatives.
Forward exchange
contracts allow you
to 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.

Derivatives which are embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contracts, and thehost contracts are not carried at fair value. Embedded derivatives are carried on the balance sheet at fairvalue from inception of the host contract. Unrealised changes in fair value are recognised as gains/losses
within the income statement during the period in which they arise.
Interest rate swaps

TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value and subsequently at amortised cost using theeffective interest method.

effectively swap afloating rate loan into
a fixed rate loan, or
vice versa.

INVESTMENTS IN EQUITY SECURITIESInvestments in equity securities held by the group are classified as being available for sale and are stated at fairvalue, with any resultant gain or loss being recognised directly in equity, except for impairment losses. Whenthese investments are derecognised the cumulative gain or loss previously recognised directly in equity isrecognised in the income statement.

PROVISIONS
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation
arising from past events and it is probable that an outflow of economic benefits will be required to settle theobligation. Provisions, other than deferred tax, that are payable over a number of years are discounted to netpresent value at the balance sheet date using a discount rate appropriate to the particular provision
concerned.

F23

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUEDEMPLOYEE BENEFITSDefined contribution plans
The amounts charged as expenditure for the defined contribution plans represent the contributions payable
by the BBC for the accounting periods.

Defined benefit plans
The defined benefit plans, of which the majority of staff are members, provide benefits based on final, or
career average, pensionable pay. The assets of the BBC’s main pension scheme are held separately fromthose of the Group.
Pension scheme assets are measured using current market bid values. Pension scheme liabilities are measured
using a projected unit credit method and discounted at the current rate of return on a high quality corporatebond of equivalent term and currency to the liability.
The difference between the value of the pension scheme assets and pension scheme liabilities is a surplus ora deficit. A pension scheme surplus is recognised to the extent that it is recoverable and a pension scheme
deficit is recognised in full. The movement in the scheme surplus/deficit is split between operating charges,
finance items and, in the statement of total comprehensive income, actuarial gains and losses. Generally,
amounts are charged to operating expenditure on the basis of the current service cost of the present
employees that are members of the BBC Pension Scheme.

On retirement,
members of the BBC’s
main pension
scheme are paid
their pensions from afund which is kept
separate from thegroup. The BBC makes
cash contributions tothat fund in advance ofmembers’ retirement.

Termination benefits
Termination benefits are a component of restructuring provisions and are recognised as an expense inaccordance with the accounting policy for provisions.

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

RESERVESThe operating reserve is the accumulated surplus to date.
Other reserves represent the value of a put option exercisable by minority shareholders.
The hedging reserve is used to record the effective portion of the cumulative net change in the fair value ofcash 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.

SERVICE LICENCE REPORTING
Service licences are used by the BBC Trust to regulate the BBC’s services and ensure that each aims toprovide public value and contribute to delivering the BBC’s public purposes. Note 2 provides more detail on
how costs are allocated to individual services.

USE OF ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires the Executive Board to exercise judgement in applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions or
estimates are significant to the consolidated financial statements are disclosed below:

F24

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
Post-retirement benefits
The pension costs and defined benefit plan obligations of the Group’s defined benefit plans are calculated on
the basis 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. More details are given in Note 23.

Carrying value of 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 discount ratethat reflects current market assessments of the risks specific to the asset and the time value of money, inorder to calculate present value. Please refer to Note 9 for further details on the impairment loss calculation
for the current year.

LeasesIn assessing whether a lease is an operating lease or a finance lease, judgment needs to be exercised indetermining whether or not substantially all the risks and rewards of ownership of the leased asset are heldby the Group. Given that finance leases are recognised as liabilities, and operating leases are not, this can havea significant effect on the reported financial position of the BBC. Other key judgements include thedetermination of the commencement date of a lease and the estimate of RPI to be included in the minimum
lease payments.

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 theBBC. This can be very complex, especially when there is a wide range of possible outcomes.

New standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations whichhave not been applied in these financial statements were in issue but not yet effective.
IFRS 1 (amended)/IAS 27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 3 (revised 2008)
Business Combinations
IFRS 5 (amended)
Non Current Assets held for sale and discontinued operations
IAS 17 (revised)
LeasesIAS 27 (revised 2008)
Consolidated and Separate Financial Statements
IAS 28 (revised 2008)
Investments in Associates
IFRIC 17
Distributions of Non-cash Assets to Owners
IFRIC 18
Transfers of Assets From Customers
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
Improvements to IFRSs (April 2009)
The Group does not expect that the adoption of these Standards and Interpretations in future periods will
have a material impact on the financial statements of the Group.

F25

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
1 SEGMENT REPORTING
The Executive Board, the Group’s CODM, has determined the reportable segments based upon thereports it regularly reviews and uses to make strategic decisions and allocate resources.
Segmental information provided to the BBC Executive Board is based on the BBC Group’s primary
income sources. The reportable segments 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.,•

BBC Worldwide and the Commercial businesses – These generate revenue from exploiting thevarious assets of the BBC, for example licensing formats, selling international rights,
merchandising and production facilities.

The BBC’s Other Commercial activities have been aggregated for reporting purposes as they meet thequantitative thresholds set out in IFRS 8.
Inter-segment pricing is determined on an arm’s length basis in accordance with the BBC’s fair trading
policy.
Information regarding reportable segment assets and liabilities is not reported to the Executive Board.
The UK PSB’s expenditure by service licence is also presented in Note 2c.

1a Analysis of income
BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

2010

Note

UK PSBGroup£m

Licence fee income
Joint venture income

2a11

3,446.8
4.9

–
–

–
185.9

–
–

–
–

3,446.8
190.8

19.3
3.9
283.8
–
5.0
(219.6)92.4
3,544.1

–
–
7.9
293.0
–
(1.5)
299.4
299.4

–
45.3
843.0
–
–
–
888.3
1,074.2

–
0.6
122.0
–
–
(48.9)
73.7
73.7

–
–
–
–
–
(10.2)(10.2)(10.2)

19.3
49.8
1,256.7293.0
5.0(280.2)
1,343.6
4,981.2(4.9)
3,539.2–
299.4(185.9)
888.3

–
73.7

–
(10.2)(190.8)4,790.4

Rental income
Royalties
Other revenue*
Grant-in-aid
Other grant income
Less intra-group income
Other income
Less joint venture
incomeTotal income

11* Other revenue arises from activities such as the sale of goods, provision of services and granting of licences.

Note 1 provides analysis of thedifferent segments within theBBC. These reflect the waythat management looks at theorganisation.
UK Public Service
Broadcasting Group
comprises the UK PublicServices (as defined in theAgreement) and thosesubsidiary companies
incorporated to act solely onbehalf of those public service
operations.
BBC World Service and
BBC Monitoring comprise
broadcasting and media
monitoring activities.
BBC Worldwide andOther Commercials
comprise businesses which
generate external income from
exploitation of the BBC’s
programmes, other assets andskill base.

F26

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
1a Analysis of income continued
BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

2009

Note

UK PSBGroup£m

Licence fee income
Joint venture income

2a11

3,494.4
1.5

–
–

–
299.0

–
–

–
–

3,494.4
300.5

15.2
4.1
255.3
–
5.0
(185.6)
94.0
3,589.9

–
–
7.6
289.6
–
(0.7)
296.5
296.5

–
41.8
662.8
–
–
–
704.6
1,003.6

–
0.6
128.7
–
–
(50.5)
78.8
78.8

–
–
–
–
–
(7.5)
(7.5)
(7.5)

15.2
46.5
1,054.4289.6
5.0(244.3)
1,166.4
4,961.3(1.5)
3,588.4–
296.5(299.0)
704.6

–
78.8

–
(7.5)

(300.5)4,660.8

Rental income
Royalties
Other revenue
Grant-in-aid
Other grant income
Less intra-group income
Other income
Less joint venture
incomeTotal income

11

1b Analysis of income, surplus/(deficit) by activity

2010

IncomeRestructuring costs
Depreciation andamortisation
Other operating costs
Total operating costs
Group operating
surplus/(deficit)
Gain on saleand termination ofoperations
Gain on disposalof fixed assets
Share of resultsof associates andjoint ventures
Operating segment
resultFinancing income
Financing costs
Net financing costs
Surplusbefore taxation
Taxation
Surplus for the year*

Note

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials£m*GroupAdjustments
£m

Group
£m

1a
4c

3,539.2(36.9)

299.4
(6.3)

888.3
(6.8)

73.7
(11.9)(10.2)–

4,790.4(61.9)

3(106.1)(3,376.2)(3,519.2)(32.9)(215.8)(255.0)(92.4)(691.2)(790.4)(3.5)(79.6)(95.0)

0.1
391.2
391.3

(234.8)(3,971.6)(4,268.3)

20.0

44.4

97.9

(21.3)

381.1

522.1

5

–

–

2.0

–

–

2.0

6

39.0

–

–

–

–

39.0

11

(3.1)

–

40.1

–

(0.1)

36.9

55.9

44.4

140.0

(21.3)

381.0

7
7

600.0
445.8
(533.5)(87.7)

8512.3(34.7)
477.6

Group adjustments, financeincome and costs and taxation
are not split between
reportable segments because
they are managed centrally
across the group and it is notpossible to allocate them on
a consistent basis.

Group adjustments include £387.9million (2009: £0.3million) for the defined benefit pension scheme, of this balance£334.1million (2009: £nil) relates to past service income arising from a change to early retirement terms and conditions.

F27

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
1 SEGMENT REPORTING continued
1b Analysis of income, surplus/(deficit) by activity continued

2009

IncomeRestructuring costs
Depreciation andamortisation
Other operating costs
Total operating costs
Group operating
surplus/(deficit)
Gain/(loss) on saleand termination ofoperations
Gain on disposalof fixed assets
Share of resultsof associates andjoint ventures
Operating segment
resultFinancing income
Financing costs
Net financing income
Surplusbefore taxation
Taxation
Surplus for the year*

Note

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring
£m

1a
4c

3,588.4(14.3)

296.5
(4.8)

704.6
(2.3)

78.8
(18.9)(7.5)–

4,660.8(40.3)

3(107.3)(3,299.6)(3,421.2)(30.3)(214.5)(249.6)(95.5)(587.9)(685.7)(5.9)(126.7)(151.5)

–
(1.9)
(1.9)

(239.0)(4,230.6)(4,509.9)

167.2

46.9

18.9

(72.7)

(9.4)

150.9

5

0.3

–

(9.4)

5.9

0.3

(2.9)

6

15.9

–

–

–

–

15.9

11

(5.6)

–

34.6

–

0.8

29.8

177.8

46.9

44.1

(66.8)

(8.3)

7
7

193.7
633.9
(576.3)
57.6

8

251.3
(7.5)
243.8

BBC
Worldwide£m

Other
Commercials£m*GroupAdjustments
£m

Group
£m

Group adjustments include £0.3million for the defined benefit pension scheme.

F28

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
1 SEGMENT REPORTING continued
1c Geographical location of income and non-current assets

2010

Non-current assets
excluding deferred tax
and financial
instruments:
UK
Rest of world
Additions includedin fixed assets andinvestments
External income:UK
Rest of world2009

Non–current assets
excluding deferred tax
and derivative financial
instruments:
UK
Rest of world
Additions includedin fixed assets andinvestments
External income:UK
Rest of world

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

1,028.6
3.5
1,032.1

57.5
101.7
159.2

169.9
173.5
343.4

14.8
–
14.8

(18.9)–(18.9)

1,251.9278.7
1,530.6

98.8

25.3

130.6

5.0

–

259.7

3,539.2–
3,539.2

295.5
3.9
299.4

351.1
537.2
888.3

14.8
58.9
73.7

–
(10.2)(10.2)

4,200.6
589.8
4,790.4

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Other
Commercials
£m

Group
Adjustments
£m

Group
£m

1,458.9
3.6
1,462.5

69.9
99.0
168.9

167.4
162.1
329.5

9.4
–
9.4

(11.6)–(11.6)

1,694.0
264.7
1,958.7

103.6

31.3

162.4

2.7

–

300.0

3,588.4–
3,588.4

292.9
3.6
296.5

286.4
418.2
704.6

17.9
60.9
78.8

–
(7.5)
(7.5)

4,185.6475.2
4,660.8

F29

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING
This note includes BBC Trust and Department of Culture, Media and Sport (DCMS) regulatory reports
and voluntary reports providing additional information on licence fee income and related expenditure.
The regulatory reports are presented on the basis upon which the regulations were set.

2a Licence fee income
Licence fee
2010£

Colour
Monochrome
Concessionary
Over 75s

142.50
48.00
7.50
–

Licencesin force
2010
Number‘000

Total
income2010£m

Licencefee
2009£

Licences inforce 2009
Number‘000

Total
income2009£m21,171
19
181
4,088
25,4593,002.3
1.2
1.4
556.4
3,561.3

139.50
47.00
7.50
–

21,15424
186
4,000
25,364

2,941.1
1.4
1.4
532.9
3,476.8

Quarterly payment
scheme premium
Digital switchover help scheme
under-spend (Note 2d)
Total licence fee income

17.5

17.6

(132.0)3,446.8–
3,494.4

During the year 3.5 million (2009: 3.5 million) colour licences were issued under the quarterly payment
scheme at a premium of £5 each (2009: £5).
Households in which one or more persons over the age of 75 reside, as their primary residence, areentitled to a free licence. The BBC is reimbursed for these free licences by the relevant Government
department.

2b Reconciliation of UK Public Service Broadcasting Group expenditure to the basis
for service licence reporting purposes
Service licences are used by the BBC Trust to regulate the BBC’s services and ensure that each service
provides public value and contributes to the delivery of the BBC’s public purposes. The annual
assessment of performance compares actual costs for content against an agreed and authorised baselinebudget. A reconciliation between total UK Public Service Broadcasting Group expenditure and UK PublicService Broadcasting Group expenditure for service licence reporting purposes is provided below. The
adjustments reflect the basis on which service licence baseline budgets are set.
Actual costs may vary by up to 10% of the baseline budget to permit management flexibility in its
commissioning decisions.
UK Public Service Broadcasting Group expenditure
Adjustments:
Lease reclassification
Employee benefits
UK Public Service Broadcasting Group expenditure
for service licence reporting purposes

2010
£m

2009
£m

3,519.2

3,421.2

38.2
2.8

26.8
1.3

3,560.2

3,449.3

F30

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING
continued
2c UK Public Service Broadcasting Group expenditure by service
During the year there were 28 service licences in operation. Service licences show the cost to the licencefee payer of providing the relevant service and therefore exclude any costs funded by a third party coproducer. A number of television programmes are broadcast on more than one channel and in general
the full cost of the programme is recognised as a cost of the channel when the programme is firstbroadcast. Where a programme is commissioned by two channels the cost of the programme isrecognised as a cost of the primary channel irrespective of the channel holding first transmission.
Accordingly, the costs of individual service licences are not necessarily equivalent to the costs which
would be incurred by such a service on a stand-alone basis.
For BBC HD, BBC Online and BBC Red Button, the licence reflects only the incremental costs of getting
content to air unless the content is specifically commissioned for one of these three services. The cost of
the original content is allocated to the service on which it is first transmitted.

F31

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING continued
2c UK Public Service Broadcasting Group expenditure by service continued
Content(i)£mDistribution(ii)£mInfrastructure/
support£m

Other items
£m

Total
£m

1,113.1
450.0
87.5
54.5
39.9
18.1
1.6
4.3
47.8
2.4
14.2
1,833.4
32.2
40.4
40.8
86.7
55.0
2.5
6.5
6.5
5.0
8.9
110.2
24.9
4.2
13.1
12.3
14.4
463.6
126.7
126.7

43.2
30.6
6.8
3.8
6.0
4.2
7.8
0.8
8.4
6.5
13.8
131.9
4.9
4.4
4.7
8.8
5.8
0.2
0.4
0.4
0.3
0.4
6.1
2.6
0.9
0.9
1.2
1.4
43.4
22.3
22.3

217.1
95.0
24.3
15.7
11.2
6.4
1.5
1.0
7.8
1.4
4.7
386.1
6.7
7.7
8.5
16.5
11.2
1.4
2.5
2.4
1.8
2.8
21.4
5.2
0.9
2.5
2.3
3.0
96.8
50.3
50.3

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

1,373.4
575.6
118.6
74.0
57.1
28.7
10.9
6.1
64.0
10.3
32.7
2,351.4
43.8
52.5
54.0
112.0
72.0
4.1
9.4
9.3
7.1
12.1
137.7
32.7
6.0
16.5
15.8
18.8
603.8
199.3
199.3

Spend regulated by service licence

2,423.7

197.6

533.2

–

3,154.5

Licence fee collection costs
Orchestras and performing groups
S4C
Development spend
Costs incurred to generate third party income
DAB digital radio
Digital text
Other
Restructuring costs
Total UK public services expenditure
Digital switchover (Digital UK Limited)
Digital switchover (DSHS Limited)
Total UK Public Service Broadcasting Group
expenditure

–
20.3
30.0
31.2
–
–
–
81.5
–
2,505.2
–
–

–
–
–
–
–
11.6
6.6
18.2
–
215.8
–
–

–
3.8
6.6
5.9
–
–
–
16.3
–
549.5
–
–

126.5
–
–
–
41.5
–
–
168.0
36.9
204.9
29.2
55.6

126.5
24.1
36.6
37.1
41.5
11.6
6.6
284.0
36.9
3,475.4
29.2
55.6

2,505.2

215.8

549.5

289.7

3,560.2

2010 Service

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC HDBBC ALBA
BBC News channel
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five Live Sports Extra
BBC 1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidheal
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online
Online

Note

iv
vi

v

vii

viii
ix

x
xi
xi

F32

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING continued
2c UK Public Service Broadcasting Group expenditure by service continued
Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC HDBBC ALBA
BBC News channel
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five Live Sports Extra
BBC 1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidheal
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online
Online1,142.0
450.6
87.3
54.8
35.8
16.3
2.1
3.0
47.9
2.8
13.5
1,856.1
33.1
40.1
40.0
85.9
56.5
2.6
6.8
6.5
5.2
9.2
108.6
25.0
4.0
12.9
12.0
14.5
462.9
112.2
112.2

47.9
34.1
4.2
3.0
3.4
3.5
2.7
0.8
6.6
5.1
12.3
123.6
3.5
3.8
4.1
8.3
5.7
0.3
0.5
0.4
0.4
0.5
6.3
2.4
0.9
1.0
1.3
1.1
40.5
18.5
18.5

209.2
87.5
23.6
13.9
11
5.7
1.9
0.7
6.7
1.8
4.3
366.3
6.5
6.9
7.2
14.8
10.3
0.8
2.3
2.1
1.3
2.4
18.7
5.0
0.8
2.3
2.2
2.9
86.5
47.1
47.1

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

1,399.1
572.2
115.1
71.7
50.2
25.5
6.7
4.5
61.2
9.7
30.1
2,346.0
43.1
50.8
51.3
109.0
72.5
3.7
9.6
9.0
6.9
12.1
133.6
32.4
5.7
16.2
15.5
18.5
589.9
177.8
177.8

Spend regulated by service licence

2,431.2

182.6

499.9

–

3,113.7

Licence fee collection costs
Orchestras and performing groups
S4C
Development spend
Costs incurred to generate third party income
DAB digital radio
Digital text
Other
Restructuring costs
Total UK Public Services expenditure
Digital switchover (Digital UK Limited)
Digital switchover (DSHS Limited)
Total

–
21.5
27.6
30.9
–
–
–
80.0
–
2,511.2––
2,511.2

–
–
–
–
–
10.3
6.9
17.2
–
199.8
–
–
199.8

–
3.7
5.1
5.4
–
–
–
14.2
–
514.1
–
–
514.1

122.8
–
–
–
40.0
–
–
162.8
11.0
173.8
26.0
24.4
224.2

122.8
25.2
32.7
36.3
40.0
10.3
6.9
274.2
11.0
3,398.9
26.0
24.4
3,449.3

2009 Service

Note

F33

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING continued
2c UK Public Service Broadcasting Group expenditure by service continued
Infrastructure/support costs

MarketingPress and publicity
Libraries, learning support and community events
Reduction to pension payment
Overheads (excluding restructuring)
BBC Trust Unit (excluding restructuring)

2010
£m

2009
£m

74.5
5.0
49.8
–
406.3
13.9
549.5

76.6
5.3
49.9
(19.5)
387.1
14.7
514.1

Note

xii
iii
iii

(i) Content costs are made up of the direct programme/service specific costs of production and an apportionment of otherproduction related costs that are managed centrally including, for example, newsgathering and copyright costs. Of the total
content costs regulated by service of £2,423.7million (2009: £2,431.2million) direct costs were £2,247.7million (2009:£2,259.0million) and the centrally allocated costs were £176.0million (2009: £172.2million).
(ii) The cost of distribution represents the transmission and carriage of the BBC’s UK public services (television, radio andinteractive) on digital and analogue broadcast platforms – this includes analogue television, Digital Terrestrial Television (DTT),
satellite, cable, broadband, analogue radio and DAB digital radio. Of the distribution costs, £67.7million relates to analogue
services (2009: £77.0million) and £148.1million to digital services (2009: £122.8million).
(iii) Overheads represent expenditure on the BBC’s central functions, for example the Director-General’s office, BBC People, BBC
Finance, Policy and Legal departments. Spend incorporates accommodation and staff costs relating to those functions. The
proportion of these costs which are directly attributable to programme-making are included within total content spend, whilst
costs of services provided across the BBC as a whole or managed at a corporate level (for example marketing, press andpublicity) are shown as infrastructure and support spend.
(iv) BBC HD’s content costs were under the baseline budget by more than the 10% tolerance due to significant savings incontractual costs.
(v) BBC Radio 3’s content costs were over the baseline budget by more than the 10% tolerance level as delays in efficiency savings
resulted in additional costs during the year.
(vi) Included within BBC News channel content costs are production costs of £30.0million, newsgathering costs of £17.3million
and other costs of £0.5million (2009: production costs of £29.8million, newsgathering costs of £17.6million and other costs of£0.5million).
(vii) The service licence for BBC Local Radio covers all of the individual stations in England.
(viii)The BBC is required to provide Welsh language programming to S4C (the Welsh language channel) as part of the StrategicPartnership Agreement between the BBC Trust and the S4C Authority.
(ix) Development spend is not regulated by service licence and, as such, is separately identified. The 2010 figure includes costs
relating to the multiplatform release of the BBC iPlayer and improvements in other consumer-facing products such as
navigating and viewing content on bbc.co.uk and the multiplatform offering of Formula One.
(x) Restructuring costs primarily relate to the Continuous Improvement programmes and costs resulting from our commitment torelocate and increase investment out of London occurring within UK Public Service Broadcasting (see Note 4c).
(xi) Under the terms of the current licence fee settlement, a proportion of licence fee income is set aside to help pay for wider
industry costs of relating to digital switchover. This includes a marketing and awareness campaign run by Digital UK Limited andthe Digital Switchover Help Scheme administered by DSHS Limited.
As set out in Note 2d the BBC controls 56% of the voting rights of the company Digital UK Limited, and therefore
consolidates its results with those of the BBC. As a result, these costs represent the full expenditure by Digital UK Limited,which is financed by contributions from the BBC and other broadcasters. The BBC contributed £27.5million (2009:£24.3million) being 100% of the communication expenditure (which is ring-fenced, see Note 2d) and 56% of all other costs
incurred by Digital UK Limited. £1.7million (2009: £1.7million) was contributed by other broadcasters.
The BBC contributed £48.5million (2009: £23.6million) to DSHS Limited with £7.1million (2009: £0.8million) being
contributed by third parties.
(xii) See Note 23b for a full explanation of pension costs.
(xiii) For comparative purposes the cost incurred to generate third party income have been removed from theinfrastructure/support cost and shown separately

F34

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING continued
2d UK Public Services Group 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
Digital UK Limited

Amount spentprior to2009£m

Amountspent in2009£mAmountspent in2010£m

Amountrepayable
2010£m

Cumulative
Total
£m

Six-yearring- fenced
funding
£m

5.9
27.6

23.6
20.4

48.5
29.7

132.0
–

210.0
77.7

603.0
201.0

The Secretary of State has agreed with the BBC that the £603million estimated cost of the Digital
Switchover Help Scheme (operated by DSHS Limited) will be ring-fenced and set aside from the licencefee for the purpose of funding the Scheme over the six-year life of the licence fee settlement. Thisagreement specifies that in the event that the costs of the project exceed this limit due to higher than
anticipated demand, this will not be at the expense of the BBC’s programmes, services or otherresources.
During the year the BBC and the Secretary of State agreed a mechanism for recovering under spent ringfenced funds. Of the £132.0million cumulative under spend as at 31 March 2010, £89.1million will be
repaid in 2010-11 and £42.9million in 2011-12. Confirmed under-spends arising in future periods will
become available for repayment in the following year. Responsibility for ensuring value for money forfunds repaid will pass from the BBC Trust to the Government. The funds will be used for purposes notinconsistent with the purposes of the licence fee.
The Framework Agreement between the BBC and DCMS states that the BBC is committed to leading
certain aspects of the digital switchover programme, through Digital UK, and the licence fee settlement
includes a ring-fenced amount of up to £201million from the inception of Digital UK until the end of thesix-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.

2e Analysis of net (debt)/funds for Department of Culture, Media and Sport (DCMS)
borrowing ceilings
At 1 April
2009
£m

Cash
flows
£m

Non-cashchanges£m

Exchange£m

At 31 March2010£mCash and cash equivalents
Bank overdrafts
Gross funds
Cash classified as held for sale
Loans and loan notes
Derivatives associated with loans
Finance leases
Leases not included in DCMS
borrowing limits

124.3
(2.5)
121.8
–
(271.3)(4.8)(617.9)

149.6
0.8
150.4
–
72.3
–
9.0

(8.3)
–
(8.3)
8.3
–
(3.5)
–

(1.7)
–
(1.7)
–
(12.4)
–
–

263.9
(1.7)
262.2
8.3
(211.4)(8.3)(608.9)596.2–(40.7)–

555.5

Net (debt)/funds(176.0)231.7(44.2)(14.1)(2.6)

Made up of:
Public Service Broadcasting
Centre House Productions
BBC Worldwide
Other commercial businesses
Net debt

46.4(13.6)(157.5)(51.3)(176.0)168.1(10.7)(23.0)(137.0)(2.6)

The DCMS definition of‘borrowings’ excludes leases
which would be classified as
operating under UK GAAP, butwhich are classified as financeleases under IFRS. These leases
are therefore excluded whencomparing net debt/funds to
DCMS borrowing ceilings.

F35

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2 UK PUBLIC SERVICE BROADCASTING GROUP ADDITIONAL REPORTING CONTINUED
The debt and repayments on finance leases held by Centre House Productions Limited are offset directly
by cash held on matching deposits, and the income from them, such that there is no long-term cash
effect.

2f Reconciliation of net funds/(debt) to the Department of Culture, Media and Sport(DCMS) borrowing ceilings
Commercial
Businesses

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

2010

Note

Capital or
current
expenditure*£m

Net funds/(debt)
Borrowing ceiling

24f

168.1
(200.0)–(25.0)(160.0)(350.0)24f

46.4(200.0)–(25.0)(208.8)(350.0)***£m

Public Services in thiscontext represent the UK
Public Service BroadcastingGroup (excluding Centre
House Productions Limited– see Note 24b), BBC
World Service and BBC
Monitoring.

2009
Net funds/(debt)
Borrowing ceiling*

The Public Service borrowing limit of £200million is set by the Secretary of State in accordance with the Framework
Agreement between the BBC and DCMS. As at 31 March 2010, 31 March 2009, and throughout both financial years, the BBC
was in compliance with the borrowing ceilings.

** £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 2010 and 31 March 2009, BBC Commercial
Holdings Limited was in compliance with both of these covenants. 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.

F36

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
3 TOTAL OPERATING COSTS
NoteIntangible fixed assets, property, plant and equipment andother investments
Depreciation– owned assets– leased assets
Write off/impairment of property, plant and equipment
Amortisation of intangible fixed assets
Impairment of intangible fixed assets (excl. goodwill)
Impairment of investments
Impairment of goodwill

10
9
9
9

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*
Programme research costs
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 (gains)/losses on embedded derivatives
Fair value (gains)/losses on open forward foreign currency contracts
Staff costs
Exceptional pension income (defined benefit)
Other operating costs**
Total
*

4b
4b

2010
£m

2009
£m

110.6
28.9
6.7
95.3
–
1.7
17.5
260.7

113.3
24.4
10.9
101.3
2.9
2.3
–
255.1

3.7
3.7

4.0
4.0

43.0
38.4
12.8
(0.1)
1.9
28.7
50.1
3.6
0.2
(2.6)
4.1
(7.1)
(14.0)
1,286.0(334.1)
2,893.0
4,003.9
4,268.3

42.4
34.4
21.7
(0.5)
10.4
32.1
47.8
2.6
0.2
(10.3)
5.7
8.1
10.4
1,292.4–
2,753.4
4,250.8
4,509.9

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

** Other includes the direct programme/service specific costs of production and other production related costs excluding items
disclosed separately including staff costs.

F37

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
3 TOTAL OPERATING COSTS continued
The analysis of auditor’s remuneration is as follows:
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

2010
£m

2009
£m

0.6

0.5

1.0
0.3
0.2
0.1
0.5
0.8
3.5
0.1
3.6

0.7
0.2
0.1
–
–
1.1
2.6
–
2.6

4 EMPLOYEES AND REMUNERATION
4a Persons employed
The average number of persons employed in the year was:Average for the year
2010
2009
NumberNumberUK Public Service Broadcasting GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Group total

17,238
2,448
2,598
577
22,861

17,078
2,379
2,580
837
22,874

Within the averages above, 2,870 (2009: 2,806) part-time employees have been included at their fulltime equivalent of 1,647 (2009: 1,584).
In addition to the above, the Group employed an average full-time equivalent of 746 (2009: 789)
persons on a casual basis and the BBC Orchestra and BBC Singers, employed on programme contracts,
totalled 379 (2009: 375) full-time equivalents.

F38

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
4 EMPLOYEES AND REMUNERATION continued
4b Staff costs
Note

Salaries and wages*
Social security costs
Pension costs*– main scheme excl. exceptional pension income(defined benefit)**– Exceptional pension income (defined benefit)***– other schemes
Restructuring costs
Comprising:
UK Public Service Broadcasting GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Pension schemes additional operating cost (defined benefit)***
*

23bii
23bii
23bii
4c

2010
£m

2009
£m

1,012.3
84.0

1,003.6
86.9

124.6(334.1)
3.2
61.9
951.9

158.9
–
2.7
40.3
1,292.4

1,004.8
106.2
182.1
46.7
(387.9)
951.9

974.1
99.1
155.5
64.0
(0.3)
1,292.4

A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefit pension scheme members. The
contributions paid via the salary sacrifice arrangement have been treated as employer contributions, and a corresponding
reduction in salary. The total salary sacrificed in accordance with this arrangement was £43.5million (2009: £38.3million).

** The actual employer cash contributions to the defined benefit pension scheme are borne by each business. The additional
operating cost is the cost to the Group over and above these contributions. It is not possible to allocate this to each businesson a reasonable and consistent basis.
*** Pension costs in 2010 includes a one-off benefit of £334.1million resulting from the changes to the early retirement terms andconditions within the defined benefit pension scheme.

4c Restructuring costs
UK Public Service Broadcasting GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses

2010
£m

2009
£m

36.9
6.3
6.8
11.9
61.9

14.3
4.8
2.3
18.9
40.3

UK Public Service Broadcasting Group restructuring costs include the Continuous Improvement
Programme and costs resulting from our commitment to relocate and increase investment out of
London. Also included in restructuring costs are redundancy and severance costs incurred as part of areview process aimed at achieving more efficient operations within Commercial Businesses.

F39

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

4e 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 Executive Board, including the
Non-Executive Directors, the Trustees, the Directors of the Trust Unit, and the Chief Executive Officer
of BBC Worldwide.
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 www.bbc.co.uk/aboutthebbc/running/executive/eb.
Key management personnel compensation is as follows:
Short term employee benefits*
Post-employment benefits
Other long term benefits
*

2010
£m

2009
£m

7.0
0.3
0.2
7.5

6.6
0.4
0.1
7.1

The BBC Group introduced a salary sacrifice arrangement on 1 June 2008 for Old and New Benefits members who joined
the Pension Scheme before 1 November 2006. This arrangement is also applicable to all Career Average Benefit members.
Eleven (2009: ten) members in the table above participated in the arrangement. From that date, the terms and conditions of
employment were changed for those employees opting for the salary sacrifice arrangement and as a result employee pension
contributions made via the salary sacrifice have been treated as employer contributions, with a corresponding reduction insalary. Base salaries for key management have not been adjusted to reflect the impact of salary sacrifice.

5 Gain/(loss) on sale and termination of operations
Sale of Outside Broadcast division
Project Kangaroo sale/(closure)
BBC jam closure
Gain/(loss) on sale and termination of operations

2010
£m

2009
£m

–
2.0
–
2.0

5.9
(9.1)
0.3
(2.9)

In the year ended 31 March 2008, an independent joint venture (‘UK VOD LLP’) was created by BBC
Worldwide, ITV and Channel 4 to develop a new UK on-demand service known to the industry as
Kangaroo. On 4 February 2009, the Competition Commission reported that it believed the proposed
venture would create a lessening of competition in the emerging video on demand industry in the UK,
and blocked the joint venture from continuing. As a result BBC Worldwide terminated its investment
and during the year ended 31 March 2009, exceptional costs relating to this termination totalling£9.1million were charged to the income statement within the BBC Worldwide segment. This included
BBC Worldwide’s share of the joint venture’s assets impairment. In July 2009, UK VOD LLP sold all of
the Project Kangaroo’s assets, resulting in a gain of £2.0million.
On 1 April 2008, BBC Studios and Post Production Limited sold its Outside Broadcast business, aprovider of mobile production units, communications and special camera solutions, based in Langley,
Berkshire, resulting in a gain of £5.9million.

F40

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
6 GAIN ON DISPOSAL OF FIXED ASSETS
Disposal of properties
Gain on disposal of fixed assets

2010
£m

2009
£m

39.0
39.0

15.9
15.9

The gain on disposal of properties relates to the sale of Woodlands £22.5million, Victoria Road
£5.0million and Kingswood Warren in Surrey £11.5million.
The gain of £15.9million in 2009 related to the disposal of Queen Margaret Drive in Glasgow.
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 inaggregate in Note 3.

7 NET FINANCING (COSTS)/INCOME
Note

Financing income
Interest income
Expected return on pension scheme assets

23bii

Financing costs
Interest expense
Interest on obligations under finance leases
Fair value movement on financial liabilities
Fair value losses on interest rate swaps and caps
Unwinding of discount on provisions
Interest cost on pension scheme liabilities
Net financing (costs)/income

18
23bii

2010
£m

2009
£m

2.4
443.4
445.8

7.9
626.0
633.9

(12.0)(46.3)(4.9)(3.5)(66.7)(3.1)(463.7)(533.5)(87.7)(15.2)(44.6)–(5.1)(64.9)(2.7)(508.7)(576.3)
57.6

2010
£m

2009
£m

(46.3)(20.3)(21.1)(87.7)(44.6)
117.3(15.1)
57.6

The expected return on
pension scheme assets
represents the amount bywhich the assets held by thescheme have performed
better than expected.

The interest cost
represents the increaseduring the year in the valueof the plan liabilities because
the benefits are one year
closer to settlement.

The net cost of financing can be analysed as follows:

Net financing costs of leasing arrangements
Net financing (cost)/income related to pension obligations
Net financing costs related to loans and financial instruments

F41

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
8 TAXATION
8a Recognised in the income statement
The charge for the year, based on the rate of corporation tax of 28% (2009: 28%) comprised:
2010
£m

2009
£m

Foreign tax
Total current tax

27.3
(7.6)
19.7
(4.5)
15.2
14.7
29.9

22.7
(11.1)
11.6
3.4
15.0
10.1
25.1

Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior years
Total deferred tax

8d

5.1
(0.3)
4.8

(12.7)(4.9)(17.6)

Total taxation expense in the consolidated
income statement

8b

34.7

7.5

Note

Current tax
UK corporation tax
Deduct: double tax relief
Adjustments in respect of prior years

Deferred tax is
corporation tax which is
expected to be payable(or receivable) in the
future as a result ofdifferences between the
carrying amounts ofassets and liabilities, forfinancial reporting
purposes, and thecorresponding tax bases
used to calculate thecorporation tax currently
payable.

8b Reconciliation of taxation expense
The Group is only liable to taxation on those activities carried out with a view to making a profit and onrent, royalties and interest receivable. The BBC does not therefore receive relief for all its expenditure,and the tax assessed for the year consequently differs from the standard rate of corporation tax in the
UK. The differences are explained below:
2010
£m

2009
£m

512.3
6.0

251.3
16.0

518.3

267.3

145.1

74.8

Public Services activities
Public services taxable external income
Non-Taxable Licence Income
Non-cash element of net Group pension charge

5.4(10.0)(102.9)6.6(33.7)(32.9)

Commercial activities
Disallowed expenditure
Tax differential on overseas earnings
Tax differential in Joint Ventures and Associates

4.7
0.3
2.9

6.0
1.7
2.5

(0.3)
(4.5)
40.7
(6.0)
34.7

(4.9)
3.4
23.5
(16.0)
7.5

Note

Surplus before tax
Share of Joint Venture and Associates
Surplus before tax multiplied by standard rate of corporation
tax in the UK of 28% (2009: 28%)
Effects of

Adjustments in respect of prior years
Deferred tax
Current tax
Total tax charge for the year
Share of tax of Joint Venture and Associate
8a

F42GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
8 TAXATION continued
8b Reconciliation of taxation expense continued
The tax impact of a gain on sale and termination of operations (Note 5) and a gain on disposal of fixed
assets (Note 6) is £0.6million (2009: £nil). There is no capital gains tax arising on the sale of property(Note 6) due to the availability of indexation allowances.

8c Factors that may affect future tax charges
The group anticipates that the future tax charge will not alter significantly since all licence fee income isfree of tax.

8d Deferred tax asset/(liability)

At 1 April 2008
Charge to income statement
Acquired on acquisition of investment
Exchange differences
At 1 April 2009
Charge to income statement
Acquired on acquisition of subsidiary,
JV and Associates
Exchange differences
At 31 March 2010
Deferred tax asset/(liability) presented within:

Non-current assets
Non-current liabilities

Provisions£mFinancial
instruments
£m

Other
£m

Net deferred
tax asset/(liability)£m(12.9)
7.0
(1.4)
–
(7.3)
3.8

11.8
(2.6)
–
3.5
12.7
(3.4)

0.3
5.1
–
–
5.4
(5.3)

0.1
8.1
1.2
(2.4)
7.0
0.1

(0.7)
17.6
(0.2)
1.1
17.8
(4.8)

0.3
–
(3.2)

2.3
(1.3)
10.3

–
0.2
0.3

–
0.7
7.8

2.6
(0.4)
15.2

2010
£m

2009
£m

2008
£m

21.5
(6.3)
15.2

27.1
(9.3)
17.8

15.3
(16.0)(0.7)

Fixed asset
temporarydifferences£m

The tax charge is driven by the results of the commercial businesses, as the group’s public sector ‘free-toair’ broadcasting activities are not subject to taxation.
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of therelated tax benefit through future taxable profit is probable. The Group has unrecognised deferred tax
assets arising on capital losses totalling £24.4million (2009: £24.9million) and on operating losses totalling£nil (2009: £2.9million). These assets are not recognised on the basis that there is insufficient certainty
that capital or operating gains will arise against which the Group can utilise these losses.
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed
earnings of subsidiaries for which deferred tax liabilities have not been recognised was £3.1million (2009:£1.9million). No liability has been recognised in respect of these differences because the Group is in theposition to control the timing of the reversal of the temporary differences and it is probable that suchdifferences will not reverse in the foreseeable future.
Temporary differences arising in connection with the Group’s interest in the undistributed earnings ofassociates and joint ventures for the year are insignificant (2009: insignificant).

8d Deferred tax asset/(liability)
Deferred tax relating to cash flow hedges amounting to £0.3million (2009: £nil) has been included inother comprehensive loss and charged to equity.

F43

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
9 INTANGIBLE ASSETS
9a Intangible assets carrying amount and amortisation
Goodwill£m

Programmerights£m

Residualprogrammerights£m

Other*
intangibles
£m

Total
£m

Cost
At 1 April 2008
Additions on acquisition**
AdditionsElimination of fully amortised programme rights
Disposals
Exchange differences
At 1 April 2009
Additions on acquisition
AdditionsElimination of fully amortised programme rights
Disposals
Classified as held for saleExchange differences
At 31 March 2010

76.6
7.6
–
–
–
2.8
87.0
25.3
–
–
–
(5.6)
13.6
120.3

50.6
–
9.8
(4.8)
–
–
55.6
–
6.0
(1.7)
–
–
0.3
60.2

91.1
–
83.1
(51.2)
–
18.6
141.6
–
84.5
(47.3)
–
(2.5)
(4.1)
172.2

127.3
7.4
28.6
–
(2.9)
0.4
160.8
–
17.3
–
(8.0)
(0.7)
10.7
180.1

345.6
15.0
121.5
(56.0)
(2.9)
21.8
445.0
25.3
107.8
(49.0)
(8.0)
(8.8)
20.5
532.8

Amortisation and impairment
At 1 April 2008
Charge for the year
Elimination of fully amortised programme rights
Disposals
Impairment***
Exchange differences
At 1 April 2009
Charge for the year
Elimination of fully amortised programme rights
Disposals
Impairment
Classified as held for saleExchange differences
At 31 March 2010

–
–
–
–
–
–
–
–
–
–
17.5
–
–
17.5

44.2
4.9
(4.8)
–
–
–
44.3
5.5
(1.7)
–
–
–
0.3
48.4

35.9
76.0
(51.2)
–
–
17.6
78.3
66.9
(47.3)
–
–
(2.3)
(3.4)
92.2

46.1
20.4
–
(2.9)
2.9
–
66.5
22.9
–
(5.9)
–
(0.6)
1.8
84.7

126.2
101.3
(56.0)
(2.9)
2.9
17.6
189.1
95.3
(49.0)
(5.9)
17.5
(2.9)
(1.3)
242.8

Net book value
At 31 March 2010

102.8

11.8

80.0

95.4

290.0

At 31 March 2009
At 31 March 2008

87.0
76.6

11.3
6.4

63.3
55.2

94.3
81.2

255.9
219.4

Net book value

2010
£m

2009
£m

2008
£m

SoftwareAcquired masthead
Acquired carrier agreements
Other

58.1
26.8
7.6
2.9
95.4

63.1
22.6
6.4
2.2
94.3

55.7
22.9
–
2.6
81.2

*

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

Other intangibles includes:

F44

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
9 INTANGIBLE ASSETS CONTINUED** Additions in the prior year reflect the acquisition of UK.TV. This goodwill has been allocated to the group of assets or cashgenerating units (CGUs) within the BBC Worldwide segment that are expected to benefit from the business combination.
*** The impairment charge of £2.9million recorded against other intangibles during the prior year primarily relates to thetermination of the Kangaroo joint venture in BBC Worldwide. The impairment loss relating to the Kangaroo joint venture isincluded in the loss on termination of businesses in the income statement while the remaining impairment loss is included in
total operating costs.

9b Goodwill
All goodwill is recognised in BBC Worldwide. Goodwill additions in the current year reflect theacquisition of 2entertain Limited (see Note 19a). Included within additions of £25.3million is goodwill of£14.7million transferred from investment in joint ventures which arose on the original acquisition of theGroup’s 60% interest in 2entertain Limited.
Goodwill, allocated by cash generating unit (CGU), is analysed as follows
2010
£m

2009
£m

64.2
25.3
13.3
102.8

68.7
–
18.3
87.0

Goodwill by cash generating unit

Australian Travel Guide business
DVD Distribution business
Other CGUs

Goodwill impairment in the current year relates to the Australian Travel Guide business.
The recoverable amount of each CGU is based on value in use calculations. The present value of future
cash flows has been calculated by applying pre-tax discount rates to pre-tax cash flows.
The Group 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.
No impairment of goodwill was recognised in the prior year or at the date of transition to IFRS.
Australian Travel Guide business
The goodwill in this CGU arose as a result of the acquisition of Lonely Planet on 1 October 2007. An
impairment charge of £17.5million in this CGU has been recognised during the course of 2010, resulting
in the carrying value of goodwill in this CGU being written down to its recoverable amount. The
impairment charge reflects the strength of the Australian dollar relative to the US dollar and Sterling at
the date of the impairment testing.
The estimated cash flows of the current business plan used in determining the recoverable amount of the
CGU are consistent with those used at 31 March 2009 as they remain management’s expectation for the
performance of the CGU. The CGU continues to achieve its short term targets and to expand in the key
UK and US markets. However, upon converting the estimated non-Australian cash flows to Australian
dollar for the purposes of the impairment testing at the relatively weak spot exchange rates at the dateof the impairment testing, the recoverable amount has fallen below the carrying value and an impairment
has been necessary. If the exchange rates at 28 February 2010, when the testing was performed, hadremained consistent with those at 31 March 2009, the recoverable value would have exceeded thecarrying value and no impairment charge would have been recorded.
The recoverable amount calculation uses cash flow projections based on the current business plan
approved by management covering a ten year period and a discount rate of 12.8% (2009: 12.6%). The
calculation required a ten year projection period to fully assess the impact of a gradual transition to digitalcontent delivery which is expected to grow the business substantially beyond the near term. In addition
to providing digital content, the business intends to utilise online capabilities to provide a wider service
offering. Beyond this ten year period a terminal value was calculated using a growth rate of 3%. This
growth rate does not exceed the long-term average growth rate for the market in which Lonely Planet
operates.

F45

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
9b Goodwill continued
The main assumptions on which the forecast cash flows were based are growth of the travel market and
the Group’s share of key markets, being the US, UK and Australia.
In determining a value to assign to growth of the travel market in the short term the Group consulted
the Consumer Confidence Index (‘CCI’), which usually has a 5-7 month time lag impact on the business.
In the longer term, a value was determined in line with Gross Domestic Product (‘GDP’) and economic
growth forecasts.
Past experience was used to assign a value to the Group’s share of key markets.
DVD distribution business
The goodwill in this CGU arose as a result of the acquisition in the year of 2entertain. Cash flow
projections used in the recoverable amount calculation are based on the current business plan approvedby management covering a five year period and are extrapolated using an expected growth rate of 1%. A
discount rate of 19.9% has been applied to the cash flows. In forming the assumptions used in calculating
the recoverable amount, the Group has used expectations of long term trends for the DVD distribution
industry.
Management believes that any reasonably possible change in the key assumptions on which the DVD
distribution business’ recoverable amount is based would not cause carrying amount to exceed its
recoverable amount.
Other CGUs
Other CGUs include the Australian Channels business, Audiobooks business and UK Magazines businessthese CGUs are not individually significant.
Management believes that any reasonably possible change in the key assumptions on which therecoverable amounts are based would not cause the carrying amounts to exceed the recoverable
amounts.

F46

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
10 PROPERTY, PLANT AND EQUIPMENT
10a Property, plant and equipment carrying amount and depreciation
Cost or valuation
At 1 April 2008
Additions
Brought into service
Disposals
Transfers
Assets held for saleExchange movements
At 31 March 2009
Additions on acquisition
Additions
Brought into service
DisposalsWrite off*

Land andbuildings£mPlant andmachinery£m

Furniture andfittings£m

Assets underconstruction
£m

Total
£m

851.2
20.7
1.1
(2.7)
(0.1)
(1.4)
0.9
869.7
–
25.0
10.5
(20.3)
–

956.5
54.7
26.2
(61.1)
8.2
–
2.1
986.6
0.7
39.7
40.3
(64.7)
–

157.5
9.1
3.0
(9.1)
(8.2)
–
0.5
152.8
–
12.2
5.1
(2.6)
–

64.3
57.0
(30.3)
(0.4)
0.1
–
–
90.7
–
48.3
(55.9)(0.6)(6.7)

2,029.5
141.5–(73.3)–(1.4)
3.5
2,099.8
0.7
125.2–(88.2)
(6.7)

(0.7)
(0.1)
884.1

(0.5)
2.8
1,004.9

(0.8)
0.8
167.5

–
0.5
76.3

(2.0)
4.0
2,132.8

Assets held for saleExchange movements
At 31 March 2010
Depreciation
At 1 April 2008
Charge for the year
Disposals
Transfers
Impairment
Assets held for saleExchange adjustments
At 31 March 2009
Charge for the year
Disposals
Transfers
Assets held for saleExchange adjustments
At 31 March 2010
Net book value
At 31 March 2010

177.4
30.2
(1.4)
–
3.7
(0.8)
0.7
209.8
30.2
(10.1)
–
(0.4)
(0.1)
229.4

569.1
91.7
(53.6)
3.2
9.8
–
1.8
622.0
91.6
(63.8)
–
(0.4)
1.5
650.9

71.1
15.8
(5.1)
(3.2)
0.8
–
0.4
79.8
17.7
(2.4)
–
(0.7)
1.0
95.4

–
–
–
–
–
–
–
–
–
–
–
–
–
–

817.6
137.7
(60.1)
–
14.3
(0.8)
2.9
911.6
139.5
(76.3)
–
(1.5)
2.4
975.7

654.7

354.0

72.1

76.3

1,157.1

At 31 March 2009
At 31 March 2008

659.9
673.8

364.6
387.4

73.0
86.4

90.7
64.3

1,188.2
1,211.9*

The write off at cost of £6.7million in UK PSB ‘assets under construction’ is as a consequence of the Digital Media Initiative(DMI) project being re-scoped in order for it to be delivered as a complete ‘end to end’ digital production tool.

F47

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
10 PROPERTY, PLANT AND EQUIPMENT continued
10b Property, plant and equipment held under finance leases
Land andbuildings£mPlant andmachinery£m

Furniture andfittings£m

Assets underconstruction
£m

Total
£m

Net book value
At 31 March 2010

448.7

28.7

–

–

477.4

At 31 March 2009
At 31 March 2008

467.2
474.4

36.8
45.0

–
0.4

–
–

504.0
519.8

11 INTERESTS IN ASSOCIATES AND JOINT VENTURES
Details of significant joint ventures and associates along with principal subsidiary undertakings, including
their activities, are provided in Note 26.
Group share of joint ventures
2010
2009
2008
£m
£m
£m

Group share of associates
2010
2009
2008
£m
£m
£m

Total
2009
£m

2008
£m

140.6
37.2
177.8

204.1
47.9
252.0

225.0
28.5
253.5

Current assets
Non-current assets
Total assets

107.6
24.2
131.8

Current liabilities
Non-current liabilities
Total liabilities(53.0) (96.5) (110.2) (41.0) (38.5) (41.5) (94.0) (135.0) (151.7)(84.0) (88.6) (84.3) (192.3) (212.5) (122.2) (276.3) (301.1) (206.5)(137.0) (185.1) (194.5) (233.3) (251.0) (163.7) (370.3) (436.1) (358.2)

Adjustment to reflect
effective obligation
Goodwill
Total net book value

165.1
29.2
194.3

178.3
19.6
197.9

33.0
13.0
46.0

2010
£m

39.0
18.7
57.7

46.7
8.9
55.6

34.6
2.6
32.0

22.8
19.7
51.7

42.5
21.5
67.4

185.4
13.5
11.6

191.4
13.6
11.7

107.9
4.1
3.9

220.0
16.1
43.6

214.2
33.3
63.4

150.4
25.6
71.3

46.2
(14.2)
32.0

72.0(20.3)
51.7

67.4
–
67.4

11.6
–
11.6

11.7
–
11.7

3.9
–
3.9

57.8
(14.2)
43.6

83.7(20.3)
63.4

71.3
–
71.3

Income

190.8

300.5

274.6

72.9

57.8

48.8

263.7

358.3

323.4

Profit/(loss) after tax
Adjustment to reflect
effective obligation**
Other

22.5

22.4

44.8

6.9

(6.8)

(6.3)

29.4

15.6

38.5

0.8
–
23.3

2.6
2.0
27.0

1.9
–
46.7

5.2
0.4
12.5

10.0
(0.3)
2.9

7.7
(0.1)
1.3

6.0
0.4
35.8

12.6
1.7
29.9

9.6
(0.1)
48.0

The net book value ispresented within:
Interest in associates andjoint ventures
Provisions**Of the provisions balance for joint ventures, the recognition of the Group’s share of net liabilities (which did not represent
operating losses) for UK Gold Holdings Limited (UKGH) as at 1 April 2008 was recorded in the Consolidated statement ofcomprehensive income, resulting in a reserves adjustment of £19.4million. In the current year the Group has recognised£7.0million as its share of profit for UKGH, carrying forward an amount of £13.0million within provisions (Note 18) as theGroup’s share of net liabilities.

** Under the terms of the agreements with the other investors in certain of the Group’s joint ventures and associates the Group
has no obligation to fund losses incurred by those entities or to make good their net liabilities. As a result no share of any
relevant losses is included in the financial statements.

F48

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
12 AVAILABLE FOR SALE INVESTMENTS

2010
£m

2009
£m

Cost
At 1 April
Exchange adjustment
At 31 March

4.0
–
4.0

4.2
(0.2)
4.0

Provision
At 1 April
Charge for the year
Exchange adjustment
At 31 March

4.0
–
–
4.0

1.5
2.7
(0.2)
4.0

Net Book Value––

The available-for-sale investment relates to the Group’s 20% unquoted investment in the ordinary sharecapital of Radio Mid-Day (West) India PVT. Limited, a company registered in India. The principal activityof the company is to obtain and operate FM radio licences in India. During the prior year, the Directors
reassessed the carrying value of the Group’s investment based on its future business plan and recorded
an additional provision of £2.7million bringing the carrying value of the investment to £nil. This
assessment reflects difficult challenging local and global market conditions. Recoverable amountcalculations were based on value in use and were calculated using a discount rate of 16.1%. The prioryear impairment loss is reflected in the BBC Worldwide segment.
This investment is classified as available-for-sale as the Group has no significant influence over thecompany. This is because the Group does not have Board representation and has limited influence due
to Indian regulations applicable to foreign investors.
The group also holds an available-for-sale investment at £nil cost relating to its 10% share of the total
issued share capital of Daunus Limited. The principal activity of Daunus Limited is property development.

13 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Interests in associates and joint ventures
Non-current assets
Programme-related assets and other inventories
Intangible assets
Property, plant and equipment
Current assets
Programme-related assets and other inventories
Trade and other receivables due within one year
Cash and cash equivalents
Total assets classified as held for sale

Trade and other payables
Current tax liabilities
Total liabilities classified as held for sale

2010
£m

2009
£m

2008
£m

7.2

–

–

0.2
4.6
0.5

–
–
0.6

–
–
16.5

2.4
6.8
8.3
30.0

–
–
–
0.6

–
3.2
–
19.7

2010
£m

2009
£m

2008
£m

(8.1)
(0.3)
(8.4)

–
–
–

(5.1)
–
(5.1)

During the year, the Group took the decision to dispose of its 50% interest in Animal Planet Europe andhas classified this associate as an asset held for sale. The asset is carried at £7.2million at 31 March 2010.
Following a decision taken by management in September 2009 the group company Audiobooks is held
for sale as at 31 March 2010.
F49

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
14 PROGRAMME-RELATED ASSETS AND OTHER INVENTORIES
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

2010
£m

2009
£m

2008
£m

132.2
285.7
71.2
159.8
648.9
33.4
682.3

139.3
252.1
74.1
130.4
595.9
19.6
615.5

130.0
243.3
79.8
159.3
612.4
20.6
633.0

Within other inventories is £4.9million (2009: £6.7million; 2008: £5.9million) relating to the Australian
Travel Guide business, which is expected to be sold more than 12 months after the balance sheet datein accordance with the entity’s normal operating cycle.

15 TRADE AND OTHER RECEIVABLES
15a Other receivables due after more than one year
Other receivables
Amounts owed by associates and joint ventures
Prepayments and other assets*
Total
*

2010
£m

2009
£m

2008
£m

17.1
5.7
2.9
25.7

43.0
2.8
385.1
430.9

17.0
4.3
378.1
399.4

2010
£m

2009
£m

2008
£m

174.4
410.8
30.1
36.1
32.3
570.1
1,253.8

141.9
384.6
43.3
30.8
19.7
127.4
747.7

134.4
368.4
36.4
26.2
13.0
117.5
695.9

See ‘other payables’ for explanation of balance.

15b 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*See ‘other payables’ for explanation of balance.

F50

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
16 TRADE AND OTHER PAYABLES
16a Trade and other payables due within one year
Trade payables*
Amounts owed to associates and joint ventures
Other taxation and social security
Other payables**Accruals and deferred income
Licence savings stamp deposits and direct debit instalments
Total
*

2010
£m

2009
£m

2008
£m

490.6
2.3
26.8
522.6
393.7
68.6
1,504.6

396.0
7.1
27.4
45.8
329.6
71.5
877.4

442.5
2.6
28.1
57.3
360.7
73.5
964.7

Trade payables also include programme-related payables, residual copyright payments, and salaries and wages.

** Other payables includes a £382.0million liability for the BBC’s contracted obligation in respect of the Broadcasting House leasearrangement. This liability has been measured at its fair value. A corresponding asset has been recognised in ‘Prepayments andother assets’. These amounts will be transferred to finance lease creditors and fixed assets respectively on occupation of the
Broadcasting House building in accordance with the planned refurbishment programme. In 2009, these amounts were included
within ‘other payables’ and ‘prepayments and other assets’ due after more than one year in accordance with the occupation
schedule. Other Payables also includes a £37.8million (2009: £32.3million) liability in relation to a put option over 25% of theissued share capital of Lonely Planet (see Note 20).

16b Other payables due after more than one year
Other payables
Total

2010
£m

2009
£m

2008
£m

175.1
175.1

513.1
513.1

514.7
514.7

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 theircontracts. The BBC monitors compliance against the terms of this code. Payments for programmeacquisitions are made in accordance with contractual terms. The Group’s number of days outstanding inrespect of other trade payables at 31 March 2010 was 29 days (2009: 32 days). Residual payables andassociated costs have been excluded for the purpose of this calculation, as they relate to payments toartists and contributors other than trade creditors.

17 BORROWINGS
17a Borrowings due within one year
Bank loan and overdraft
Unsecured loan notes
Obligations under finance leases
Total

2010
£m

2009
£m

2008
£m

1.7
–
5.7
7.4

2.5
3.3
8.4
14.2

58.6
0.7
7.6
66.9

2010
£m

2009
£m

2008
£m

211.4
603.2
814.6

268.0
609.5
877.5

140.0
610.0
750.0

17b Borrowings due after more than one year
Bank loan
Obligations under finance leases
Total

F51

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
17 BORROWINGS continued
17c Finance lease obligations
Finance lease liabilities are payable as follows:

2010
Not later than one year
Later than one year but not later than five years
Later than five years
2009
Not later than one year
Later than one year but not later than five years
Later than five years
2008
Not later than one year
Later than one year but not later than five years
Later than five years

Minimum
lease
payments£m

Interest£mPrincipal
£m

51.0
210.2
1,138.4
1,399.6

45.3
175.3
570.1
790.7

5.7
34.9
568.3
608.9

53.7
214.9
1,193.2
1,461.8

45.3
180.4
618.2
843.9

8.4
34.5
575.0
617.9

53.5
196.2
1,247.1
1,496.8

45.9
177.1
656.2
879.2

7.6
19.1
590.9
617.6

A finance lease is alease where the leasee
has taken on 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.
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’). In the case of a property lease, the BBC considers that leased assets and liabilities
should be recognised in accordance with its occupancy of the site unless there is significant evidence tosuggest that the right to use the asset has passed at an earlier date. Where a significant site is being
redeveloped, occupation may occur in distinct phases; consequently, the leased asset and liabilities arerecognised based on the proportion of the site occupied at each commencement date.
Further, 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 RPI. Where thishas 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 £552.5million (2009:£550.8million, 2008: £539.8million) have contingent elements included within their contracts and resulted
in contingent rents of £16.3million (2009: credit £6.9million 2008: £0.6million) being reflected inoperating costs.

F52

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
18 PROVISIONS AND CONTINGENT LIABILITIES

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

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

At
1 April
2009£m

Charge forthe year£m

Utilisedduringthe year£m

Releasedduringthe year£m

Unwindingof discount£m

At
1 April
2010
£m

95.6
12.6
19.6
0.3

64.5
8.0
1.8
–

(79.5)
(2.6)
–
(0.3)

(2.6)
(4.9)
–
–

3.1
–
–
–

81.1
13.1
21.4
–

20.3
2.1
150.5

0.9
3.5
78.7

–
(0.2)
(82.6)(7.0)(0.8)(15.3)

–
–
3.1

14.2
4.6
134.4

87.0

59.3

63.5
150.5

75.1
134.4

At
1 April
2008£m

Charge forthe year£m

Utilisedduringthe year£m

Releasedduringthe year£m

Unwindingof discount£m

At
1 April
2009
£m

120.0
13.8
16.4
1.5

44.1
2.9
4.1
0.1

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

(3.8)
(2.4)
–
(0.4)

2.7
–
–
–

95.6
12.6
19.6
0.3

–
1.3
153.0

20.3
1.2
72.7

–
(0.1)
(71.0)

–
(0.3)
(6.9)

–
–
2.7

20.3
2.1
150.5

112.4

87.0

40.6
153.0

63.5
150.5

The majority of the restructuring charge for the year relates to redundancy for the Continuous
Improvement programme, (a five-year programme to secure annual efficiencies ending in 2012/13) andto the BBC’s commitment to transfer investment out of London.
Litigation and insurance provisions relate to self-insurance and production related insurance based on
previous experience as well as potential legal claims.
Property provisions relate to the cost of returning leasehold properties (accounted for as operatingleases) to their original condition at the end of the lease. The average life of these leases is 12 years, andthe actual amount payable will depend on the extent of leasehold improvements made over theremainder of the lease.
Other provisions consist of a number of balances arising across the BBC in the normal course ofbusiness.
Share of joint ventures net liabilities represents the amount held in provisions relating to the group shareof joint ventures with net liabilities (see Note 11).
At 31 March 2010 the group had contingent liabilities estimated to be £0.6million (2009: £1.0million) in
respect of guarantees and indemnities.

F53

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
18 PROVISIONS AND CONTINGENT LIABILITIES continued
The 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. Provision is only made to theextent that the group consider it probable that there will be an outflow of economic benefits and theamount can be reliably estimated.

19 ACQUISITIONS
19a Acquisition of 2entertain Limited
On 6 August 2009, BBC Worldwide gained control of 2entertain Limited (‘2entertain’) and from thisdate consolidated its results and financial position. Prior to 6 August 2009, BBC Worldwide equity
accounted for 2entertain in line with its 60% ownership and joint control of the entity. The purchasefollowed BBC Worldwide’s joint venture partner entering administration and BBC Worldwide exercising
its call option over the joint venture partner’s shares. The purchase was completed on 1 March 2010
when BBC Worldwide acquired the remaining 40% of 2entertain shares.
The adjustments required to the book values of the assets and liabilities of 2entertain in order to present
the net assets at fair value under the accounting policies of BBC Worldwide were a reduction of£13.8million. These are set out below:
Book
value
£m

Fair value
adjustments
£m

Fair
value
£m

Non-current Assets
Programme investments
Property, plant and equipment

13.8
0.7

(13.8)––
0.7

Current assets
Inventories
Trade and other receivables
Advances
Other current assets
Derivative Financial Instruments
Cash and cash equivalents

13.7
18.7
15.7
8.1
0.5
40.5

–
–
–
–
–
–

13.7
18.7
15.7
8.1
0.5
40.5

Total assets
Current Liabilities
Trade payables
Royalty creditors
Accruals and deferred income
Total Liabilities

111.7(13.8)

97.9(6.9)(39.6)(24.9)(71.4)

–
–
–
–

(6.9)
(39.6)(24.9)(71.4)Net assets acquired
Less: investment in joint venture already owned

40.3(13.8)

26.5(15.9)

Goodwill

9.9

Purchase consideration and costs of acquisition

20.5

Satisfied by:
Cash consideration
Costs of acquisitions

17.0
3.5

Total

20.5

F54

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
19a Acquisition of 2entertain Limited continued
Following BBC Worldwide joint venture partner entering administration, the licence agreement covering
2entertain’s right to distribute BBC programme investments terminated. This termination and BBC
Worldwide’s call option, was challenged by the administrators of BBC Worldwide’s joint venture partner
and was subsequently upheld by the High Court and Court of Appeal. As a result the programme
investments were considered to have a £nil market value and were written down accordingly. The Court
also ruled that the consideration paid by BBC Worldwide for the remaining 40% stake should be a fairvalue reflecting the termination of this licence agreement. On this basis, BBC Worldwide subsequently
agreed with the administrators the price paid of £17.0million.
A consistent approach is undertaken at each acquisition to identify the fair value of the separable assets
and liabilities acquired. The residual goodwill on acquisition for 2entertain principally represents the valueof the assembled workforce and the transfer of their knowledge of the operation. This does not form aseparable asset under IFRS 3 but is nonetheless expected to contribute to the future results of theGroup.
2entertain contributed £30.2million to operating profit in BBC Worldwide for the period between thedate of acquisition and 31 March 2010.
If the acquisition had occurred on 1 April 2009, management estimates that BBC Worldwide revenues(excluding BBC Worldwide’s share of joint venture revenue) would be £49.0million higher at£937.3million. Its contribution to BBC Worldwide’s profit attributable to equity holders for the year
ended 31 March 2010 would have been £10.0million, giving rise to a profit before tax figure of£130.4million. This information takes account of the profit recognised while the investment was a joint
venture and should not be viewed as indicative of the results of operations that would have occurred if
the acquisitions had actually been completed on 1 April 2009.

19b Other acquisitions
During the year ended 31 March 2010, BBC Worldwide also acquired minority shareholdings in two
production companies for a total consideration of £0.7million. No fair value adjustments were required.
Goodwill of £0.7million arose on acquisition representing the skills of the entities’ workforce.
In accordance with IAS 28: Investment in Associates both of the acquired minority shareholdings havebeen assessed as associated undertakings.

19c Prior year acquisitions
On 1 July 2008 the Group acquired the remaining 80% of UK.TV, registered in Australia, for a total cash
consideration of AU$31.2million (£15.1million). UK.TV operates a television channel showing British
television content in Australia and New Zealand. This transaction has been accounted for by thepurchase method of accounting. The Group previously held a 20% interest in UK.TV upon which no
goodwill was recognised.
The business was acquired to provide a platform for the launch of BBC-branded channels in Australia
and to participate fully in a channel largely broadcasting BBC content.
The total adjustments required to the book values of the assets and liabilities of UK.TV in order topresent the net assets of those companies at fair value and under the accounting policies of the Group
were £3.4million.
The goodwill arising on acquisition is attributable to the value of the uncommitted workforce.
UK.TV contributed £11.2million to revenue and £2.7million to profit before tax for the period between
the date of acquisition and 31 March 2009.
If the acquisition had occurred on 1 April 2008, management estimates that its contribution to BBC
Worldwide revenues for the year ended 31 March 2009 would have been £14.1million. Its contribution
to BBC Worldwide profit attributable to equity holders for the year ended 31 March 2009 would havebeen £3.5million. This information takes into account profits recognised while the investment was an
associate and the amortisation of acquired intangible assets together with related income tax effects andshould not be viewed as indicative of the results of operations that would have occurred if theacquisitions had actually been completed on 1 April 2008.

F55

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
19c Prior year acquisitions continued
In determining these amounts, management has assumed that the fair value adjustments that arose on
the date of acquisition would have been the same if the acquisition occurred on 1 April 2008.
The Group previously held a 20% interest in UK.TV. In line with IFRS 3 an adjustment of £0.6million has
been recorded in retained earnings to reflect the increase in stake.
During the year ended 31 March 2009, the group also acquired minority shareholdings in several
production companies, accounted for as associates or joint ventures. The Group’s share of the fair valueof assets acquired was £3.6million, and the Group’s share of the fair value of liabilities acquired was£3.2million. £10.4million of goodwill was recognised, on a consideration including costs of £10.4million.
The goodwill recognised on acquisition is attributable to the anticipated profitability of content to be
produced.

20 RESERVES
Operating reserve
An adjustment of £0.5million was recognised in the Consolidated Statement of Changes in Equity, being
the cumulative profits recognised by the group in relation to the acquisition of 2entertain.
At 31 March 2010, the cumulative goodwill written off to reserves on acquisitions prior to 1999
amounted to £6.8million. This amount is unchanged on prior year and remains in equity upon transition
to IFRS as permitted by IFRS 1: First time adoption of IFRS.

Other reserve
Other reserve includes a put option over 25% of the issued share capital of Lonely Planet, which is
exercisable by the minority shareholders. On 7 October 2009, the terms of the put option wererenegotiated. This renegotiation has resulted in the original liability being de-recognised and a new liability
based upon the revised option terms being recognised. The debit entry for this liability was recognised
within equity as it is considered that the minority shareholders continue to retain the risks and rewards ofownership. Changes to the fair value of the put option liability other than in relation to changes in foreignexchange rates, continue to be recorded in the income statement within financing income and expense.

21 RECONCILIATION OF GROUP OPERATING SURPLUS TO CASH GENERATEDFROM OPERATIONSGroup operating surplus
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
Profit on disposal of operations(Increase)/decrease in stocks
Increase in debtors
Increase/(decrease) in creditors
Decrease in provisions
Cash generated from operations

2010
£m

2009
£m

522.1
260.7
(387.9)3.5(19.6)–
7.3–(54.5)(67.1)
226.5(16.1)
474.9

150.9
255.1
(0.3)
5.0
18.5
(0.5)
10.4
(1.8)
13.3
(76.5)(100.9)(23.3)249.9

F56

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
22 LONG TERM COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET
22a Contracts placed for future expenditure
Fixed asset additions
Programme acquisitions and sports rights
Independent programmes
Other fixed payments on long term outsourcing arrangements

2010
£m

2009
£m

50.9
1,026.2
148.8
3,432.7
4,658.6

51.7
1,307.5
106.8
3,865.2
5,331.2

Represents amounts which
the BBC is contractuallycommitted to, but whichshould not be recognised on
the balance sheet as they do
not meet the recognition
criteria.

The BBC has outsourced certain non-core functions, including IT support, content distribution andtransmission, facilities management and elements of finance support.
Following the provisions of s410A of the Companies Act 2006 the Group has included amounts
committed under agreements that are not reflected in the balance sheet, or disclosed elsewhere in thefinancial statements. The Group has interpreted this disclosure to include fixed payments due underoutsourcing and similar arrangements for the duration of those arrangements. The amounts disclosed do
not include variable payments.

22b 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

2010
£m

2009
£m

110.1
344.9
453.4
908.4

104.4
381.4
514.3
1,000.1

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

The BBC’s operating lease agreements primarily relate to office space, land, computers and other IT
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.

22c Post balance sheet events
There are no material events after the balance sheet date to disclose.

23 PENSION PLANS
23a Group pension plans
The Group operates several pension plans. The BBC Pension Scheme, to which most employees belong,
and a small unfunded plan (the Unfunded Scheme), which is closed to new members, are contributory
defined benefit plans. Additionally the Group Personal Pension Scheme and several small schemes aredefined contribution plans.
Note 23b sets out the assets and liabilities and charges for the period for each plan. Note 23c provides
further details on the BBC Pension Scheme.

23b Pension charges and balances within the financial statements
23b i Pension asset/(liability) included in the balance sheet

BBC Pension Scheme
Unfunded Scheme
Total

2010
£m

Pension asset
2009
£m

2008
£m

2010
£m

Pension liability
2009
£m

2008
£m

–
–
–

–
–
–

528.4
–
528.4

(1,640.9)(6.2)(1,647.1)(138.6)(4.7)(143.3)

–
(5.1)
(5.1)

F57

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23b Pension charges and balances within the financial statements continued
23b ii Pension income/(charges) in consolidated income statement
Defined benefit schemes
BBC Pension
Scheme£m

Unfunded
Scheme£m

Definedcontribution
scheme£m

All schemes£m2010
Current service cost
Past service costs
Exceptional past service income*
Total operating income/(charge)**
Expected return on pension plan assets
Interest on pension scheme liabilities
Net finance cost
Net income/(cost) in consolidated income statement(128.2)(32.6)
334.1
173.3
443.4
(463.4)(20.0)
153.3

–
–
–
–
–
(0.3)
(0.3)
(0.3)

(3.2)
–
–
(3.2)
–
–
–
(3.2)

(131.4)(32.6)
334.1
170.1
443.4
(463.7)(20.3)
149.8

2009
Current service cost
Past service cost*
Gain on curtailments
Total operating charge**
Expected return on pension plan assets
Interest on pension scheme liabilities
Net finance income/(cost)
Net cost in consolidated income statement(161.8)(24.2)
10.0(176.0)626.0(508.4)117.6(58.4)

–
–
–
–
–
(0.3)
(0.3)
(0.3)

(2.7)
–
–
(2.7)
–
–
–
(2.7)

(164.5)(24.2)
10.0(178.7)626.0(508.7)117.3(61.4)*

The current service costis the underlying cost to the
BBC of pension rights
earned by employees
during the year.
The past service
income arises fromchanges to the terms andconditions relating tomembers defined
retirement benefits,
resulting in a credit for
years of service alreadygiven.
The expected return on
pension plan assets
comprises estimates basedon predictions of future
performance and economic
conditions.

This balance relates to past service income arising from a change to early retirement terms and conditions.

** Of the total net operating income of £173.3million for 2010 (2009 net charge £176.0million), £36.2million (2009 £17.1million
expense) was recognised as an expense in earlier years as part of redundancy costs in accordance with IAS 37. The remaining
income of £209.5million (2009: charge £158.9million) was recognised in the current year.

23b iii Movement in (deficit)/surplus during the year

(Deficit)/surplus in scheme at
the start of the year
Movement in the year:
Current service cost
Contributions (fromemployer)*
Past service income/(costs)
Gain on settlements andcurtailments
Net finance (cost)/income
Actuarial (loss)/gain recognisedin the consolidated statementof comprehensive loss
Deficit in scheme at the end of
the year*

BBC Pension
Scheme2010£mUnfundedscheme
2010
£m

Total
2010
£m

BBC Pension
Scheme2009£mUnfundedscheme
2009
£m

Total
2009
£m

(138.6)(4.7)(143.3)

528.4

(5.1)

523.3

(128.2)–(128.2)(161.8)–(161.8)

214.3
301.5

0.3
–

214.6
301.5

176.0
(24.2)

0.3
–

176.3
(24.2)–(20.0)–(0.3)–(20.3)

10.0
117.6

–
(0.3)

10.0
117.3

(1,869.9)(1.5) (1,871.4)(784.6)0.4(784.2)(1,640.9)(6.2) (1,647.1)(138.6)(4.7)(143.3)The defined
contribution plans do
not give rise to balance
sheet pension assets/
liabilities as there is no
ongoing liability for theemployer from these plansonce the contributions due
for the year have been
settled.

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 main scheme.
As the scheme is unfunded there are no assets and hence no expected return on assets.
F58

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23c BBC Pension Scheme
The BBC Pension Scheme is the main pension plan of the Group and covers the majority of employees.
This plan provides salary related benefits on a defined benefit basis funded from assets held in separate
trustee-administered 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.
23c i Scheme financial position
2010
£m

2009
£m

2008
£m

2007
£m

2006
£m

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

8,117.9(7,788.6)
329.3

7,843.4(7,675.9)
167.5

83%

98%

107%

104%

102%

IAS 19 valuation

Scheme assets
Scheme liabilities(Deficit)/surplus
Percentage by which scheme assets
cover liabilities

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

Key movements in the year are shown in Note 23b iii.
A deferred tax asset or liability will not arise for the Group because most of the Group’s public service
activity is not subject to taxation.
23c ii Changes in the present value of plan liabilities
The table below illustrates the movement on the plan liabilities during the year. The key things which
affect this are the additional year of pension benefits earned (and employee contributions made), interest
charged on existing liabilities, any gains or losses relating to participants leaving the pension scheme,changes in assumptions made and benefits paid out during the year.
Opening present value of plan liabilities
Current service cost
Past service (income)/cost
Gains on curtailments
Interest on pension plan liabilities
Experience (gains)/losses arising on plan liabilities
Changes in assumptions underlying plan liabilities
Contributions by plan participants
Benefits paid
Closing present value of plan liabilities

2010
£m

2009
£m

2008
£m

6,592.6
128.2(301.5)–463.4(33.2)
3,266.1
7.2(327.1)
9,795.7

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

7,788.6
164.8
21.5
–
413.6
149.1
(786.0)53.1(291.1)
7,513.6

The plan liability
represents the expectedamount of money that will
be needed in the future to
pay employees for theircurrent and future service
to the company.
Changes inassumptions underlying
plan liabilities represents
the changes in estimatesused to value the future
liability. Key assumptions
include the discount rate,
future increase in salaries,
mortality and employee
turnover.

F59GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23c iii Changes in the fair value of plan assets
The table below illustrates the movement on the plan assets during the year. The key things which affectthis are the additional year of contributions made, changes in the value of the pension plan assets(including the investment return) and benefits paid during the year.
A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefit members and1 November 2006 for Career Average Benefit members. The contributions paid via the salary sacrificearrangement have been treated as employer contributions.
Opening fair value of plan assets
Expected rate of return on plan assets
Actuarial gains/(losses) on plan assets
Contributions by employer
Contributions by plan participants
Benefits paid
Closing present value of plan assets

2010
£m

2009
£m

2008
£m

6,454.0443.4
1,363.0
214.3
7.2(327.1)
8,154.8

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

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

Actuarial gains/losses
on plan assets
represent the amount bywhich the assets held by
the scheme (such as
equities, bonds andproperty) have
performed better orworse than expected.

23c iv Plan assets
The allocation of assets by the Trustees is governed by a need to manage risk against the desire for highreturns and any liquidity needs. A high percentage of assets are held in equities which the Trustees
expect will produce higher returns in the long term. The target allocation, based on market values, forequities is 50% (UK equities 25% and overseas equities 25%), bonds 30%, property 10% and alternatives
10%.
Type of asset

2010
£m

Equities
Bonds
Property
Alternatives*
Cash
Total assets

4,573
1,825
787
719
251
8,155

Actual return on pension
plan assets**

1,806

*

%

56
22
10
9
3

2009
£m

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

%

51
25
12
8
4

(1,468)

2008
£m

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

%

58
21
12
6
3

(22)

Alternatives include private equity, debt and currency.

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

23c v Pension losses in consolidated statement of comprehensive loss
2010
£m

2009
£m

1,363.0
33.2(3,266.1)(1,869.9)(2,094.0)
171.3
1,138.1(784.6)

Cumulative loss recognised in the consolidated statement of comprehensive loss (4,395.3)(2,525.4)

Actual return less expected return on pension plan assets
Experience gains arising on plan liabilities
Changes in assumptions underlying the present value of plan liabilities
Net loss recognised in the consolidated statement of comprehensive loss

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

F60

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23c vi 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 inconsolidated statement of comprehensiveloss
Amount (£million)
Percentage of plan liabilities

2010

2009

2008

2007

2006

1,363.0
16.7%(2,094.0)
32.4%(584.6)
7.3%(121.0)1.5%

1,246.5
15.9%

33.2
0.3%

171.3
2.6%

(149.1)2.0%(164.6)
2.1%

208.6
2.7%

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

52.3
0.7%

136.1
1.7%

658.4
8.6%

23c vii Funding the Scheme
As a result of the 2007 actuarial valuation by Towers Watson, it has been agreed between the BBC andthe pension scheme trustees that employer contributions would increase to 19.35% from 1 July 2008.
Employee contributions for Old and New Benefit members rose from 6% to 6.75% from 1 April 2009
and will rise to 7.5% from 1 April 2010 and employer contributions decreased from 19.35% to 18.6%
from 1 April 2009 and will decrease to 17.85% from 1 April 2010. Employee contributions for Career
Average Benefit members are set at 4%.
A salary sacrifice arrangement was introduced on 1 June 2008 for Old and New Benefits members and1 November 2006 for Career Average Benefit members. The contributions paid via the salary sacrificearrangement have been treated as employer contributions.
An interim valuation was performed as at 1 April 2009 which indicated an increased deficit on thescheme compared to the previous actuarial valuation. The next formal actuarial valuation is expected tobe performed as at 1 April 2010.
Contribution rates

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

Projection
2011
%

2010
%

2009
%

2008
%

2007
%

17.85
7.5
4.0

18.6 18.8/19.35
6.75
6.0
4.0
4.0

18.8
6.0
4.0

7.5
5.5/6.0
4.0**

17.85

18.6 18.8/19.35

18.8 19.3/18.8

Excludes the cost effectively paid for by the employee and the salary sacrifice element.

** The Career Average Benefit scheme started on 1 November 2006.

On the basis assumed above, contributions totalling £179.4million are expected to be paid in 2011.

F61

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23c viii Principal actuarial assumptions
The calculation of the scheme liabilities and pension charges, for IAS 19 purposes, requires a number ofassumptions, both financial and demographic, to be made. The principal assumptions used by theactuaries, at the balance sheet date were:Principal financial assumptions

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

2010
%

2009
%

2008
%

3.7

4.4*

5.6

3.7
3.5
2.4
3.7
5.5

3.0
2.7
2.4
2.9
7.2

3.6
3.4
2.5
3.6
6.9

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

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

The effect of reducing the discount factor from 7.2% in 2009 to 5.5% in 2010 increased the plan liabilitiesby £2,260million.
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
Female2010
Number of
years

2009
Number of
years

2008
Number of
years

27.0
29.7

26.9
29.6

26.6
29.1

29.0
31.8

28.9
31.7

28.1
30.7

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

2010
£m

2009
£m

Equities
Bonds and gilts
Property
Alternatives
CashTotal expected rate of return

8.8
4.4
6.6
8.8
4.4
7.5

8.6
3.7
6.2
8.6
4.4
6.9

*

As at the beginning of the financial year.

The expected return on plan assets 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 themarket. 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.

F62

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23 PENSION PLANS continued
23c ix Scheme membership analysis and maturity profile
Contributors
Pensioners
Dependents
Deferred pensioners

2010
Number

2009
Number

2008
Number

17,883
18,776
3,920
18,971

17,774
17,9703,863
19,137

18,736
17,5693,798
18,286The scheme is becoming more mature with the number of pensioners increasing. There has also been aslight increase in the number of contributors. These movements are reflected in the overall reduction in
cash inflows shown in Note 23cx.

The maturity of a scheme
provides an indication of
the cash requirements ofthe scheme and the likely
attitude of the Trustees torisk within their investment
policy. The more mature ascheme, the more likelythat Trustees will favour
low risk investments.

23c x Scheme cash flows (day-to-day liquidity)
2010 saw a decrease in the net cash inflow compared to 2009. The increase in the numbers ofpensioners, transfer payments and adverse market conditions resulted in increased cash outflows as thepayments made out of the scheme increased and the return on the schemes investments reduced. These
increased cash outflows are partly offset by an increase in the contributions made to the scheme
following a rise in the number of contributors as noted in Note 23cix.
In 2009 cash inflows of the pension scheme exceeded its cash outflows. The employer’s contribution
rate increased from 18.8% to 19.35% from 1 July 2008 but this has been offset by a significant reduction
in member contributions. In addition, there has been an increase in pensions paid and lump sums onretirement which have combined to reduce the cash inflow compared to 2008.
Contributions (employer and employee)
Investment income
Cash inflows
Payments of pensions and transfers out
Expenses
Net cash inflow

2010
£m

2009
£m

226.9
200.2
427.1
(341.9)(33.8)
51.4

196.3
225.2
421.5
(313.1)(36.9)71.5

F63

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS
24a Financial risk management
The group’s financial risk management operations are carried out by a Group Treasury function, withinparameters defined formally within the policies and procedures manual agreed by the Executive Board.
Group Treasury’s activity is routinely reported and is subject to review by internal and external auditors.
Group Treasury uses financial instruments to raise finance and to manage financial risk arising from theBBC’s operations in accordance with its objectives which are:•to ensure the business of the BBC, both Public Services and Commercial, is funded in the most efficientmanner 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 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. The group finances its operations from these financial instruments.
The group does not undertake speculative treasury transactions.
Market risk
Currency risk: The group is principally a domestic organisation with the majority of transactions, assets
and liabilities arising in the UK and being sterling based. However, the Group undertakes sometransactions in currencies other than sterling. Due to movements in exchange rates over time, theamount the Group expects to receive or pay when it enters into a transaction may differ from theamount that it actually receives or pays when it settles the transaction.
Some contracts may also contain clauses whereby changes in currency rates outside an agreed range
impact on the contract price; in the majority of cases the value of the individual contracts and otherfeatures within the contract limit the currency risk exposure to a level that is not significant to the group.
The most significant currency exposure by total value of transactions is US dollars, however due to therelative size of this exposure in comparison to the group’s sterling-denominated business; the BBC does
not consider this to be significant for the group. The group does, however, generally enter into forward
currency contracts to manage, or hedge, this currency risk, which allows the group to settle transactions
at known exchange rates, reducing further any uncertainty.

Market risk comprises
currency risk and otherprice risks.
A forward currency
contract is a contract tobuy or sell foreign currency
in exchange for sterling at a
specific rate on a specificdate. By locking into aparticular exchange rate,
the currency risk that may
be associated with a futurepurchase or sale iseliminated.

The overall income or expenditure to be recognised in relation to contracts denominated in foreign
currency (and the related hedges) is therefore fixed, however where these contracts span financial years,
the recognition of the fair value of the forward currency contracts results in timing gains/losses in eachfinancial year. These timing gains/losses are therefore a result of market conditions as opposed tovariances in underlying contract value. As a result of this certainty of cash flows the group has mitigatedits underlying sensitivity to currency fluctuations such that no sensitivity analysis need be presented.
Interest rate risk: The group’s main exposure to interest rate fluctuations arises on externalborrowings. Since March 2003 the group has been borrowing at floating rates of interest and then using
interest rate swaps, caps and collars to manage the group’s exposure to interest rate fluctuations andprovide greater certainty of cash flows. Interest rate swaps, caps and collars are taken out based on
projected borrowing requirements, therefore differences will occur between the notional amount of theswaps, caps and collars and the actual borrowing requirements. The effect of taking out the interest rate
swaps, caps and collars is that in the longer term the group has no significant underlying sensitivity tointerest rate fluctuations and hence no sensitivity analysis has been presented.

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

F64

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24a Financial risk management continued
Other price risk of financial assets: The group invests surplus cash in money market funds andmoney market deposits, therefore it is not subject to other price risks, such as market price risk.

Other price risk is any
price change other thanthose arising from changes
in currency or interest
rates.

Credit risk

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

The Group’s credit risk management policy in relation to trade receivables involves regularly assessing thefinancial reliability of customers, taking into account several factors such as their financial position andhistorical performance. Credit terms, where given, are generally for a 30-day period. The carrying amountof financial assets included in the financial statements represents the Group’s maximum exposure tocredit risk in relation to these assets.
Trade and other receivables: The largest element is the licence fee debtor, £410.8million (2009:£384.6million, 2008: £368.4million).The amount of income that the BBC receives from is directly related
to the amount of licence fee collected from households in the UK.
Of the remaining £843.0million (2009: £363.1million, 2008: £327.5million) trade and other receivables,£43.7million (2009: £40.8million, 2008: £34.1million) is past due and not impaired.
At 31 March 2010 an impairment provision of £9.1million (2009: £12.5million, 2008 £5.2million) was
recognised.
Investments: The group limits its exposure to credit risk by only investing in liquid securities and onlywith counterparties that have a minimum credit rating of A-, with a higher minimum rating up to AArequired depending upon the duration and amount.
Liquidity risk
The BBC is subject to ceilings on its borrowings set by the Secretary of State in accordance with theAgreement between the BBC and DCMS (see Note 2f). In order to comply with these ceilings together
with the terms of any individual debt instruments the BBC’s Group Treasury manages the group’s
borrowings by continuously monitoring group cash flow forecasts. The BBC holds its surplus liquidity inreadily convertible financial instruments with highly rated financial institutions.

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

F65

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24b Fair values of financial instruments
The following table shows the fair value and carrying value of the group’s financial instruments, incategories according to how the financial instrument is measured. It also shows the maturity profile foreach 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

Financial assets at fair value throughincome and expenditure
Derivative financial instruments

11.9

6.7

–

18.6

Loans and receivables
Trade and other receivables

588.6

–

–

588.6

Cash and cash equivalents

263.9

–

–

263.9

Financial liabilities at fair value throughincome and expenditure
Derivative financial instruments(8.9)(13.3)–(22.2)(1.7)(452.8)(5.7)(211.4)(3.5)(34.9)––(568.3)(213.1)(456.3)(608.9)2010 – Carrying value and fair value

Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases

F66

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24b Fair values of financial instruments continued
Amountsdue inless than
one year£m

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

Total
£m

2009 – Carrying value and fair value
Financial assets at fair value through income
and expenditure
Derivative financial instruments

10.9

12.2

–

23.1

Loans and receivables
Trade and other receivables
Cash and cash equivalents

526.2
124.3

–
–

–
–

526.2
124.3

–

–

–

–

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

Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases(5.8)(409.5)(8.4)(268.0)–(34.5)––(575.0)(273.8)(409.5)(617.9)2008 – Carrying value and fair value
Financial assets at fair value through income
and expenditure
Derivative financial instruments

2.6

2.6

–

5.2

504.4
78.0

–
–

–
–

504.4
78.0

–

–

2.7

2.7

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

(2.3)

(0.5)

(0.1)

(2.9)

Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases(59.3)(405.1)(7.6)(140.0)–(19.1)––(590.9)(199.3)(405.1)(617.6)

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

Loans and receivables
Trade and other receivables
Cash and cash equivalents
Available-for-sale financial assets
Other investments (non-current)

F67

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24b Fair values of financial instruments continued
As at 31 March 2010 there are no differences (2009: no differences, 2008: no differences) between thefair value and carrying value of any of the group’s financial instruments. The fair value of forward currency
contracts, interest rate swaps, caps and collars and embedded derivatives are based on market prices andexchange rates at the balance sheet date. These are recorded in the statement of income andexpenditure (see Notes 3 and 7). The remaining financial instruments are carried at cost or amortised
cost in accordance with IAS 39 ‘Financial Instruments: Recognition and Measurement’, whichapproximates to fair value.
The finance leases include £12.2million (2009: £15.0million, 2008: £18.0million) relating to Centre House
Productions Limited. Centre House Productions Limited enters into finance leases as a means offinancing drama productions which result in lower production costs for the BBC. These finance leases arematched by defeasance deposits which may only be used to settle the finance lease liabilities andtherefore do not represent separate assets and liabilities. Consequently they are netted off the financelease creditor to show the net unmatched liability at the year end. These defeasance deposits,£177.9million at 31 March 2010 (2009: £199.8million, 2008: £219.0million), are structured such that the
principal on deposit and interest earned will be sufficient to cover the rental obligations on the financeleases until the end of the lease. Accordingly it is not included as borrowing for the purposes ofcompliance with the BBC’s borrowing ceilings.

Defeasance deposits areamounts deposited with banks
which earn the exact amountof interest needed to cover thecapital repayment and interest
element of each of the financeleases. The defeasance deposits
are ‘ring-fenced’ and therefore
cannot be used for any transactions
apart from the agreed capital andinterest payments.

At 31 March 2009, the Group had guaranteed bank loans outstanding in Worldwide Media Limited
totalling Rupees 155million (£2.1million) (2008: Rupees 155million, £2.0million). These loans were fully
repaid in the year and therefore no guarantee is outstanding at 31 March 2010.

F68

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24c Derivative financial instruments
The fair values of standalone derivatives are determined using market prices and exchange rates at thebalance sheet date in active markets which determines their classification as Level 1. The fair value ofembedded derivatives that are not traded in an active market are determined using valuation modeltechniques. All significant inputs into the valuation techniques are based on observable market data
justifying classification as Level 2. At 31 March 2010 and 31 March 2009 there are no material differences
between the fair value and carrying value of any of the Group’s other financial instruments.
Fair value
hierarchy level

Assets£m

Liabilities£m

2010
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives

1
1
2

6.7
–
–
6.7

(3.7)
(8.3)
(1.3)
(13.3)

Less than one year
Forward foreign currency contracts

1

11.9
11.9

(8.9)
(8.9)

2009
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives

1
1
2

11.8
0.3
0.1
12.2

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

Less than one year
Forward foreign currency contracts
Embedded derivatives

1
2

10.9
–
10.9

(20.3)(2.2)(22.5)

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

1
1
2

2.2
0.3
0.1
2.6

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

Less than one year
Forward foreign currency contracts
Embedded derivatives

1
2

2.6
–
2.6

(2.2)
(0.1)
(2.3)

At 31 March 2010 the group had entered into a net commitment to sell foreign currencies amounting to£100.1million (2009: net commitment to sell £135.6million, 2008: net commitment to purchase£17.9million) that mature in the period through to 2013 in order to fix the sterling cost of commitments
through this period (mainly Euros and US dollars). After taking into account the effects of these forward
foreign exchange contracts, the group had no significant currency exposure.

F69

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24c Derivative financial instruments continued
Interest rate risk is managed by the use of interest rate swaps, caps and collars. Sterling fixed rateborrowings are achieved by entering into interest rate swap transactions; all outstanding swaps
mature by April 2014. The impact of a change in interest rates can also be limited by entering into
interest rate cap and collar transactions; all outstanding caps and collars mature by April 2013. In
total, £223.9million (2009: £213.4million, 2008: £80.0million) of swaps and £212.2million (2009:£209.6million, 2008: £128.2million) of caps and collars were entered. Of these only £193.9million(2009: £108.4million, 2008: £80.0million) of swaps and £182.2million (2009: £129.6million, 2008:£128.2million) of caps were effective at 31 March 2010 as new agreements are arranged to ensureborrowings are suitably covered for the foreseeable future. This is £164.7million higher (2009:£33.3million lower, 2008 £8.9million higher) than the current level of borrowings of £211.4million(2009: £271.3million, 2008: £199.3million).
In accordance with IAS 39, the Group has reviewed contracts for embedded derivatives that are
required to be separately accounted for if they do not meet certain requirements set out in thestandard. Any such embedded derivatives have been recognised at fair value.

24d Hedges of net investments in foreign operations
The group has Australian dollar (AUS$) denominated borrowings which it has designated as ahedge of a net investment in foreign operations (Lonely Planet), in order to hedge against the risks
associated with exchange rate movements between sterling and the AUS$. The fair value of the
AUS$ borrowings at 31 March 2008 was £90.3million and the fair value of the investment at 31
March 2008 was £93.7million. The net investment hedge was discontinued from September 2008
following the settlement of the associated foreign currency borrowings.

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

F70

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24 FINANCIAL INSTRUMENTS continued
24e Liquidity risk
The following table details the Group’s remaining contractual maturity for its non-derivative financial
liabilities (including obligations under finance leases). The table has been drawn up based on theundiscounted cash flows of financial liabilities based on the earliest date on which the Group can berequired to pay:
2010
Variable interest rate instruments
Not later than one year
Later than one year but not later than five years
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
2009
Variable interest rate instruments
Not later than one year
Later than one year but not later than five years
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
2008
Variable interest rate instruments
Not later than one year
Later than one year but not later than five years
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

Cash flow£mInterest£mPrincipal
£m

163.9
51.1
–

0.8
1.1
–

163.1
50.0
–

51.0
210.2
1,138.4
1,614.6

45.3
175.3
570.1
792.6

5.7
34.9
568.3
822.0

221.9
52.0
–

1.4
1.7
–

220.5
50.3
–

53.7
214.6
1,193.2
1,735.4

45.3
180.4
618.2
847.0

8.4
34.2
575.0
888.4

154.6
53.4
–

6.0
2.1
–

148.6
51.3
–

53.6
194.8
1,247.1
1,703.5

45.9
177.0
656.2
887.2

7.7
17.8
590.8
816.2

F71

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24f Borrowing facilities

Facility

Interest rate

UK Public Service Broadcasting
LIBOR-based loan or Loan – margin of
overdraft
0.175%
Overdraft – bankbase rates plus 1%
Loan – margin of
Sterling revolving
credit facility
0.45%
agreement
Uncommitted money Margin of between
market lines (short- 0.125% and 0.5%
over LIBOR
term borrowings)
BBC Commercial Holdings Limited
Multicurrency,
LIBOR* plus 0.275%
revolving credit facility rising to LIBOR* plus
agreement for loans 0.325% when theand letters of credit facility is more than
50% utilised.
Letter of credit fee isthe same as the banklending margin, butdoes not include
LIBOR
Overdraft or money Money market line –market lines
margin of 0.45%
Overdraft – bankbase rates plus 1%
BBC Worldwide Limited
Loan with European European Investment
Investment Bank
Bank’s own funding(50% secured bycost plus a margin of
0.09% on unsecured
letters of credit)**
loans
*

Total
available
31 March
2010
£m

Drawn
down at
31 March
2010
£m

Total
available
31 March
2009
£m

Drawn
down at
31 March
2009
£m

Total
available
31 March
2008
£m

Drawn
down at
31 March
2008
£m

–

–

–

–

50

–

200

–

200

–

–

– June 2013

25

–

25

–

24

–

350**

161

350**

218

350**

20

–

20

–

20

4

November
2010

50

50

50

50

50

50

£20m
December
2011 and£30m
May 2012

Expiryor review
date

ExpiredJune 2008

145 June 2012

The base rate used will vary according to the currency drawn. At 31 March 2010 £61.1million (2009: £47.8million, 2008: £90.3million) was drawn down in
AUS$ and consequently linked to BBSW rather than LIBOR. All other amounts drawn are in sterling and consequently linked to LIBOR.

** Of this amount, up to £100million is available to issue letters of credit in favour of the European Investment Bank to support its lending under facilities to thegroup. At 31 March 2010, total drawn on this facility was £187.3million which consisted of cash drawings of £161.7million (2009: £243.5million, 2008:£146.0million) and £25.6million (2009: £25.6million, 2008: £25.6million) utilised by way of letters of credit.

There have been no defaults or breaches of covenants on the facilities above during the year (2009: none, 2008: none).
In addition to the facilities above the group has other smaller facilities, upon which nothing was drawn at the year end (2009:£3.3million, 2008: £0.7million), used to manage working capital.

F72

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
25 RELATED PARTY TRANSACTIONS
25a Transactions with related parties excluding key management personnel
Joint ventures, associates and otherinvestments
2010
2009
£m
£m

83.8
(52.0)–
10.7
42.5

Rendering of services
Receiving of services
Pension contributions
Dividends received

Amounts owed by related parties
2010
2009
£m
£m

BBC Pension Scheme
Joint ventures, associates andother investments

2008
£m

108.1
(57.3)–
37.0
87.8

BBC Pension Scheme
2010
2009
£m
£m

–
–
214.3
–
214.3

–
–
176.0
–
176.0

Amounts owed to related parties
2010
2009
£m
£m

2008
£m

–

–

–

(9.1)

(4.0)

(2.7)

35.8
35.8

46.1
46.1

40.7
40.7

(2.3)
(11.4)(7.1)(11.1)

(2.6)
(5.3)

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.

25b Transactions with key management personnel
Member of key management
personnel

Close family member
employed onstandard terms andconditions

Artists contracts withclose family member

Transactions witha company owned/
controlled bymember and/or
close family member

Notes

Trustees:
Diane Coyle
Richard TaitMembers of the Executive Board and other members of key management personnel:
Jana Bennett
Juniper Communications
Limited*Peter Salmon
Wife Sarah Lancashire 2010
amount received was not
significant (2009 received£185,000)Samir Shah
Juniper Communications
Limited**Related parties include key
management personnel, their
immediate families and external
entities controlled by them.
Key management personnel isthe BBC Trustees, members of the
Executive Board, the Chief
Executive Officer of BBC
Worldwide and the Director,
Trust Unit.
Transactions between the BBC andthose related parties are explainedin this note.

Juniper Communications Limited is co-owned by BBC non-executive Director Samir Shah (70%), his wife Belkis Shah (20%)
and the husband of Jana Bennett (Director, BBC Vision) Richard Clemmow (10%). During the year the BBC received services
from Juniper Communications Limited to the value of £893,503 (2009: £715,261), with £55,757 outstanding at 31 March 2010(2009: paid in full). In addition, Juniper Communications Limited received services from the BBC to the value of £109,000(2009: £108,520), which were fully paid at 31 March 2010 (2009: £10,684 outstanding at 31 March 2009).

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 www.bbc.co.uk/aboutthebbc/running/executive/eb.

F73

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
26 INTERESTS IN JOINT VENTURES, ASSOCIATES AND SUBSIDIARIESThe group holds (directly and indirectly) interests in the following significant joint ventures, associates andsubsidiaries 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, Media Centre, 201 Wood Lane, London
W12 7TQ.

26a Significant joint ventures and their activities
The group has a 50% equity interest in the following joint ventures which are all incorporated in GreatBritain and registered in England and Wales, unless otherwise stated:
Name of entity

Activity

Commercial joint ventures:
UK Gold Holdings Limited
UK Channel Management Limited
UK VoD LLP*JV Programmes LLC (incorporated in the USA)
Ragdoll Worldwide Holdings Limited

Accounting date

Channels
31 March 2010
Channels
31 March 2010
Development
31 December 2009
Sales and distribution 31 March 2010
Magazines and children’s 31 March 2010

Joint ventures arebusinesses the BBC jointly
controls with other parties.

Joint ventures of UK Public Service Broadcasting
DTV Services Limited**Marketing
31 August 2009
Freesat (UK) Limited
Provision of free to air 31 March 2010
satellite television
service*

33% equity interest. VoD LLP has a December year end, since it was set up in February 2008, results were equity accounted
for the year to 31 December 2009.

** 20% equity holding. DTV Services Limited has an August year end, results were equity accounted for the year to 31 August
2009

26b Significant associates and their activities
Holdingof issued
ordinaryshares%Activity

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

23
39
*10
50

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

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

50
**
**
50

Content provider
Audience research
Broadcasting forum
Audience research*

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

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

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

F74

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
26 INTERESTS IN JOINT VENTURES, ASSOCIATES AND SUBSIDIARIES continued
26c Subsidiary undertakings
Name of entity

Activity

Commercial Subsidiaries:
BBC Commercial Holdings Limited*

BBC Worldwide Limited
BBC World News Limited
BBC Ventures Group Limited

**
**
**

BBC Studios and Post Production Limited
Lonely Planet Pty Limited (incorporated in Australia)
2entertain Limited
BBC Worldwide Australia Pty Limited (incorporated inAustralia)
BBC Magazines Limited
BBC Magazines Rights Limited
BBC Worldwide Americas Inc. (incorporated in theUSA)
BBC World Distribution Limited
Subsidiaries incorporated to act on behalfof UK Public Service Broadcasting:
BBC Property Limited
Centre House Productions Limited
Digital UK Limited***DSHS Limited
*

^ **
**
^^ **

Holding company
Publishing, channels andprogramme distribution
Channels
Holding company
Programme making facilities andservices
Travel Guides Publisher
Home entertainment

**
**
**

Investment company
Investment company
Investment company****

Investment company
Programme distribution

*
*
*
*

Property
Production financing
Digital switchover
Digital switchover

Subsidiary
undertakings arebusinesses the BBC
controls.

Directly owned.

** Indirectly owned.
*** The BBC controls 56% of the voting rights of Digital UK Limited. Its results have been consolidated into the group accounts.
Digital UK Limited is a company limited by guarantee of which the BBC is a joint member. The other members and their voting
rights in Digital UK Limited are: ITV plc 11%, Channel Four Television Corporation 11%, Channel Five Broadcasting Limited
8.75%, National Grid Wireless 6.25%, SON Limited 3.5%, S4C 2.25% and Teletext Limited 1.25%.
^

BBC Resources Limited changed its name to BBC Studios and Post Production Limited on 1 April 2009.

^^ 2entertain was 60% owned and accounted for as a joint venture up to 5 August 2009.

F75

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
27 CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDSThe BBC has adopted IFRS in these financial statements for the year ended 31 March 2010. The results
and balance sheet for the year ended 31 March 2009 and 2008 differ in some respects from theillustrative IFRS financial statements previously published, as in finalising the BBC group IFRS accounting
policies and approach to the exemptions and options available in IFRS, the application of these policies
has been further refined. The reconciliations below highlight the key impacts on both the surplus for thefinancial year and the net assets.
Year ended
31 March
2010£mYear ended
31 March
2009
£m

488.2
(1.5)
7.4
2.6
(19.1)
477.6

254.2(15.4)
5.4
1.3
(1.7)
243.8

Reconciliation of comprehensive loss from UK GAAP to IFRS

Year ended
31 March
2010£mYear ended
31 March
2009£mLoss (UK GAAP)IAS 17 – Lease reclassification
IAS 38 – Goodwill and intangible assets
IAS 19 – Employee benefits
Other
Loss (IFRS)(1,377.5)
(1.5)
7.4
2.6
(19.1)(1,388.1)(528.2)(15.4)
6.1
1.3
(0.3)
(536.5)Reconciliation of net (liabilities)/assets from UK GAAP to IFRS

31 March
2010£m

31 March2009£m

1 April2008£m

Net (liabilities)/assets UK GAAPIAS 17 – Lease reclassification
IAS 38 – Goodwill and intangible assets
IAS 19 – Employee benefits
Other
Net (liabilities)/assets IFRS

(383.3)(160.8)25.1(14.1)
0.9(532.2)990.1(159.2)
17.2(16.7)
20.9
852.3

1,519.2(143.7)
13.5(18.3)
18.4
1,389.1

Reconciliation of surplus from UK GAAP to IFRS

Surplus (UK GAAP)IAS 17 – Lease reclassification
IAS 38 – Goodwill and intangible assets
IAS 19 – Employee benefits
Other
Surplus (IFRS)The principal IFRS adjustments are as follows:a) IAS 17 – Lease reclassification
The BBC classified its leases as either finance leases or operating leases in accordance with SSAP 21‘Leases and Hire Purchase Contracts’. IAS 17 Leases includes similar definitions for finance and operatingleases, however it sets out different requirements for determining whether an individual lease has thecharacteristics of a finance lease. In particular, it normally requires property leases to be separated into
components comprising a lease of a land and a lease of the building; this is not required by SSAP 21.
As a result the buildings elements of certain property leases (in particular Broadcasting House, WhiteCity and Pacific Quay), which are classified as operating leases under SSAP 21, have been reclassified as
finance leases under IFRS. For these leases the building has been recognised as a property asset (which isdepreciated over the life of the lease) and a corresponding liability for the lease payments has beenrecorded, excluding finance charges that will be recognised over the period of the lease. In addition, therelevant portion of the operating lease rental previously accounted for as an expense has been
eliminated.
The land elements of these leases continue to be classified and accounted for as operating leases.

F76

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
27 CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS continued
These property transactions involved the BBC, which owns the freehold to the sites, first granting a longleasehold to a third party and then leasing the property back on a short leasehold, thereby continuing to
occupy the property. In accordance with UK GAAP the granting of a long leasehold is typically accounted
for as a sale of the property with any surplus on the sale being recognised in the income and expenditureaccount at the time of the sale. Under IFRS, the land and buildings elements of these leases must be
considered separately; the land element treated as an operating lease and the building element as afinance lease. In addition, the proceeds from the granting of the long leaseholds, under sale and leaseback
arrangements, have been treated as deferred income to be released to the income statement over theperiod of the lease (up to 150 years) and any surplus originally recognised under UK GAAP being
reversed.
Non-property related leases have not been affected.
b) IAS 38 – Goodwill and intangible assets
Purchased goodwill
In accordance with FRS 10 ‘Goodwill and Intangible Assets’ the BBC amortised capitalised purchased
goodwill over its estimated expected useful life, which was usually 20 years. Under IFRS purchased
goodwill is not amortised and instead is subject to an annual impairment test. As a result the goodwill
amortisation for the year has been reversed and no impairment has been identified on transition. In
accordance with the first-time adoption exemption, goodwill that had been amortised, or written off
against reserves, prior to the date of transition has not been reinstated.
Intangible assets
Although the definitions of intangible assets in FRS 10 and IAS 38 are similar, IFRS require certain assets
to be accounted for as intangible assets that would be treated as tangible fixed assets under UK GAAP,
for example computer software costs. Similarly investments in programmes for future sale meet the IAS
38 definition of intangible assets. These reclassifications do not affect the measurement of the assets(including amortisation over their useful economic life).
c) IAS 19 – Employee benefits
Under UK GAAP, the BBC did not make a provision for holiday pay, i.e. holiday earned but not taken
prior to the year end. In contrast, IAS 19 requires the cost of short-term compensated absences to berecognised when employees render the service that increases their entitlement. As a result an additional
accrual has been made to reflect this.
d) Other
Included within the other adjustments are the following adjustments.
One relates to disposal groups of assets and liabilities (together forming business units) that, in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, would beclassified as assets held for sale. Under IFRS 5, from the date a disposal group meets the definition of held
for sale, any assets within the disposal group must no longer be depreciated (or amortised) and thedisposal group is valued at the lower of its carrying amount or its fair value less costs to sell with theassets and liabilities presented separately in the balance sheet. Amortisation since the date the disposalgroup met the held for sale criteria has been reversed, but no further measurement adjustment has beennecessary and the assets and liabilities in the disposal group are re-presented as held for sale.
Although both UK GAAP and IFRS require, or permit, associates and joint ventures to be accounted forusing versions of the equity method, there are some differences in the practical application of themethods. In particular IAS 28 Investments in Associates (which describes the equity method whether
applied to investments in associates or joint ventures) and IAS 1 require that where the equity method isadopted, the share of the operating surplus of associates (and joint ventures) to be included in theincome statement be based on the investors’ share of profit after tax and minority interests. In contrast
FRS 9 ‘Associates and Joint Ventures’ requires an investor to include its share of operating results andthen add its share of any subsequent items (eg taxation) to the relevant line.

F77

GROUP FINANCIAL STATEMENTSNOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
27 CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS continued
UK GAAP requires an impairment review of goodwill where the useful economic life is identified as
being greater than one year, or where circumstances indicate that the carrying amount may not berecoverable. In comparison, IAS 36 Impairment of assets, requires all goodwill to be reviewed annuallyfor impairment, or more frequently if there are indications that it may be impaired. The 2010 annual
review resulted in an impairment of goodwill being recognised (see Note 9) due to the exchange rate
fluctuations noted between the Australian dollar, US Dollar and Sterling.

F78

UK GAAP – STATEMENTS

UK GAAP ACCOUNTING STANDARDS RECONCILIATIONTHIS DOES NOT FORM PART OF THE FINANCIAL STATEMENTS
The BBC’s Charter and agreement requires a ‘statement of accounts’ to be prepared.
In recent years, both quoted companies and the public sector have moved to reporting under IFRS, andUK accounting standards are becoming converged with IFRS. This year, HM Treasury will require the
BBC to provide detailed financial information on an IFRS basis for consolidation in the Whole ofGovernment Accounts for 2009/10.
The BBC’s primary financial information has been presented under IFRS for 2009/10, which provides
additional transparency for readers over the requirements of UK accounting standards, and therefore isconsistent with the overarching requirement for the BBC to be open and transparent.
The BBC has completed the following reconciliations between the International Financial ReportingStandards (IFRS), shown within the financial statements on preceding pages, and the results prepared
under UK accounting standards to aid the readers understanding of the changes.
The UK accounting standards used are consistent with those published in the 31 March 2009 financial
statements.

F79

UK GAAP – STATEMENTSCONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 2010

2010

Group income
Operating costs excluding
exceptional costs
Exceptional pension income
Exceptional restructuring
costs
Total operating
expenditure
Group operating surplus
Share of operating surplus of
associates and joint ventures
Operating surplus: groupand share of associates
and joint ventures
Profit on sale andtermination of operations
Profit on disposalof fixed assets
Surplus before interestand taxation
Interest receivable andsimilar items
Interest payable andsimilar items
Other net finance cost(from defined benefit
pension scheme)
Surplus before taxationand minority interest
Taxation
Surplus after taxation
and before minority
interest
Minority interest
Surplus for thefinancial year

UK GAAP£m

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

IFRS
£m

4,789.8

0.6

–

–

–

–

4,790.4(4,603.5)
334.1

38.2
–

4.9
–

1.8
–

(18.6)–

36.7–(4,540.5)
334.1(25.2)––––(36.7)(61.9)(4,294.6)
495.2

38.2
38.8

4.9
4.9

1.8
1.8

(18.6)(18.6)––(4,268.3)
522.1

44.1

–

1.7

–

(0.5)

(8.4)

36.9

539.3

38.8

6.6

1.8

(19.1)

(8.4)

559.0

2.0

–

–

–

–

–

2.0

39.0

–

–

–

–

–

39.0

580.3

38.8

6.6

1.8

(19.1)

(8.4)

600.0

2.8

–

–

–

–

443.0

445.8

(32.3)(40.3)–––(460.9)(533.5)(20.3)

–

–

–

–

20.3

–

530.5
(42.3)

(1.5)
–

6.6
0.8

1.8
0.8

(19.1)
–

(6.0)
6.0

512.3
(34.7)

488.2
(3.5)

(1.5)
–

7.4
(0.8)

2.6
–

(19.1)
–

–
–

477.6
(4.3)

484.7

(1.5)

6.6

2.6

(19.1)

–

473.3

F80

UK GAAP – STATEMENTSCONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 20092009

Group income
Operating costs excluding
exceptional costs
Restructuring costs
Total operating
expenditure
Group operating surplus
Share of operating surplus of
associates and joint ventures
Operating surplus: groupand share of associates
and joint ventures
Loss on sale and terminationof operations
Profit on disposalof fixed assets
Surplus before interestand taxation
Interest receivable andsimilar items
Interest payable andsimilar items
Other net finance income(from defined benefit
pension scheme)
Surplus before taxationand minority interest
Taxation
Surplus before taxationand minority interest
Minority interest
Surplus for thefinancial year

UK GAAP£m

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

IFRS
£m

4,605.7

1.7

–

–

0.6

52.8

4,660.8(4,461.8)(29.9)

26.8
–

2.3
–

1.3
–

–
–

(38.2)(10.4)(4,469.6)(40.3)(4,491.7)
114.0

26.8
28.5

2.3
2.3

1.3
1.3

–
0.6

(48.6)
4.2(4,509.9)
150.9

49.3

–

2.3

–

1.8

(23.6)

29.8

163.3

28.5

4.6

1.3

2.4

(19.4)

180.7

(1.1)

–

–

–

(1.8)

–

(2.9)

15.9

–

–

–

–

–

15.9

178.1

28.5

4.6

1.3

0.6

(19.4)

193.7

9.1

–

–

–

–

624.8

633.9

(26.3)(43.9)–––(506.1)(576.3)

117.3

–

–

–

–

(117.3)–278.2(24.0)(15.4)
–

4.6
0.8

1.3
–

0.6
(2.3)

(18.0)
18.0

251.3
(7.5)

254.2
(0.5)

(15.4)
–

5.4
(0.6)

1.3
–

(1.7)
–

–
–

243.8
(1.1)

253.7

(15.4)

4.8

1.3

(1.7)

–

242.7

F81

UK GAAP – STATEMENTSCONSOLIDATED STATEMENT OF TOTAL RECOGNISEDGAINS AND LOSSES

2010

Group surplus for the financial year
Exchange differences on translationof foreign operations
Recognition and transfer
of cash flow hedges
Tax on items taken directly to equity
Actuarial losses on defined benefit
pension schemes
Total recognised gains and losses relating
to the year

2009

Group surplus for the financial year
Exchange differences on translationof foreign operations
Actuarial losses on defined benefit
pension schemes
Recognition of share of joint
venture liabilities
Total recognised gains and losses relating
to the year

UK GAAP£m

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

IFRS
£m

484.7

(1.5)

6.6

2.6

(19.1)

473.3

3.9

–

–

–

–

3.9

1.0
(0.3)

–
–

–
–

–
–

–
–

1.0
(0.3)

(1,871.4)

–

–

–

–

(1,871.4)(1,382.1)

(1.5)

6.6

2.6

(19.1)(1,393.5)

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

IFRS
£m

UK GAAP£m

253.7(15.4)

4.8

1.3

(1.7)

242.7

22.9

–

0.7

–

–

23.6

(784.2)

–

–

–

–

(784.2)(19.4)––––(19.4)(527.0)(15.4)

5.5

1.3

(1.7)

(537.3)

F82

UK GAAP – STATEMENTSCONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2010

At 31 March 2010

Fixed assets
Intangible assets
Tangible assets
Investment in programmes
for future sale
Investments in joint ventures
Interests in associates
Current assets
Stocks
Debtors due after morethan one year
Debtors due within one
year
Total debtors
Assets held for sale
Cash at bank and in hand
Liabilities held for sale
Creditors – amounts
falling due within
one yearNet current assets
Total assets less current
liabilities
Creditors – amounts
falling due after morethan one year
Provisions for liabilities
Net assets excluding
pension liability
Pension liability
Net liabilities
Represented byOperating reserve
Other reserve
Hedging reserve
Translation reserve
BBC reserves
Minority interest

UK GAAP£m

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

IFRS
£m

117.7
745.8

–
470.3

90.0
(58.9)

–
–

(4.9)
0.4

87.2
(0.5)

290.0
1,157.1

106.1
44.8
18.3
1,032.7

–
–
–
470.3

–
2.5
0.5
34.1

–
–
–
–

–
(1.1)
–
(5.6)

(106.1)–(7.2)(26.6)–
46.2
11.6
1,504.9

551.8

–

(0.1)

–

0.2

130.4

682.3

125.0

(49.7)

0.5

0.8

(6.4)

(16.3)

53.9

941.0
1,066.0–
272.2
1,890.0
–

447.9
398.2
–
–
398.2
–

0.5
1.0
–
–
0.9
–

–
0.8
–
–
0.8
–

(0.2)
(6.6)
–
–
(6.4)
–

(123.5)(139.8)
30.0
(8.3)
12.3
(8.4)

1,265.7
1,319.6
30.0
263.9
2,295.8(8.4)(1,178.5)
711.5(353.4)
44.8

(1.9)
(1.0)

(12.6)(11.8)(10.0)(16.4)

22.7
26.6(1,533.7)753.7

1,744.2

515.1

33.1

(11.8)(22.0)–

2,258.6(320.3)(160.1)(675.9)
–

–
(8.0)

(2.3)
–

(4.5)
27.4

–
–

(1,003.0)(140.7)

1,263.8(1,647.1)(383.3)(160.8)–(160.8)

25.1
–
25.1

(14.1)–(14.1)

0.9
–
0.9

–
–
–

1,114.9(1,647.1)(532.2)(357.1)(36.3)
0.5–(392.9)9.6(383.3)(160.8)–––(160.8)–(160.8)

18.4
–
–
0.7
19.1
6.0
25.1

(14.1)–––(14.1)–(14.1)

(1.5)
–
–
2.4
0.9
–
0.9

(32.5)
–
–
32.5
–
–
–

(547.6)(36.3)
0.5
35.6(547.8)15.6(532.2)

F83

UK GAAP – STATEMENTSCONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2009

At 31 March 2009

Fixed assets
Intangible assets
Tangible assets
Investment in programmes
for future sale
Investments in joint ventures
Interests in associates
Current assets
Stocks
Debtors due after morethan one year
Debtors due within one
year
Total debtors
Assets held for sale
Cash at bank and in hand
Creditors – amounts
falling due within
one yearNet current assets
Total assets lesscurrent liabilities
Creditors – amounts
falling due after morethan one year
Provisions for liabilities
Net assets excluding
pension liability
Pension liability
Net assets
Represented byOperating reserve
Other reserve
Revaluation reserve
Translation reserve
BBC reserves
Minority interest

UK GAAP£m

IFRS 3 Business
Combinations
and IAS 38
IAS 17
Intangible
AssetsLeases£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

IFRS
£m

95.7
728.0

–
523.2

85.3
(62.3)––(11.6)
(0.1)

86.5
(0.6)

255.9
1,188.2

99.7
68.8
11.2
1,003.4

–
–
–
523.2

–
3.9
0.5
27.4

–
–
–
–

–
(0.7)
–
(12.4)(99.7)––(13.8)–
72.0
11.7
1,527.8

491.0

–

(0.1)

–

11.9

112.7

615.5

122.2

385.3

0.5

–

–

(37.8)

470.2

831.3
953.5
–
124.3
1,568.8

2.2
387.5
–
–
387.5

–
0.5
–
–
0.4

–
–
–
–
–

–
–
–
–
11.9

(74.9)(112.7)
0.6
–
0.6

758.6
1,228.8
0.6
124.3
1,969.2(952.4)
616.4

25.6
413.1

(1.8)
(1.4)

(14.4)(14.4)

0.6
12.5

13.2
13.8

(929.2)
1,040.0

1,619.8

936.3

26.0

(14.4)

0.1–

2,567.8(314.6)(171.8)(1,095.5)
–

–
(8.8)

(2.3)
–

–
20.8

–
–

(1,412.4)(159.8)1,133.4(143.3)990.1(159.2)–(159.2)

17.2
–
17.2

(16.7)–(16.7)

20.9
–
20.9

–
–
–

995.6
(143.3)852.3

1,015.7(32.3)
0.8
–
984.2
5.9
990.1

(159.2)–––(159.2)–(159.2)

11.3
–
–
0.7
12.0
5.2
17.2

(16.7)–––(16.7)–(16.7)

19.3
–
–
1.7
21.0
(0.1)
20.9

(20.4)
–
(0.8)
21.2
–
–
–

850.0
(32.3)
–
23.6
841.3
11.0
852.3

F84

UK GAAP – STATEMENTSCONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2010
2010
UK GAAP£m

Operating activities
Cash generated fromoperating activities
Taxation paid
Net cash from operating
activities
Dividends received
from joint ventures
and associates
Return on investments
and servicing of financeInterest received
Interest paid
Interest paid on financeleasesDividends paid to minority
interests
Net cash outflow fromreturn on investments
and servicing of financeTaxation
Taxation paid
Capital expenditure on
financial investments
Purchase of tangible fixed
assetsInvestment in programmes
for future sale
Drawdown of loan
to joint venture
Proceeds from the saleof tangible fixed assets
Net cash outflow from
capital expenditure andfinancial investments
Acquisition and disposals
Purchase of a subsidiary
Cash acquired withsubsidiary
Acquisition of subsidiary
net of cash acquiredwith subsidiary
Purchase of interests in joint
ventures and associates
Proceeds from sale ofoperations

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

2010
IFRS
£m

426.6
–

47.4
–

–
–

–
–

1.7
–

(0.8)
(33.7)

474.9(33.7)

426.6

47.4

–

–

1.7

(34.5)

441.2

10.7

–

–

–

–

–

10.7

2.4
(14.3)

–
–

–
–

–
–

–
–

–
–

2.4
(14.3)

(1.0)

–

–

–

–

1.0

–

(0.8)

–

–

–

–

–

(0.8)

(13.7)

–

–

–

–

1.0

(12.7)(33.7)

–

–

–

–

33.7

–

(125.2)

–

–

–

–

–

(125.2)(100.8)

–

–

–

–

–

(100.8)

1.3

–

–

–

–

–

1.3

44.3

–

–

–

–

–

44.3

(180.4)

–

–

–

–

–

(180.4)(20.5)

–

–

–

–

20.5

–

40.5

–

–

–

–

(40.5)

–

–

–

–

–

–

20.0

20.0

(0.7)

–

–

–

–

–

(0.7)

2.0

–

–

–

–

–

2.0

F85

UK GAAP – STATEMENTSCONSOLIDATED CASHFLOW STATEMENT CONTINUEDFOR THE YEAR ENDED 31 MARCH 2010
2010
UK GAAP£m

Net cash inflow fromacquisitions and disposals
Net cash inflow before
use of liquid resources
and financing
Management of liquid
resources
Sale of liquid resources
Purchase of liquid resources
Net cash inflow frommanagement of liquid
resources
Financing
Increase in loans
Increase in borrowings
Repayment of loans
Capital element of financelease payments
Repayment of loan notes
Net cash outflow fromfinancing
Increase in cash in theyear
Cash and cash equivalents at
beginning of the year
Effect of foreign exchange
rate changes on cash andcash equivalents
Cash classified as held forsale
Cash and cash
equivalents at the endof the year

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

2010
IFRS
£m

21.3

–

–

–

–

–

21.3

230.8

47.4

–

–

1.7

0.2

280.1

5,732.6(5,732.6)

–
–

–
–

–
–

–
–

(5,732.6)
5,732.6

–
–

–

–

–

–

–

–

–

104.3
–
(174.1)

–
–
–

–
–
–

–
–
–

–
–
–

(104.3)
101.0
–

–
101.0
(174.1)

(9.0)
(3.3)

(47.4)
–

–
–

–
–

–
–

(1.0)
3.3

(57.4)–(82.1)(47.4)

–

–

–

(1.0)

(130.5)

148.7

–

–

–

1.7

(0.8)

149.6

121.8

–

–

–

–

2.5

124.3

–

–

–

–

(1.7)

–

(1.7)

–

–

–

–

(8.3)

–

(8.3)

270.5

–

–

–

(8.3)

1.7

263.9

F86

UK GAAP – STATEMENTSCONSOLIDATED CASHFLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 20092009
UK GAAP£m

Operating activities
Cash generated fromoperating activities
Taxation paid
Net cash from operating
activities
Dividends received fromjoint ventures andassociates
Return on investments
and servicing of financeInterest received
Interest paid
Interest paid on financeleasesDividends paid to minority
interests
Net cash outflow fromreturn on investments
and servicing of financeTaxation
Taxation paid
Capital expenditure on
financial investments
Purchase of tangible
fixed assets
Investment in programmes
for future sale
Drawdown of loan
to joint venture
Proceeds from the saleof tangible fixed assets
Net cash outflow from
capital expenditure andfinancial investments
Acquisition and disposals
Purchase of a subsidiary
Cash acquired withsubsidiary
Acquisition of subsidiary
net of cash acquired withsubsidiary
Purchase of interests in joint
ventures and associates
Paid on terminationof operations
Proceeds from saleof operations

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

2009
IFRS
£m

215.2
–

39.0
–

–
–

–
–

(4.3)
–

–
(23.1)

249.9(23.1)

215.2

39.0

–

–

(4.3)

(23.1)

226.8

37.0

–

–

–

–

–

37.0

7.7
(15.3)

–
–

–
–

–
–

–
–

–
–

7.7
(15.3)

(0.4)

–

–

–

–

0.4

–

(0.8)

–

–

–

–

–

(0.8)

0.4

(8.4)

(8.8)
(23.1)

–

–

–

–

23.1

–

(147.5)

–

–

–

–

–

(147.5)(100.8)

–

–

–

–

–

(100.8)

(0.4)

–

–

–

–

–

(0.4)

20.5

–

–

–

–

–

20.5

(228.2)

–

–

–

–

–

(228.2)(15.1)

–

–

–

–

15.1

–

1.9

–

–

–

–

(1.9)

–

–

–

–

–

–

(13.2)(13.2)(15.8)

–

–

–

–

–

(15.8)

(0.9)

–

–

–

–

–

(0.9)

15.1

–

–

–

–

–

15.1

F87

UK GAAP – STATEMENTSCONSOLIDATED CASHFLOW STATEMENT CONTINUEDFOR THE YEAR ENDED 31 MARCH 20092009
UK GAAP£m

Net cash outflow fromacquisitions and disposals
Net cash (outflow)/inflow
before use of liquid
resources and financing
Management of liquid
resources
Sale of liquid resources
Purchase of liquid resources
Net cash inflow frommanagement of liquid
resources
Financing
Increase in loans
Increase in borrowings
Repayment of loans
Capital element of financelease payments
Increase in loan notes
Net cash inflow fromfinancing
Increase in cash in theyear
Cash and cash equivalents at
beginning of the year
Effect of foreign exchange
rate changes on cash andcash equivalents
Cash and cash
equivalents at the endof the year

IFRS 3 Business
Combinations
IAS 17and IAS 38
Leases Intangible Assets£m£m

IAS 19
Employee
Benefits
£m

Other
£m

Reclassification
£m

2009
IFRS
£m

(14.8)

–

–

–

–

–

(14.8)(22.7)

39.0

–

–

(4.3)

0.4

12.4

526.3
(526.3)

–
–

–
–

–
–

–
–

(526.3)
526.3

–
–

–

–

–

–

–

–

–

218.0
–
(144.4)

–
–
–

–
–
–

–
–
–

–
–
–

(218.0)
223.1
–

–
223.1
(144.4)(9.7)
2.6(39.0)
–

–
–

–
–

–
–

(0.4)
(2.6)

(49.1)–

66.5(39.0)

–

–

–

2.1

29.6

43.8

–

–

–

(4.3)

2.5

42.0

78.0

–

–

–

–

–

78.0

–

–

–

–

4.3

–

4.3

121.8

–

–

–

–

2.5

124.3

F88

Governance

BBC Corporate Governance
Framework
The BBC’s corporate governance framework is defined in theRoyal Charter (the Charter).

The BBC Trust assesses the performance of the BBC’s
management and its services. Its review and assessment for
2009/10 can be found in Part One of the Annual Reportand Accounts.
The Charter requires the Executive Board to have regard togenerally accepted principles of good corporate governance.
So, although the BBC is not a listed company, it has opted
to follow the relevant provisions of the Financial Services
Authority’s Listing Rules and the 2008 Financial Reporting
Council Combined Code on Corporate Governance (the2008 FRC Code), in order to be consistent with companies
quoted on an EU regulated market.
The Executive Board has complied with the requirementsof the Charter, creating appropriate and effective governancearrangements for the BBC. This has also secured substantial

compliance with the 2008 FRC Code although in a numberof areas the 2008 FRC Code is not appropriate to thecircumstances of the BBC. Compliance with the Charterhas resulted in a small number of areas where compliancewith the 2008 FRC Code has not been achieved, although
the Executive Board believes that this does not compromise
the quality of the governance arrangements in place, as
shown below.
Some provisions of the 2008 FRC Code are not appropriate
to the BBC’s circumstances as a public body that is notprofit-oriented and does not have shareholders. In particularprovisions relating to interaction with shareholders clearly do
not apply to the BBC, although in some circumstances it ispossible to consider, by analogy, the way in which the Trust

PrinciPle of the 2008 FRC code
A.2 – There should be a clear divisionof responsibilities at the head of thecompany between the running of theboard and the executive responsible
for the running of the company’sbusiness. No one individual shouldhave unfettered powers of decision.

BBc PositionT

A.3 – The board should include abalance of executive and non-executive
directors (and in particular independent
non-executive directors) such that noindividual or small group of individuals
can dominate the board’s decision
taking.

T

E
T
I

T

T
All non-executive directors are
considered independent for the
purposes of the 2008 frc code,
after recognising the need for insightfrom the media sector in the UK.

F89

engages with licence fee payers. This is set out in Part Oneof the Annual Report and Accounts.
Another 2008 FRC Code provision that is linked toshareholders relates to aligning executive remuneration
with enhancing shareholder value and therefore making
performance-related elements of remuneration a significant
proportion of total remuneration (provision B.1.1). The BBC’s
strategy for the remuneration of executive Directors, set
by the Trust and the Executive Remuneration Committee,
complies with the 2008 FRC Code principle B.1 that levelsof remuneration should be sufficient to attract, retain andmotivate directors of the quality required to run the BBC
successfully. However, taking into account the BBC’s public
purposes, the amount of variable (or performance-related)
remuneration that may be earned is limited. During 2008/09
the Executive Board decided to suspend the discretionary
bonus arrangements for all staff (other than staff employedin certain commercial businesses); any bonuses that were
contractual commitments were honoured.

compliance costs estimated at £17.6million (2009: £17.3million),
which includes the BBC’s annual £3.5million subscription
to Ofcom.
Executive Board
Role of the Executive Board
The Executive Board is responsible for managing all the BBC’s
operations, with the sole exception of the BBC Trust Unit. This
includes the following:• delivering the BBC’s services in line with the purpose remits,
service licences and other business strategies;• directing editorial and creative output;• ensuring compliance with all relevant legal and regulatory
requirements (including initial handling of complaints about theBBC), except where these areas specifically relate to the BBC
Trust or the BBC Trust Unit;• appointing the management teams for the BBC and its
subsidiaries and holding them to account;• conducting the BBC’s financial affairs to ensure value formoney; and• accounting to the BBC Trust for its own performance, as well as
the performance of the BBC and its subsidiaries, and complying
with any decisions from the BBC Trust.

Cost of Compliance
In order to ensure that we complied with all relevant
legislation, to which the BBC is subject in 2009/10, we incurred
Table 2

Executive Board and Committee attendance
Executive
Board

Number of meetings for the periodMark Thompson
Mark Byford
Lucy Adams2
Sharon Baylay3
Jana Bennett
Tim Davie
Erik Huggers
Zarin PatelPeter Salmon4
John Smith5
Caroline Thomson
Marcus Agius
Senior Independent Director
Chairman of the Remuneration Committee
Val Gooding
Chairman of the Fair Trading Committee
from September 2009
Dr Mike Lynch
David Robbie
Chairman of the Audit Committee
Dr Samir Shah
Robert Webb
Chairman of the Fair Trading Committee
until September 2009

Audit Fair Trading
Committee Committee

Ordinary

Extraordinary

11
10
11
7/9
10/10
10
10
10
11
5/5
5/5
10

6
6
4
3/4
4/5
4
3
6
6
0/1
2/3
5

10

5

9
9

4
5

4

11
11

2
6

4
4

11

6

MemberAttendee

4Nominations
Committee1
Member3
3

4

AttendeeRemuneration
Committee
Member2
2
0

Attendee

7
6

0

5/5

3
3
1
1/1

1/1

7

2

6/6
0/1

1/1

5

3
2/2

For those directors serving for only part of the year the total number of meetings they could have attended is presented alongside the number attended (number attended/total possible).
membership of the committee differs depending on the appointment (non-executive or executive) being made. marcus agius, mark Thompson and dr mike Lynch are members for
all appointments. mark Byford is a member for executive appointments and usually invited to attend for non-executive appointments. mark Thompson is the chairman for executive
appointments and marcus agius is the chairman for non-executive appointments. however, one meeting this year discussed the renewal of marcus agius’s appointment and therefore
he did not attend. In order to maintain an appropriate balance of executive and non-executive directors, robert webb joined the nominations committee for this meeting only.
2
Lucy adams was appointed director, BBc People in June 2009.
3
Sharon Baylay was appointed director, marketing communications & audiences in may 2009.
4
Peter Salmon, director, BBc north, joined the executive Board in november 2009.
5
Following the BBc Trust’s announcement about changes to the governance arrangements for BBc worldwide, John Smith stepped down from the executive Board from 1 october 2009.
1

F90

GovernanceBBC corporate governance framework continued

Report of the Senior Independent Director
During the year, much of the BBC Executive Board’s agenda
considered the BBC’s response to the economic downturn
which continued to have an impact across all of the BBC’s activities.
Within this context public spending became a major topic and likeother national organisations the activities of the BBC were quite
correctly scrutinised.
The BBC’s own response to the operational challenges posed bycurrent economic conditions was swift. At the request of the BBC
Trust, the Executive Board provided proposals on pay policy forsenior managers, which we are now implementing. We remained
mindful of the pressures the global financial crisis, and the arrival of
new technology, has had on the BBC’s competitors, and exploredopportunities and partnerships where the BBC could appropriately
use its position to benefit the wider media sector.
In March we put forward our new strategy, Putting Quality First.
My fellow non-executive Directors and I believe that its proposals,
to reduce the scope of the BBC’s future production and output
while increasing the quality of its programming, will mitigate someof the BBC’s existing business risks and put it on a firmer footing
for the future. The BBC stands for quality, and as a board it is our
responsibility to ensure that it meets the highest public expectation.
Within the confines of the multi-year licence fee settlement, thismeans doing fewer things, but doing them even better than wehave in the past.

The composition of the Board also changed this year, adding a
new post – Director, BBC North – whilst the Chief Executive
Officer of BBC Worldwide stepped down. At times like these,
the independent perspective the non-executive Directors bringremains crucial, and the added scrutiny we have faced has lead to a
sharper, and more determined approach in order to reach the rightconclusions for licence payers and audiences.

The Executive Board usually meets monthly (except forAugust); summary minutes of meetings are available onlineat www.bbc.co.uk/info/running/executive/minutes.shtml
In practice, the Executive Board delegates some of its
responsibility to other managerial groups. Any delegation fromthe Executive Board is stated in the relevant standing orders
for each group and a framework for reporting and review
is established.
An evaluation of the effectiveness of the Executive Board,
its Committees and its interaction with the Trust took place
during 2009. The evaluation was conducted by external
consultants and included interviews with Executive Board
members both executive and non-executive, an assessmentof the governance protocols and the administrative support
to the Executive Board. A report on the conclusions of the
Review was considered by Executive Board which noted that,
although direct comparisons or benchmarking with corporateboards was difficult given the unusual governance structureof the BBC, the Board had been assessed as working wellaccording to the most important criteria. Recommendations
resulting from the review have been considered in ongoingwork to ensure the effectiveness of the BBC’s governanceprocesses.
In accordance with the requirements and provisions of theCharter the following Committees continued to operate
last year:• Audit Committee• Fair Trading Committee• Nominations Committee• Remuneration Committee

Induction, performance and development
All new directors receive an induction programme and a wide
range of information about the BBC on joining. The content of
the induction programme will vary depending on whether theappointment is to an executive or non-executive position andwhether the new director was an external candidate or not.
The information always includes details of Board proceduresand Directors’ responsibilities. All Directors have access toexternal independent advice if they wish.
The Trust assesses the performance of the Executive Boardin delivering the BBC’s services and activities, in accordancewith the Charter. This includes an on-going review of progress
and an annual performance day, which is attended by boththe Executive Board and the BBC Trust. The Chairman of the
BBC Trust also has a separate meeting with the non-executive
Directors every year.
The performance review processes for the Executive
Board’s Committees continues to evolve and each reviews
their own performance and effectiveness. No significant
issues were identified.
All the executive directors have their own personal anddivisional objectives, and their performance against themis reviewed by the Director-General each year, and by the
Remuneration Committee.

Marcus Agius
Senior Independent Director
16 June 2010

Nominations Committee
The Nominations Committee oversees the process ofproposing, appointing and – if necessary – dismissing membersof the Board. The only exception is the Chairman, who isappointed by the BBC Trust. Membership of the Nominations
Committee is dependent on whether it is dealing withexecutive or non-executive appointments.

F91

Executive appointments
No executive appointments were made this year, although
Sharon Baylay, Director, Marketing, Communications andAudiences, and Lucy Adams, Director, BBC People who wereappointed during 2008/09 took up their appointments thisyear. In addition Peter Salmon, Director, BBC North joined
the Executive Board in November 2009.
Non-executive appointments
Two non-executive Directors were due to step down in
2009/10. After a thorough review of the composition andneeds of the Executive Board, as well as the skills, experienceand knowledge of the individual directors, the Nominations
Committee re-appointed Marcus Agius as Senior Independent
Director for a further three year term from 1 December
2009 and Val Gooding as a non-executive Director for afurther two year term from 1 January 2010.
Accountability and internal control
The Board is responsible for the operational management of
the BBC (excluding the Trust Unit), which includes safeguarding
its assets and achieving value for money by ensuring there isa process in place for managing significant risks to the BBC,and maintaining an adequate system of internal control andreviewing its effectiveness.
Risk identification, management
and ownership
We consider the overall management of risk within the BBC,which is integral to the delivery of business objectives, to be
most effectively achieved through the engagement of theentire Board and so risk management is not delegated to a
sub-committee. An ongoing process for identifying, evaluating,managing, monitoring and reporting significant risks to theBBC, which accords with the Turnbull guidance (Internal
Control: Revised Guidance for Directors on the CombinedCode), has been in place for the year ended 31 March 2010
and up to the date of approval of this BBC Annual Reportand Accounts.
Internal control
The Board, supported by senior management teams, is
responsible for establishing, maintaining and reviewing theeffectiveness of the BBC’s system of internal control and for
ensuring necessary actions are taken to remedy significant
failings or weaknesses identified. Our system of control isdesigned to manage rather than eliminate the risk of failure toachieve business objectives. Although no system of internal
control can provide absolute assurance against material
misstatement or loss, the BBC’s controls are designed toprovide reasonable assurance that assets are safeguarded,transactions are appropriately authorised and material errors
or irregularities are either prevented or detected on a timely
basis. Key elements of our system of internal control include:• comprehensive monthly, quarterly and annual reporting
processes, both within business groups and up to theBoard. This includes the system of financial monitoring andreporting to the Board, based on an annual budget, monthly
reporting of actual results, regular re-forecasting and analysis
of variances and key drivers. It also includes performance
reviews tracking achievements against strategy.
• regular treasury and cash reporting, analysing funding
requirements and liquidity.
• formal authorisation limits and processes covering all
financial transactions.

MANAGING RISK AT THE BBC
The Executive Board oversees an embedded process that gives visibility to prioritised risks.
ReportDivisions represented
and risks set in context

BBC Divisions

Risk Management Team
Risk database
Common criteria used toevaluate risks consistently

Executive
Audit Committee
Papers are presented byindividuals directly responsible

Identify

ManageExecutive Board

View risks in light ofstrategy and objectives

Specialist Functions

Evaluate
F92

GovernanceBBC corporate governance framework continued• processes to ensure compliance with all applicable laws
and regulations, including Ofcom requirements.
• formal policies and procedures concerning all material
business processes, to ensure risks are managed and thattimely, relevant and reliable information is available acrossthe business.
• processes to ensure that our staff are professional andcompetent, such as recruitment policies, performanceappraisals and training programmes.
The Board, in reliance upon the detailed work of the Audit
Committee and by review and discussion of quarterly reports
on both risk and compliance, confirms that it has considered
the effectiveness of the system of internal controls in
operation throughout the financial year and up to the dateof approval of the Annual Report and Accounts.
Internal audit
Internal Audit, Risk Management and Investigation Services
combine to form our Business Assurance function, which isled by the Director of Risk and Assurance. Internal Audit’s
authority and independence is assured by the Director of
Risk and Assurance’s independent and direct access to the
Director-General and to the Audit Committee. Internal
Audit regularly tests our control systems and core businessprocesses, evaluating their adequacy and effectiveness andensuring their consistent application across the BBC. The
work plan, which is based on a continuing assessment of key
risks, is agreed annually with the Audit Committee and covers
financial, operational and compliance controls, including theexercise of the BBC’s right of audit over external parties, suchas independent production companies and suppliers of key
outsourced business services. Any significant control failings
Report of the Chairman of the Executive
Audit Committee
The Audit Committee reviews and oversees financial reporting,internal control and risk management at the BBC. Focusing theBBC’s spending on what matters most to the British public – driving
improved value for money and reinvesting savings into high quality
content – is the context against which we judge whether thecontrol environment is fit-for-purpose.
We evaluate issues raised by Internal Audit, and management’s
progress in addressing them with the minimum of delay. We also
receive regular updates from our external auditors, outlining theiraudit approach and any issues they wish to bring to our attention.
We regularly review the most significant risks facing the business,
commissioning papers and presentations from management on
major concerns and on risk profiles from across the BBC, with aview to ensuring that any proposed actions taken to manage andmitigate risk are appropriate and adequate. Where we find they
are not, we challenge management to do better and to reconsider
prioritisation.

or weaknesses identified are reported to appropriate levelsof management. The status of corrective actions taken toaddress them is reported to the Audit Committee.
Executive Audit Committee
The members of the Audit Committee, all first appointed
in January 2007, are non-executive Directors David Robbie(Chairman), Dr Mike Lynch and Dr Samir Shah. The Board issatisfied that David Robbie has significant, recent and relevant
financial experience. The committee augments the broad
range of skills of its three members, gained from considerable
experience in senior roles with other organisations, withadvice as necessary from internal and external professionals,
on relevant matters including developments in financial
reporting and company law. Meetings are also attended by the
Director-General, the Chief Financial Officer, the Director of
Risk and Assurance, and representatives from Internal Audit,
Risk Management and the external auditors.
During the year, the Audit Committee has reviewed its Termsof Reference and has approved their continued application,
deeming them appropriate to ensure the committee’s
continued effectiveness.
The Audit Committee met four times during the financial
year. The committee meets at least annually with the external
auditors without any member of management present. The
Chairman of the Audit Committee meets with the Directorof Risk and Assurance, alone or with the external auditors,
but without management, and also meets privately with theexternal audit lead partner.
Minutes of each Audit Committee meeting, once approved,
are available to the Executive Board and to the BBC Trust.
Recommendations of the committee on any area within its
Issues facing the BBC, or the wider industry, and which we haveconsidered this year, have included: the implications of social andtechnological changes, especially on licence fee income; the securityof confidential information; overall resilience of content delivery;
and the implications for the BBC of adopting International Financial
Reporting Standards (IFRS).
The scope of this committee covers the whole BBC group;
therefore we also receive and discuss updates from the other
Audit Committees which oversee our commercial businesses.
David Robbie
Chairman of the Executive Audit
Committee
16 June 2010

F93

remit where action or improvement is needed are reported
back to the Board by whatever route is deemed mostappropriate to the nature and circumstances of the issue. The
committee Chairman formally reports to the Board at least
once a year on all matters within the committee’s duties andresponsibilities.
The Audit Committee has fulfilled its responsibilities for theyear; it has:• reviewed the effectiveness of the system of internal controls,
including controls over financial reporting. In doing so it has
considered the findings of the internal and external auditorsand sought assurance from management that any control
issues highlighted are being addressed. It has also consideredreports from management on processes for managing
significant risks.
• reviewed the BBC’s arrangements for the adoption of IFRS
and its group financial statements, including accounting
policies, compliance with legal and regulatory requirements,
and the findings of the external auditors.
• overseen the BBC’s relationship with the external auditors,
including their engagement, the scope of and approachto their work, their fees, their performance and their
independence, including the approval and compliance withthe policy on non-audit work.
• approved the work plan of Internal Audit.
• reviewed the fraud detection processes and whistle-blowing
arrangements.
• considered post investment reviews for major investments.
• monitored the implementation of all actions required as aresult of the programme of value for money reviews carriedout by the National Audit Office.
Independence of external auditors
We comply with the 2008 FRC Code guidance on maintaining
an appropriate relationship with external auditors. The BBC
re-appointed KPMG LLP as external auditors during 2008 fora period of three years starting with 2008/09, after a formal
tender process. This period is extendable twice by one year
each time, subject to a formal review process to be led by the
Audit Committee.
The Audit Committee is satisfied that KPMG has adequate
safeguards in place to avoid the possibility of its audit objectivity
and independence being compromised, including appropriate
rotation of its team, as well as an appropriate quality assurance
programme.
To safeguard and support the external auditor’s independence
and objectivity, the Audit Committee has set a clear policy
which defines the threshold above which proposed non-audit
work to be carried out by KPMG LLP must be approved inadvance by the committee, and also defines when it must be
submitted to competitive tender. In all cases, KPMG LLP is notconsidered for work which might compromise its ability to
independently opine on the BBC’s financial statements.

Recruitment from KPMG LLP into any senior management
position in the BBC requires the prior approval of the Audit
Committee.
Whistle-blowing
We have a ‘whistle-blowing’ (protected disclosure) policy,
to facilitate the confidential communication via a number ofroutes of any incident in which there is a suspicion that theBBC’s codes have been breached. In recognition that there
could be sensitivities regarding actual or suspected incidents,
we provide a ‘whistle-blowing’ hotline, administered by anindependent external company to ensure anonymity. Each
incident or suspicion reported via any route is investigatedin a confidential manner, a response is communicated andaction is taken as appropriate. The Audit Committee ensuresthat there are appropriate arrangements in place for the
proportionate and independent investigation of mattersreported and for appropriate follow-up action.
Executive Board Remuneration Report
This report sets out the BBC’s remuneration policy anddetails the remuneration received by the members of the
Executive Board. It has been prepared on the basis that therequirements of the Large and Medium-sized Companies andGroups (Accounts and Reports) Regulations 2008 and thoseof the Financial Services Authority apply to the BBC whereverthese disclosure provisions are relevant. The sections on
pensions and remuneration received by the Executive Board
members are audited by KPMG LLP.
Remuneration Committees: constitution and operation
The Remuneration and Appointments Committee (RAC)of the BBC Trust is responsible for setting the remuneration
strategy for the Executive Board and is responsible for all
aspects of the remuneration of the Director-General andthe non-executive Directors.
The Executive Remuneration Committee (ERC) is responsiblefor implementing the agreed strategy for all executive
members of the Executive Board, with the exception of the
Director-General. Its members are non-executive Directors:
Marcus Agius (Chairman), Robert Webb and Val Gooding.
Meetings of the ERC are also attended, on invitation, by the
Director-General and the Director, BBC People, who advise
on matters relating to other members of the Executive Boardand the overall performance of the BBC. When mattersconcerning the remuneration of the Director, BBC People
are considered, they are not present. The ERC has access tointernal expertise through the BBC’s Reward Director who
also attends the meetings.
Complying with the 2006 FRC Combined Code on
Corporate Governance, the ERC takes specialist advice
from external professional advisers on some matters,
and particularly those relating to market practice.
During the year, independent advice was received fromPricewaterhouseCoopers.

F94

Governance

Report of the Chairman of the Executive
Remuneration Committee
Executive remuneration has come under increasing scrutiny inrecent months and concerns have been expressed that salaries,
bonuses and long term incentives for senior individuals in both theprivate and the public sectors appear excessive against a back dropof deep economic recession. Accordingly, in February 2009, the
BBC Trust requested that the BBC Executive Board undertake athorough review of its senior management remuneration policy
and asked the Executive to consider how our approach could be
modified to respond to the economic climate. We responded byputting in place a series of measures to address both the levels of
remuneration received by individual senior managers and the total
BBC senior management paybill. These measures will have theeffect of reducing the amount spent on senior managers by 25%
over the next three years. In summary:• BBC Executive pay was frozen for four years.
• bonuses for BBC Executives were removed indefinitely.
• senior management pay was frozen and all senior management
bonuses were removed for two years.
• the BBC pledged to reduce the number of senior managers
by 18% over a four year period.
In carrying out this review, the Executive aimed to achieve a difficultbalance between attracting and retaining the talented staff needed
to lead the BBC and to continue to deliver outstanding content,with the need to ensure that it continues to offer Licence Fee
payers value for money in a period when many of them haveexperienced the negative effects of the recession.
The review was wide-ranging and looked at our current
remuneration strategy and policy, as well as undertaking a detailed
study of our current Senior Managers, including where they had
been recruited from, their length of service, age, experience andfor those who had left the BBC, where they had gone on to work.
The existing strategy orientated BBC executive remuneration
principally towards the private sector labour markets from which
the BBC generally recruits, rather than towards the public sector.
The strategy also recognised the necessary restrictions on the
BBC’s ability to pay the significant cash bonuses and share-based
awards enjoyed by the private sector. The review confirmed thatwhilst the strategy in place had proven largely successful in attracting
and retaining the right calibre of individuals, there were some areas
where internal relativities and the desire to ensure that senior pay
was broadly comparable in different parts of the organisation, hadlead to pay rising above the median of the specific labour market.
Overall the picture was one of restraint, with BBC senior managers
receiving average pay settlements that mirrored both the private
and public sectors and with senior managers in both the creativeand business management areas joining and remaining at the
BBC for lower remuneration than they could expect to receive
elsewhere – in many instances, significantly lower.
The review also took into account the commercial pressures on theBBC, which is at the heart of change of unprecedented pace andscale in the media sector. Whilst we have built up some of the skills
needed to reinvent the organisation for the digital age, the need
to attract specialist technical and other skills will only increase. It istherefore vital that the BBC has the ability to attract highly skilled
staff whose abilities command premium salaries. At the same time
we saw evidence that the economic downturn had resulted infundamental change to market practices with regard to bonuses orlong term incentives and we anticipated that the value of executive

remuneration packages would soon resume their long-term above
inflation rate of growth.
Taking all of these factors into account we made a numberof additional recommendations with regard to executive
remuneration. They included:• a BBC discount factor of 50-80% of the commercial sector
comparators’ total remuneration for executive directors and a
discount of between 20-40% for senior managers. This will mean
that, in real terms, a senior manager joining or choosing to remain
at the BBC can expect to receive significantly less remuneration
than their commercial counterparts.
• a revised role replacement policy, whereby we would consider
whether a vacant role needs to be replaced at all, whether it canbe reduced to a lower grade or whether we can pay a lower
salary• we have removed the internal relativity process where wecompared across Divisions as a key consideration for salary levelsetting and we will have remuneration strategies which recognise
the different markets in which we operate, (ie: journalism, digital
media, television production, business disciplines, etc)
• we wish to increase the rate of internal promotion from 65% to
70% within three years, resulting in reduced external recruitment
expenditure
In implementing these significant measures, we are hopeful thatthe brand of the BBC and the satisfaction of working in the public
service will enable us to continue to recruit and retain those key
individuals who lead the BBC’s ability to produce high quality output
and to manage the organisation effectively and efficiently. If we findthat this ability is impaired and that we can no longer attract andretain the people who lead the quality of services to our audiences,
we would review with the Trust the appropriateness of ourrecommendations.
I am pleased to report that in the few months since the publicationof our report and the end of the financial year that we have alreadymade progress. We have reduced the number of senior managers
by 15 (2.3%) and we have reduced the total paybill for the period
October 2009-April 2010 by £6.78million (8.6%). We will maintainthis momentum, and see even greater reduction in numbers
and paybill this year. The Executive Remuneration Committee
will continue to review progress. Moreover, the BBC’s decision
to publish the salaries of the 107 most senior managers in theorganisation, in addition to the existing publication of remuneration
statements for the executive directors demonstrates ourcommitment to continued transparency in this area.
The responsibility of the Executive Remuneration Committee
is to ensure that the BBC senior remuneration is sensitive andresponds to the changing economic climate, provides the Licence
Fee payer with value for money and enables the BBC to attract
and retain the people who will deliver the outstanding services ouraudiences deserve. Whilst this remains a complex and challenging
task, I believe that we have thoroughly reviewed all of the relevantinternal and external factors and have arrived at a remuneration
strategy and a set of medium term measuresthat provide the confidence that our
responsibilities are being met.
Marcus Agius
Chairman of the Executive Remuneration
Committee
16 June 2010
F95

Remuneration of non-executive Directors
Non-executive Directors’ fees are determined by the Trust.
Non-executive Directors are appointed initially for a periodof two years, except the Senior Independent Director, who
is appointed for an initial three-year period.
Remuneration of executive directors
The strategy that has been set by the Trust is to provide
remuneration that attracts, motivates and retains the key
talent required to lead the BBC and to deliver outstanding
public service broadcasting, whilst also recognising the BBC’s
status as a publicly funded corporation which must deliver
value to the licence fee payer.
Each year the ERC reviews independently provided market
pay data to support it in its decision making on remuneration,and ensure that levels of pay are consistent with the agreed
strategy. As basic salaries for all executive directors was frozen
in 2009, no market comparison was undertaken.
Further details on each component of the remuneration of
executive directors are provided in the following paragraphs.
Base pay
In determining base pay the ERC takes into account thebase pay of the BBC’s principal competitors and theother organisations with which it competes for talent; theaffordability of the BBC to reward its executives; and theperformance of the executive. Base pay is aligned at aroundthe market median for total remuneration, discounted by afactor of 50-80% ensuring that the BBC does not lead themarket on executive pay in the media sector.
Variable pay
A limited element of variable pay, linked to the achievement of
key objectives and overall contribution to BBC performance, isprovided. Executive directors are eligible for an annual bonusof up to a maximum of 10% of base pay, of which up to 6% is
for the achievement of divisional valuefor-money targets, andup to 4% is for the achievement of divisional transformational
objectives. During the year the annual bonus scheme for
executive directors (with the exception of the CEO of
BBC Worldwide) was suspended indefinitely. As a result
no discretionary bonuses were paid in 2010.
With regard to the CEO of BBC Worldwide, the BBC’s
remuneration strategy recognises that as a commercially
funded business, it is appropriate that its CEO participatesin the annual bonus and the long term incentive plans of
BBC Worldwide.

Benefits
In addition to pensions, the other main contractual benefits
are a car and fuel allowance, private health insurance, andlife assurance. The Director-General and Deputy DirectorGeneral are entitled to a chauffeur-driven car under earlier
arrangements. The Director-General has no entitlement toa personal car allowance or fuel allowance.
PensionMembers of the Executive Board are eligible to participate in
the BBC Pension Scheme, which provides for pension benefits
on a defined benefit basis.
For an employee joining the Pension Scheme before
1 November 2006, the accrual rate is 1/60th of the final
pensionable salary for each year of service with pensionablesalary being base pay, including London Weighting, but notincluding any bonuses or other payments. For employees inthis group the normal pensionable age is 60. For an employee
who joined on or after the 1 November 2006 the accrual
rate is 1.67% of their pensionable pay for each year of service,adjusted in line with inflation. For employees in this group thenormal pensionable age is 65.
The majority of the executive directors have a normal
pensionable age of 60 but may continue in employment
to age 65. The normal retirement date for Erik Huggers,
Sharon Baylay and Lucy Adams is 65 as they are Career
Average Benefits members of the Pension scheme. For
those who joined the Pension Scheme after 31 May 1989
earnings are subject to the maximum annual limit (£123,600
per annum for 2009/10). No maximum annual limit is applied
to those who joined on or before 31 May 1989. The Pension
Scheme provides for early retirement on medical grounds
and life assurance of four times pensionable pay up to aprescribed limit.
A variety of arrangements were put in place, for members of
the Executive Board who joined on or after 1 June 1989, andwhose pensionable pay exceeds the maximum annual limit,
including funded and unfunded arrangements outside of thePension Scheme. Since 1 April 2006 these arrangements havebeen replaced by a cash supplement paid to each Director
on pensionable salary above the maximum annual limit. See
Table 3.

Any participating employee who reaches or exceeds theLifetime Allowance (£1.75million for 2009/10) may opt out of
the Pension Scheme and instead receive a cash supplement.
Employment contracts
Employment contracts of executive directors have a notice
period of a maximum of 12 months, and are subject to earlier
termination for cause. As at 31 March 2010 the unexpired
term of each executive director was a maximum of 12months. There is no contractual entitlement to any additional
remuneration in the event of early termination other than in
the case of termination for reason of redundancy.

F96

GovernanceOutside interests
With the prior agreement of the Director-General andthe Nominations Committee, executive members of the
Executive Board may hold one remunerated external
directorship with up to 15 days per year permitted to fulfil
these duties. Remuneration which arises from directorships
may be retained by the executive member. Executive
directors may also hold non-remunerated posts outside
the BBC.
During the year no executive director held any other
remunerated external directorship. To obtain the Executive
Board’s register of interests visit www.bbc.co.uk/aboutthebbc/
running/executive/eb
It is recognised that non-executive Directors are likely to haveother directorships and the restrictions applying to executive
directors do not apply to them.

The BBC’s Commercial Businesses
The CEO of BBC Worldwide (the commercial subsidiaryof the BBC) was a member of the Executive Board for six
months of the year. He participates in the annual bonus plan
and long term incentive plan (LTIP) of BBC Worldwide.
These plans are not funded by the licence fee and the fullcosts of base pay, annual bonus and the LTIP are self-fundedby the commercial revenues of BBC Worldwide.
The CEO of BBC Worldwide is eligible for a maximum annual
bonus of 55% of base pay under the plan (increased from 50%
in April 2009), determined principally by performance against
profit targets. Up to 75% of the previous year’s annual bonus
may be deferred into the LTIP.
The LTIP is a cash incentive plan designed to align the
CEO’s remuneration with the strategy of the business. The
maximum payout under the LTIP is 25% of base pay, andadditionally a potential 100% match of deferred annual bonus.
Awards, including the matching element, made under thescheme are subject to two performance measures: Profit
Growth (75% weighting) and Return on Sales growth (25%weighting), measured over a three year period and relative
to a comparator group of at least 15 other international
media companies4.
The comparator group is selected for a mix of business,
industry and geographical representation and comprises Aegis
Group, British Sky Broadcasting Group, Informa, ITV, Pearson,
WPP, Yell Group, Cablevision Systems Corp, Comcast A,
Disney (Walt) Company, Eastman Kodak, Interpublic Group
Cos, SBS Broadcasting, ProSiebenSat.1, Axel Springer (R),Havas Advertising, JC Decaux, M6-Metropole Television,
Publicis Groupe, TF1, Vivendi Universal, Arnoldo Mondadori,Mediaset, RCS Mediagroup, Dentsu Inc, Fuji Television
Network, Nippon Television Network Corp.
BBC Worldwide must be ranked at least at the median of thecomparator group for any of the award to vest. Maximum
vesting is achieved for a ranking at the upper quartile or above.
There is a straight-line vesting scale between each vesting
point. The vesting schedule is shown in the Table 6.

F97

Table 3

Remuneration received
The remuneration of the Executive Board members and the Trustees during the year is shown below:
Fee/base
pay4£000

Annualbonus£000

Taxablebenefits
£000

Other
remuneration5
£000

Total
remuneration
2009/10£000

Total
remuneration
2008/09
£000

267

–

12

49

328

–

–

–

–

–

–

396

Executive directors
Director, BBC People
Lucy Adams

Joined 1 June 2009

Stephen Kelly

Left 28 February 2009

Director, MC&A
Sharon Baylay

Joined 5 May 2009

281

–

13

51

345

–

Director, Vision
Jana Bennett

415

–

15

87

517

515

Deputy Director-General
Mark Byford

475

–

13

–

488

485

365

–

15

72

452

403

–

–

–

–

–

248

Director, Audio & MusicTim Davie1
Jenny Abramsky

Retired 30 September 2008

Director, Future
Media & Technology
Erik Huggers

Joined 1 August 2008

330

–

15

62

407

274

Ashley Highfield

Left 30 June 2008

–

–

–

–

–

124

352

–

14

68

434

429

Chief Financial Officer
Zarin Patel
Director, BBC North
Peter Salmon

Joined 1 November 2009

156

–

6

31

193

–

Chief Executive Officer,
BBC Worldwide
John Smith4

Stepped down
30 September 2009

200

141

7

–

348

480

Director-General
Mark Thompson

668

–

7

163

838

834

Chief Operating Officer
Caroline Thomson

335

–

21

63

419

413

Total executive directors

3,844

141

138

646

4,769

4,601

Total
remuneration
2009/10£000

Total
remuneration
2008/09£000

Fee/base
pay4£000

Annualbonus£000

Taxablebenefits
£000

Other
remuneration6£000

Marcus Agius

51

–

–

–

51

50

Val Gooding2

37

–

–

–

37

35

Mike Lynch

36

–

–

–

36

35

David Robbie

41

–

–

–

41

40

Samir Shah

36

–

–

–

36

35

Robert Webb3

83

–

–

–

83

40

Total non-executive Directors

284

–

–

–

284

235

Total Executive Board

4,128

141

138

646

5,053

4,836

662

677

5,715

5,513

Non-executive Directors7

Total Trustees
Total

on 1 october 2008 Tim davie was appointed as director, audio & music. Prior to this appointment he was director, mc&a.
2
val Gooding was appointed chair of Fair Trading committee 1/2/10.
3robert webb ceased to be chair of Fair Trading committee 30/9/09. From 1 october 2009 he was appointed as non-executive chairman of both BBc commercial holdings Limited
and BBc worldwide Limited. In recognition of these additional responsibilities he received fees of £45,000 during the 2009/10 financial year.
4
John Smith stepped down from the BBc Board on 30/9/09. The base pay detailed is for the six months that he was an executive director. Base pay for the year was £420,000. Benefits
have been pro-rated. The bonus payment shown represents a payment for the whole financial year, in addition to which an equal amount has been invested into the 2010-2013 deferredbonus scheme. The maximum payout under the LTIP has increased to 25%, effective for the 2009-2012 scheme. Total renumeration for the year was £823,000 as disclosed in the BBc
worldwide annual review.
5
The BBc introduced a salary sacrifice arrangement on 1 June 2008 for members who joined the Pension Scheme before 1 november 2006, and those directors as indicated in the table
above participated in the arrangement. The terms and conditions of employment were changed for those employees opting for the salary sacrifice arrangement and as a result employee
pension contributions made via the salary sacrifice arrangement have been treated as employer contributions, with a corresponding reduction in salary. Base salaries for executive directors
have not been adjusted to reflect the impact of salary sacrifice to enable like for like comparison with prior years. The total salary sacrifice by executive directors was £77,060 (2009: £84,704).
6other remuneration relates to pension arrangements; providing cash supplements for directors subject to the maximum annual limit.
7
non-executive directors are appointed initially for a period of two years, except the Senior Independent director, who is appointed for an initial three-year period.
1

F98

Governance

Table 4

Defined benefit schemes
Details of defined benefit entitlements are shown below:
Transfervalue ofaccruedpension at
31 March
2010£000

Transfervalue ofaccruedpension at
31 March
2009£000

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

Increase/(decrease)in transfer
value lessdirector’s
contributions£000

Age as at
31 March
2010

Increase/(decrease)in accrued
pensionover year
£000

Total
accruedpension at
31 March
2010£000

Lucy Adams1

45

2

2

11

–

–

11

Sharon Baylay2

41

2

2

10

–

–

10

Jana Bennett

54

3

16

247

212

–

35

Mark Byford

51

9

215

3,682

3,406

–

276

Tim Davie

42

2

10

92

57

–

35

Erik Huggers3

37

2

4

19

7

–

12

Zarin Patel

49

3

24

284

220

–

64

Peter Salmon4

53

2

7

107

73

–

34

John Smith

52

(26)

183

3,250

3,673

–

(423)

Mark Thompson

52

3

12

167

130

–

37

Caroline Thomson

55

6

73

1,460

1,475

–

(15)

Executive directors

5

Lucy adams was appointed as a director on 1 June 2009 and joined the scheme on 1 July 2009. She is a career average Benefits member with less than two years’ service, and so she is notentitled to a deferred pension at 31 march 2010. however, to be consistent with the other members, we have calculated and valued her accrued deferred pension benefits.
2
Sharon Baylay was appointed as a director on 5 may 2009 and joined the scheme on 1 June 2009. She is a career average Benefits member with less than two years’ service, and so she is
not entitled to a deferred pension at 31 march 2010. however, to be consistent with the other members, we have calculated and valued her accrued deferred pension benefits.
3erik huggers is a career average Benefits member who had less than two years’ service at 31 march 2009 and so he was not entitled to a deferred pension at that date. however, to beconsistent with the other members at 31 march 2009 we have calculated and valued his accrued deferred pension benefits as at 31 march 2009.
4
Peter Salmon is a new Benefits member who was appointed as a director on 1 november 2009, although he joined the scheme on 1 october 2006. The figures shown include the period
before he was appointed as a director.
5
John Smith resigned as a director on 30 September 2009 but he is still an active member of the Scheme at 31 march 2010, therefore his accrued pension as at 31 march 2010 has beenvalued.
No payments in respect of termination or compensation for loss of office were paid to or receivable by Executive Board members during the year.
1

Table 5

LTIP vesting schedule for BBC Worldwide
Performance ranking for BBC Worldwide

LTIP payment

Upper quartile or above
MedianBelow median

20% of base salary (25% for 2009-12 Scheme) and 100% match of deferred bonus
10% of base salary, and 50% match of deferred bonus
Nothing vests

Notes
1 Straight line pro-ration applies between each of the vesting points above.
2 50% of the amount of any deferred annual bonus is also forfeited if performance is below the lower quartile.

Table 6

LTIP vesting for CEO of BBC Worldwide

LTIP award
LTIP 2007 to 2010

Bonusdeferred£000

End ofperformance
periodLTIP
award
vested£000

Deferredbonus matching
award vested
£000s

Total
vested£000s

a80March 2010

b
88

c
80

a+b+c
248

Table 7

LTIP potential vesting in 2011 to 2012 for CEO of BBC Worldwide

LTIP award
2008 to 20112009 to 2012

Bonusdeferred
£000s
a
88
69

End ofperformance
periodMarch 2011
March 2012

Potential
LTIP vesting(at target)
£000s
b
44
44

Potential
LTIP vesting(at maximum)
£000s
c
88
110

Notes
1. LTIP 2008-2011 for performance below lower quartile 50% of deferred bonus is forfeited.
2. Potential LTIP vesting is based on current earnings and rounded to nearest 1,000.

Potential
deferred bonus
matching award(at target)
£000s
d
44
34

Potential
deferred bonus
matching(at maximum)
£000s
e
88
69

Total
potential(at target)
£000s
a+b+d
176
147

Total
potential(at maximum)
£000s
a+c+e
264
248

F99

Statement of Executive Board
responsibilities in respect of the Annual
Report and Accounts

The Charter requires the BBC to prepare an audited annual reportand 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, statements ofcompliance with applicable codes and regulations (including the
Executive Board Remuneration Report) and the statement ofaccounts which are intended by them to give a true and fair view ofthe state of affairs of the BBC and of the income and expenditure
for that period. The Board has prepared the accounts in accordancewith International Financial Reporting Standards (IFRSs) as adopted
by the EU (‘EU IFRS’), reflecting the fact that IFRSs are widely usedin the UK, are being adopted in the public sector, and that their use
is permitted under the Companies Act 2006
The Executive Board must not approve the statement of accounts(or ‘financial statements’) unless it is satisfied that they give a trueand fair view of the assets, liabilities and financial position of the BBC
and of the surplus or deficit for that period.
In preparing the financial statements the Executive Board has:• selected suitable accounting policies and applied them consistently.
• made judgements and estimates that are reasonable and prudent.
• stated whether they have been prepared in accordance with 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 proper accounting
records that are sufficient to show and explain the BBC’stransactions and disclose with reasonable accuracy at any time thefinancial position of the Group and enable them to ensure that thefinancial statements and the Executive Board Remuneration Reportcomply with the Charter. It also has a general responsibility fortaking such steps as are reasonably open to it to safeguard the assetsof the BBC and to prevent and 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 date of
approval of the Annual Report and Accounts, whose names andfunctions are listed in the Governance section of Part Two of theAnnual Report and Accounts, confirm that, to the best of eachof 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 review of thedevelopment and performance of the business and the positionof the Group, together with a description of the principal risks
and uncertainties that it faces.

Statement of disclosure of information to auditors
The Executive Board members who held office at the date of
approval of the Annual Report and Accounts confirm that, so far as
they are each aware, there is no relevant audit information of which
the BBC’s auditors are unaware; and each Executive Board member
has taken all the steps that they ought to have taken as an Executive
Board member to make themselves aware of any relevant audit
information and to establish that the BBC’s auditors are aware ofthat information.
Going concern
The Financial Statements show the BBC to be in a net liability
position as at 31 March 2010, resulting from the recognition ofan additional deficit of £1.6billion on the BBC defined benefit
pension scheme. The directors have prepared cash flow forecasts
for a period in excess of a year from the date of approval ofthese financial statements, and have reviewed these forecasts,
together with the sensitivities and mitigating factors in the context
of available funds. The directors are satisfied that the BBC is wellplaced 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 the financial
statements.
This statement was approved by the Executive Board.

Mark Thompson
Director-General
16 June 2010

F100