BBC Full Financial
Statements 2013/14

BBC Full Financial
Statements 2013/14

Presented to Parliament by the Secretary of State forCulture, Media and Sport by command of Her Majesty
July 2014
The BBC’s Annual Report and Accounts 2013/14, giving narrative
context to the numbers contained in this document, were alsolaid before Parliament on 21 July 2014 and are available online
at bbc.co.uk/annualreport© BBC Copyright 2014
The text of this document (this excludes, where
present, the Royal Arms and all departmental or
agency logos) may be reproduced free of charge
in any format or medium provided that it isreproduced accurately and not in a misleading
context. The material must be acknowledged as
BBC copyright and the document title specified.
Photographs are used ©BBC or used under theterms of the PACT agreement except whereotherwise identified. Permission from copyrightholders must be sought before any photographs
are reproduced.
You can download this publication frombbc.co.uk/fullfinancialstatements
Designed by Fishburn™
thisisfishburn.com

Prepared pursuant to the BBC Royal Charter 2006 (Art.45)

Contents
02
04
13
14
15
19
88

Review of the Managing Director
BBC Finance & Operations
Financial overview
Looking forward
Statement of Executive Board responsibilities
Independent Auditor’s report
Group financial statements and notes
Glossary

BBC Full Financial Statements 2013/14

01Review of the Managing Director,
BBC Finance & Operations‘‘This year we have built on
our impressive track recordof delivering efficiencies whilst
maintaining the production ofoutstanding programmes andservices. The BBC is currently
well placed to meet its targets
as well as to continue to invest
in its future.’’Anne Bulford

Delivering efficiencies whilst prioritising our most valued output
The BBC has just completed its fourth year with the colour
licence fee at £145.50 and is in the middle of delivering a major
efficiency project, Delivering Quality First (DQF), which is on
track to deliver an annual total of £700million in annual recurrent
savings. Staff across the BBC continue to work hard to deliver
these efficiencies, which allows the BBC to fund a range of new
obligations. This year has been one of a continued focus on
successfully delivering efficiencies whilst ensuring our mostcreative outputs are prioritised.
In 2013/14, the BBC started to fund a number of new obligations
from the licence fee, specifically Broadband rollout, S4C, Local
TV and BBC Monitoring, at a combined cost of £250million.
The delivery of the first £374million of the £700million DQF
savings target has meant that these costs have been absorbed
without the need to utilise the BBC’s cash balances. As a result
we start 2014/15 in a strong position with sufficient cash reserves
to fund the World Service (at an annual incremental funding
requirement of £245million from 1 April 2014) withoutcompromising the quality or range of our output.
The delivery of these savings has also given the BBC the foundationfrom which to make a number of key strategic decisions this year
for our licence fee funded activities, targeting increased investmentin the strategic priorities announced by the Director-General in
October 2014.
A track record of delivering efficiencies
DQF builds on the BBC’s long track record of successfully deliveringsavings and meeting efficiency targets. Across our Value For Money(2005-2008) and Continuous Improvement (CI) (2008-2013)
programmes, we delivered nearly £1billion of real terms recurringsavings, and these have already been reinvested in our content andessential infrastructure. This has been achieved whilst maintaining
focus on the quality of services provided, optimising value formoney rather than simply maximising savings in order to become
the cheapest provider.

CBeebies presenter Cat Carey

02

Cast of Ambassadors

BBC Full Financial Statements 2013/14

2012/13 was the first year of our DQF programme, which has anannual savings target of £700million by 2016/17. We planned toachieve a significant proportion of the savings by this year andprogress has been made with audited savings of £374million
delivered. We are on track to achieve the full £700million
by 2016/17.

Breakdown of UK PSB Group expenditure 2013/14

Other direct content spend

91

3

87

2

We are doing this by taking advantage of new technologies andways of working to reduce costs, increasing commercial income,and addressing concerns around talent costs and top management
pay and expenses.

Property and technology

271

7

357

9

Distribution

217

6

222

6

In delivering our savings we have sought to protect our
production activities as much as we can. We have foundproductivity savings through the reprocurement of key supplierdeals, by improving our asset utilisation and by controlling talent
spend. We have exited both Television Centre and our WhiteCity building. We have streamlined our facilities management
workflows and invested in new systems and processes to deliver
savings in our Finance division.
Enhancing and simplifying our governance structure
As an organisation, we have demonstrated that we are able tooptimise our cost base and deliver against efficiency targets set,
however, we need to go further in order to be confident that the
BBC is a well-run organisation. We recognise that there havebeen failures in the past, such as the Digital Media Initiative (DMI)
and in the level of some individual severance payments made toformer executives and senior managers.
We have learned lessons from these and made changes to ourgovernance structures and processes to deliver a simpler, morecreative BBC. Since April, we have implemented a new way ofworking with the BBC Trust with a clearer definition of individual
responsibilities. The Trust is now focussed on challenging thestrategy for the BBC and making sure we are answerable tolicence fee payers whilst the Executive takes full responsibility
for the running of the BBC. This means a reduction in meetings
with fewer, but more effective updates to the Trust and ensuring
the Executive Board are the key decision makers.
In addition, we have simplified our meeting structures tostreamline decision making and reduce bureaucracy. As anorganisation, we will be much clearer on how decisions are
made and who in the organisation is accountable for them.
We now have in place a cap of £150,000 on all severance
payments and have also removed pay in lieu of notice in all but
the most exceptional of circumstances. Dame Fiona Reynolds,
our Senior Independent Director, has reviewed our severance
deals and her findings have been published online: bbc.co.uk/
aboutthebbc/insidethebbc/howwework/reports/bbc_review_
severance_payments_2013_14.html.

BBC Full Financial Statements 2013/14

Service licences –direct content spend

2013/14£m%

2012/13
£m

%

2,315

61

2,443

64

Other infrastructureand support

325

9

318

9

LF collection costs

102

3

111

3

Digital Switchover

7

–

57

1

Broadband rollout / S4C /Local TV

242

6

–

–

Costs to fund other income

230

6

232

6

Lease cost reclassified

(81)

(2)

(82)

(2)

Restructuring costs

10

–

23

1

Pension deficit payments
Total

49

1

49

1

3,778

100

3,817

100

Future challenges
The delivery of efficiencies, both through the ongoing DQF
programme and the historical CI programme, means we start
2014/15 in a strong position with sufficient cash reserves to meet
our immediate obligations. As an organisation however, we face
new competitive pressures in an evolving media landscape andstructural change in audience behaviour, and this means the BBC’s
strategic context is changing. We have set ourselves three overall
goals to address these challenges and stay ahead of the trend:innovating online
making the most creative content andserving all our audience
This will enable us to continue to build on our track record ofdelivering savings pushing both efficiency and creativity as hard as
we can. We must, however, be mindful that given our constraints
and financial risks, these savings alone cannot fully fund theinvestments needed and consequently, difficult decisions inrelation to scope reductions have to be made. The mostsignificant of these is the proposed move of the BBC Three linear
channel to an online platform only, which will be subject to a
public consultation in 2014, as part of a public value test
undertaken by the BBC Trust.

03

Financial overview
How we use the licence fee

The way in which the BBC is funded places significant responsibilities
on the BBC as an organisation. Specifically, it has to:provide value for money by focusing expenditure on
the programmes and services the public most wants fromthe BBC;
ensure that its output is then delivered as cost efficiently
as possible;
ensure effective and efficient collection of the licence fee;andmaximise funding from other sources, most significantly
BBC Worldwide, the BBC’s commercial trading operation,
in a manner consistent with the terms of its Charter andother obligations.

Adjustment to last years published results
Changes in accounting standards for pension costs mean ourcomparative figures have been restated this year. The change
predominantly impacts the interest calculation on our plan assets
and means that our previously reported surplus before taxationof £367million has reduced to £196million and the previously
reported net liabilities position of £60million has improved toa net assets position of £40million.
Results for the year
Our results this year once again show that we have successfully
managed the financial challenges facing us so as to ensure a soundbase for meeting our future commitments and delivering ourstrategic ambitions. Disposal of commercial businesses including
Lonely Planet mean total income for the year has fallen from
£5,102million to £5,066million, but this was offset by lower overall
operating costs resulting in group surplus of £154million for theyear (2012/13 restated: £157million). Through our efficiency
programmes and a step-down in activity following the London
Olympics last year, our operating costs have fallen from
£4,808million to £4,722million.

Summary consolidated income statement
For the year ended 31 March 2014
Restated2013£m

Income statement classification

What is it?

2014
£m

Licence fee income

The total of licence fees collected

3,726

3,656

Reduced Digital Switchover funding and limitedhousehold growth

Other income and revenue

Commercial (mainly BBC Worldwide) income
and Grant-in-Aid for World Service

1,340

1,446

Fall in sales in Worldwide partially offset by
Global News

5,066

5,102

Operating costs

The cost of producing all content and of running
the BBC(4,722)(4,808)

Exceptional impairment oftangible and intangible assets

One-off significant item

–

(52)

Prior year write off of DMI

Restructuring costs

Sums provided to fund future efficiency initiatives

(16)

(44)

Release of accounting provision in 2013/14 as aresult of lower actual restructuring costs thanoriginally budgeted for completed moves

Total income

What has happened this year?

Fall reflecting additional cost of Olympics last year

(4,738)(4,904)

Share of results of associates
and joint ventures

Our share of the profit of the businesses where
we control less than 50%

23

23

Gain on sale of operations anddisposal of fixed assets

Profit on asset disposals

4111

Other gains and losses

Share of net liabilities of joint ventures

(17)

–

The BBC’s accounting share of the net liabilitiesof UKTV not previously recognised

Net financing costs

The net interest on the BBC’s pension assets andliabilities, interest on loans and fair value
movements on derivatives

(149)

(136)

Higher accounting charge for the BBC pension
plan liabilities

Tax

The net tax liability of the BBC on its taxable
profits

(35)

(39)

154

157

Total operating costs

Group surplus for the year

Profit last year principally from the sale of
Television Centre and Lonely Planet

Due to the adoption of IAS 19 (revised) during 2014, the 2013 comparatives have been restated. Further information is available in the financial statements.
04



BBC Full Financial Statements 2013/14

Income
Total licence fee income collected increased by £16million
from £3,706million to £3,722million as a result of modest
household growth.
Licence fee income is adjusted for the costs of the Digital
Switchover (DSO) initiative to give net licence fee income.
In the year, net licence fee income increased by £70million to£3,726million. 2012/13 was the final year of DSO, although there
was some limited ongoing activity this year where none wasoriginally scheduled. Savings against DSO funding are paid overto the Government, and deducted from our income. In 2012/13
the savings amounted to £50million with a £4million carry overof cost into 2013/14.

Licence fee collected
DSO overspend/(savings)
Net licence fee

Licence fee statement
As in previous years, we also prepare a licence fee revenue
statement audited by the National Audit Office (NAO). Thisaccount sets out the amounts we collected in the year and paid
over to HM Government. Alongside their audit work, the NAO
examines our collection arrangements and reports on them to
Parliament. More on the licence fee revenue statement can befound on our website: bbc.co.uk/aboutthebbc.
Commercial trading
The licence fee is supplemented by income from the commercial
exploitation of licence fee funded content and infrastructure
through three commercial subsidiaries – BBC Worldwide,
BBC Global News and BBC Studios and Post Production (S&PP).

2013/14£m

2012/13£m

Headline income

3,722

3,706

2013/14
£m

4

(50)

3,726

3,656

Licence fee collection
Effective financial management is a key part of the BBC’s uniquerelationship with its audiences. This includes spending the licence
fee efficiently and collecting a television licence fee from everyone
who is required to buy one.

Headline result

2012/13£m

2013/14£m

2012/13£m

UK PSB Group

269

277

n/a

n/a

BBC Worldwide

1,042

1,116

157

156

BBC Global News

101

92

(7)

(1)

S&PP

29

38

(3)

(1)

Collection costs have reduced as the new contract with Capita
continues to deliver savings – costs were £102million this year,
down from £111million last year, falling below 3% of licence feecollected for the first time. Total cost savings of £220million will
be delivered over the eight years of the contract, which started in2012, releasing funding to be spent on our programmes and services.

CBBC’s My Life Race for Rio featuring Reece, Hattie and Julia who are alltrying to win a place in the Paralympics

BBC Full Financial Statements 2013/14

Cast of W1A inside New Broadcasting House05

Financial overview
BBC Worldwide
BBC Worldwide exists to support the BBC public service mission
and to maximise income to the Group on its behalf. It returned£174million to the BBC in 2013/14, up from £156million in 2012/13.
This was primarily through investment in BBC commissioned
content and dividends. Returns from BBC Worldwide to the BBC
support an ongoing commitment to manage financial performancesustainably, protecting the interests of licence fee payers.
Despite mixed market conditions and a significant adverse
impact from foreign exchange, BBC Worldwide’s overall
financial performance was good. Headline sales of £1,042million(2012/13: £1,116million) declined by 7% (or 5% after adjustingfor exchange rate movements), principally due to disposals
and a new intra-BBC revenue share arrangement for BBC.com.
Headline profit of £157million (2012/13: £156million) was up
1% (or 12% if exchange rate movements are discounted), withheadline operating margin improving to 15% (2012/13: 14%).
Revenue growth was strongest across sales to digital clients,
advertising sales and in emerging markets. BBC Worldwide’s best
performing programme in the year was Sherlock Series 3. The
Doctor Who 50th anniversary episode was also a global highlight,
transmitting in 15 languages in 98 countries, with 3D screenings in
23 countries, and generating unprecedented interest amongst
fans across the world.
BBC Worldwide entered a new phase this year, with a neworganisational structure and a new strategy. BBC Worldwide’s
ambition is to grow the BBC brand around the world, increasing
its global presence and future profitability, resulting in sustainable
and rising returns to the BBC and the UK creative industry.
BBC Worldwide announced that it will concentrate on threecore areas: increasing spend on and delivering value from content,
developing and rolling out a focused portfolio of new global BBC
genre brands and consolidating global digital services.

In its first year, the new BBC Worldwide strategy showed goodsigns of progress:
content investment was £201million (2012/13: £176million),reaching BBC Worldwide’s target of £200million one year
early. It continued to invest in the core BBC genres of drama,
natural history and factual entertainment. Major investments
included Atlantis, Doctor Who, Orphan Black, The Musketeers and
Hidden Kingdoms.
three new global genre brands were announced by BBC
Worldwide: BBC First, BBC Earth and BBC Brit. Each will
showcase premium content from the three core genres of,respectively, drama, premium factual and factual entertainment.
Plans for a mix of linear and over the top launches in lead markets
in the new financial year, prior to wider roll out, are underway.
in digital, regulatory approval was received for the launch of
BBC Store, to be funded and operated by BBC Worldwide.
BBC Store will launch in the UK next year. Meanwhile, BBC
Worldwide announced plans for a series of investments in
BBC.com, and the end of the pilot of its Global BBC iPlayer app,
as it focuses on the BBC.com site. This will help support the
BBC in achieving a global reach of 500 million per week by 2022.
The business moved to regional operation at the start of the year,
further increasing its focus on international markets. Successfulinternational expansion included the launch of new channels,
with BBC Knowledge marking a debut in Vietnam, as well as
a Memorandum of Understanding signed with China’s statebroadcaster CCTV for the development of natural history titles.
BBC Worldwide is also an important source of revenue for UK
independents, and in the year paid £116million (2012/13: £91million)
to independent rightsholders in upfront rights investment, profit
share and royalties – the vast majority of which was in the UK.

The Queen behind the screen of the BBC newsroom at the Royal opening of New Broadcasting House

06



BBC Full Financial Statements 2013/14

BBC Global NewsBBC Global News operates two commercially fundedinternational news services, BBC World News and bbc.com,
and saw a strong increase in use of its services during 2013/14.
Digital reach for News content was up 25%, with bbc.com
achieving a record 1.3 billion page views in March from 96 million
unique browsers, whilst TV distribution increased to 388 million
households. BBC Global News services were the main driverof increased audiences to the BBC’s World Service Group: thetotal weekly audience grew from 256 million to 265 million. The
business has continued to nurture key on-screen talent, and seen
great success in the social media arena as BBC World News has
welcomed its five millionth Facebook fan and been identified
as the most shared news brand on Twitter. As a result of thebusiness’ continued planned investment programme, building on
the relaunch of the BBC World News Channel in January 2013,
the business returned an operating loss close to plan of £7million
in 2013/14 (2012/13: loss of £1million).

Studios and Post Production
It has been a transformational year for Studios and Post
Production (S&PP), moving from its historic home at Television
Centre and successfully establishing operations at new core
locations – Elstree Studios and South Ruislip – whilst new studios
are being built at Television Centre.
The company delivered an impressive range of creative projects
for numerous broadcasters, media companies and content
owners – including full studios and post production services on
Strictly Come Dancing, EastEnders, Children in Need and Channel 4’s
Winter Paralympics. It hosted a variety of independent productions
including Sky’s A League of Their Own and ITV’s The Chase and built
new production facilities for Channel 4’s Deal or No Deal in Bristol.
In addition, BBC S&PP’s award winning Digital Media Services
team digitally restored the original black and white televised film
footage of the Queen’s Coronation and cult classic The
Professionals, as well as completing many other media handling
projects.
Whilst the company has achieved £29million in sales from its new
locations and smaller studio footprint, it has delivered an operating
loss of £3million for the year against a £1million operating loss theprevious year (after accounting for BBC pension deficit contributions
but before exceptional items). A level of loss was always budgeted
for this year of relocation and changing operations and is being
funded through S&PP cash reserves which were retained in
anticipation.

Radio 5 live commentators Jonathan Agnew and Geoffrey Boycott
at the Old Trafford Ashes Test, July 2013

BBC Full Financial Statements 2013/14

BBC Two drama Line of Duty

07

Financial overview
Expenditure
UK Public Services Broadcasting (UK PSB) Group expenditure2014 Service

Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

2013
Total
£m

BBC One

1,023.7

51.0

236.4

–

1,311.1

1,463.2

BBC Two

400.0

28.8

93.0

–

521.8

543.1

BBC Three

81.0

5.9

22.4

–

109.3

121.7

BBC Four

48.9

4.3

12.7

–

65.9

70.2

CBBC

76.1

5.5

19.3

–

100.9

108.7

CBeebies

28.7

4.6

9.3

–

42.6

43.0

BBC ALBA

5.2

1.3

1.5

–

8.0

7.8

BBC News Channel*

48.7

8.0

9.5

–

66.2

61.5

BBC Parliament

1.7

7.2

1.5

–

10.4

10.5

BBC Red Button

13.5

21.9

4.1

–

39.5

41.8

Television

1,727.5

138.5

409.7

–

2,275.7

2,471.5

BBC Radio 1

40.2

5.8

6.8

–

52.8

54.2

BBC Radio 2

47.8

5.7

7.3

–

60.8

62.1

BBC Radio 3

40.8

5.8

10.1

–

56.7

54.3

BBC Radio 4

91.8

9.0

19.8

–

120.6

122.1

BBC Radio 5 live

49.2

5.7

11.6

–

66.5

76.0

BBC Radio 5 live sports extra

2.4

1.4

1.4

–

5.2

5.6

BBC Radio 1Xtra

5.6

1.6

2.6

–

9.8

11.8

BBC Radio 6 Music

7.9

1.6

2.5

–

12.0

11.5

BBC Radio 4 extra

4.1

1.6

1.7

–

7.4

7.2

BBC Asian Network

6.6

1.8

2.4

–

10.8

13.0

BBC Local Radio

115.4

10.8

23.4

–

149.6

152.5

BBC Radio Scotland

22.6

3.2

6.4

–

32.2

32.7

Radio nan Gàidhael

3.8

1.4

1.0

–

6.2

6.3

BBC Radio Wales

13.4

1.4

3.8

–

18.6

18.8

BBC Radio Cymru

11.7

1.6

3.5

–

16.8

17.6

BBC Radio Ulster/BBC Radio Foyle

17.4

1.3

4.9

–

23.6

23.8

Radio

480.7

59.7

109.2

–

649.6

669.5

BBC Online**
Spend regulated by service licence

08



106.5

18.8

49.1

–

174.4

176.6

2,314.7

217.0

568.0

–

3,099.7

3,317.6

BBC Full Financial Statements 2013/14

Total UK PSB Group expenditure2014 Service

Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

2013
Total
£m

Spend regulated by service licence

2,314.7

217.0

–

–

568.0

–

3,099.7

3,317.6

–

102.1

102.1

Orchestras and performing groups

22.8

–

111.1

5.1

–

27.9

29.2

S4C

23.4

Development spend

45.2

–

5.7

76.3

105.4

30.0

–

10.0

–

55.2

BBC Monitoring

50.5

–

–

–

7.2

7.2

–

UK PSB Group pension deficit reduction payment

–

–

–

48.6

48.6

48.6

Costs incurred to generate intra-group income

–

–

–

169.3

169.3

164.8

Costs incurred to generate third-party income

–

–

–

60.6

60.6

67.4

91.4

–

20.8

464.1

576.3

501.6

Licence fee collection costs

Other content related spent
Restructuring costs

–

–

–

9.6

9.6

23.1

2,406.1

217.0

588.8

473.7

3,685.6

3,842.3

Digital Switchover (Digital UK Limited)

–

–

–

–

–

12.5

Digital Switchover (DSHS Limited)

–

–

–

7.2

7.2

44.4

Local TV ***

–

–

–

16.0

16.0

–

Broadband rollout***

–

–

–

150.0

150.0

–

2,406.1

217.0

588.8

646.9

3,858.8

3,899.2

Total UK PSB Group content expenditure

Total UK PSB Group expenditure
Lease reclassification****UK PSB Group expenditure

–

–

–

(81.0)(81.0)(81.9)

2,406.1

217.0

588.8

565.9

3,777.8

3,817.3*

Included within BBC News channel are production costs of £26.8million, Newsgathering costs of £21.2million and other costs of £0.7million (2013: production costs of £27.2million,
Newsgathering costs of £17.8million and other costs of £0.2million).
** BBC Online spend is monitored by annexe (relating to editorial areas of the service). Non-annexe spend covers costs relating to central editorial activities such as the BBC Homepage,technologies which operate across the service and overheads. The spend for each annexe was: News, Sport & Weather £47.8million (2013: £43.8million), Childrens £9.3million(2013: £8.5million), Knowledge & Learning £15.7million (2013: £18.7million), TV & iPlayer £11.1million (2013: £12.2million) and Audio & Music £11.7million (2013: £13.3million), giving a
total annexe spend of £95.6million (2013: £96.5million). Non-annexe spend was £10.9million (2013: £6.5million).
*** Under the terms of the latest licence fee agreement, The BBC has committed to contribute funding toward broadband rollout across the UK and funding for the development ofLocal TV channels.
**** In order to reflect the full cost of UK PSB Group expenditure by service, finance lease interest is included, although it is not included in the Group operating expenditure.

Infrastructure and support costs are made up of:
2014
£m

2013
£m

Property

141.2

181.6

HR and training

38.6

45.4

Policy and strategy

9.1

12.0
67.7

Finance and operations

70.3

Marketing, audiences and communication

71.9

68.7

Total central costs

331.1

375.4

Technology

130.3

175.1

Libraries, learning support and community events

32.0

33.6

Divisional running costs

62.7

64.5

BBC Trust Unit

12.0

11.9

Other

20.7

14.9

Total infrastructure/support costs

588.8

675.4

BBC Full Financial Statements 2013/14

09

Financial overview
World Service
2013/14 was the final year of Foreign & Commonwealth Office(FCO) funding for the World Service prior to becoming licencefee funded. As well as delivering planned savings of £12million in
the year a further reduction in Grant-in-Aid income of £2million
on £240million from the FCO was mitigated by savings in
restructuring costs and accommodation spend.
After its move to New Broadcasting House last year and its
co-location with BBC News teams, the organisation willcontinue to pursue building synergies and therefore savings
with the wider BBC.
Focusing spend
The BBC concentrates its expenditure on the production ofprogrammes and other content and its delivery to audiences
and users, and the essential infrastructure to support this.
Year-to-year spend can vary significantly because of the cycleof major sports events, and total content spend reduced by
4.9% to £2,406million (2012/13: £2,530million) this year which
was largely due to additional investment in our coverage of the
London Olympics last year.
No service licences spent above the regulated baseline
threshold during 2013/14. BBC Parliament service licence was
the only service to underspend by more than 10% as it delivered
additional efficiency savings, especially in its overheads, withoutcompromising editorial performance.
The BBC must invest in technology and property infrastructure
to enable new ways of working which will deliver both enhanced
content and financial efficiency savings to fund the BBC’s DQF
strategy. Last year the write down of DMI increased our
expenditure for these two areas to £357million, and expenditure
this year is lower at £271million. This is to be expected given thehistorical spend on technical infrastructure in MediaCity UK andin New Broadcasting House, the financial benefits of which
continue to be seen. Our expenditure on all infrastructure andsupport costs reduced by nearly 13% this year, as it fell from£675million to £589million. An analysis of these costs are set out
in the table on page 09.

10Delivering efficiencies
Halfway through the DQF programme, more than half of thesavings target of £700million has been delivered with savings todate of £374million, higher than our targeted figure for this pointof £367million.
Our annual savings achievement is reviewed by our auditors,
KPMG LLP. It will also be examined by the NAO in 2014/15
following up on their report, of November 2011, which
commended the way the BBC manages the delivery of efficiencies.
We are doing this by taking advantage of new technologies andways of working to reduce costs, reprocuring key contracts,
increasing commercial income, and addressing concerns aroundtalent costs and top management pay and expenses. Throughout
our efficiency programmes, there has been particular focus onrationalising and modernising our operating estate which willcontinue as part of DQF.
We have sought to protect our production activities as much as
we can, but we have found productivity savings in Television byreviewing procurement deals, by improving our asset utilisation
and by controlling talent spend. We have also mitigated the impact
of inflationary increases in our long-term sports rights deals.
We have placed particular emphasis on finding savings in thoseof our activities that do not directly face our audiences. We havere-procured our security contracts, and exited both Television
Centre and our White City building. We have also put new
rosters and supplier management arrangements in place tostreamline our Facilities Management workflows and eliminate
duplication, and we have reviewed our Marketing and Audience
activities. We have invested in new systems and processes toreduce headcount in our Finance division.
The speed of delivery of our plans for West London, as well as
the redevelopment of Television Centre, both carry a level of risk.
However, we are still on track to deliver the remaining savingsby 2016/17.
All these savings are essential to generate the cash required tocontinue to develop the BBC’s content and distribution, and thus
ensure we are able to continue to provide licence fee payers with
the quality and range of services they are entitled to expect fromthe BBC into the foreseeable future.

BBC Full Financial Statements 2013/14

Balance sheet
Prudent financial management means we have ended the yearwith £526million of cash and cash equivalents. This provides asound base as we absorb World Service’s running costs in 2014/15
and deliver on our other strategic ambitions. The provisions wehold for restructuring costs have fallen to £54million (2012/13:£81million) as provisions raised predominantly in 2012/13 were
utilised in 2013/14.

Future pension costs
The accounting pension deficit (as defined by IAS 19) has reduced
to £1,516million compared to £1,617million a year ago. The major
reasons for the reduction is the payment of additional amounts
under the agreed pension deficit recovery arrangement as well
as changes in the valuation assumptions. The accounting valuationis only a ‘snapshot’ at a particular date in time, and is therefore
sensitive to short-term market fluctuations.

The rationalisation of our estate has continued this year, and willcontinue in future years as we exit White City and refurbish
Television Centre. This is reflected in lower plant, property andequipment values and higher depreciation charges outweighing
additions in the year.

The most recent actuarial valuation was completed in 2013 andshowed a funding shortfall of £2,054million and a plan has been
agreed between the BBC and the pension scheme Trustees
detailing the contribution amounts to be paid by the BBC overa 12-year period commencing in 2014. The next formal actuarial
valuation of the Scheme is expected to be performed as at 1 April
2016. We are continuing to look at ways to reduce the volatility
in the Scheme to provide greater stability for long-term financial
planning. We believe the agreed funding plan represents a sensible
and affordable plan to address the deficit, without adversleyaffecting programmes or pension scheme members. We willcontinue working with the Trustees to ensure the Scheme
delivers best value to members and licence fee payers.

Summary consolidated balance sheet
For the year ended 31 March 20142014£m

Restated
2013£mBalance sheet classification

What is it?

Non-current assets

Mainly the BBC’s property, plant, equipment andinvestments

1,702

1,783

Increased depreciation on new
infrastructure offset by additions in the year

Current assets

Programme and other stocks and amounts to bereceived in the next 12 months

2,258

2,166

Increase in prepayments to acquire future
programme-related rights

Current liabilities

Amounts to be paid in the next 12 months(1,038)(1,149)Reduction in provisions through utilisation
and releases

Non-current liabilities(excluding pension liabilities)

Amounts to be paid after the next 12 months(1,098)(1,144)

Reduced borrowings and long-term
provisions

1,824

1,656

(1,516)(1,616)

308

40

308

40

Net assets (excluding
pension liabilities)
Net pension liabilities

The net deficit of the BBC Pension Scheme

Net assets

What has happened this year?

Decrease to reflect changes in assumptions
and contributions paid during the year

Represented by:
BBC reserves

The net resources available to the BBC for future use

BBC Full Financial Statements 2013/14

11

Financial overview
Cash
The BBC’s cash balance of £526million at the end of the year will
be used to help fund a number of imminent financial pressuresand, together with future efficiency savings, deliver our Strategic
Initiatives. These include:

Tax
The BBC is a committed and prudent tax payer in all the countries
in which it operates. Its commercial operations undertake
appropriate and legitimate tax planning measures in accordancewith the spirit and intention of all laws and regulations.

the new obligations for World Service in 2014/15 of£245million;
the continuing obligations for S4C, Local TV and Broadband,budgeted in aggregate at £230million in 2014/15;
circa £103million of spending on our Strategic Initiatives
including iPlayer+, myBBC, increased investment in the artsand our television drama portfolio; andthe next annual pension deficit recovery payment(£100million).

Summary consolidated cashflow statement
For the year ended 31 March 2014
Cash flow classification

What is it?

2014
£m

2013
£m

Net cash inflow fromoperating activities

Surplus of the BBC’s income over its operating costs

336

338

Net cash used in investing
activities

Cash invested in intangible assets and property, plant andequipment (PPE)

(243)

(40)

Net cash used in financing
activities

Net interest paid on the BBC’s borrowings

(136)

(129)

(43)

169

Net (decrease)/increase in
cash and cash equivalents
Cash and cash equivalents
at the beginning of the year

The BBC’s cash balance at the beginning of the year

575

407

Effect of foreign exchange
rate changes on cash andcash equivalents

The impact of foreign exchange rates on the BBC’s cash

(6)

1

Movement in cash held as
restricted funds

DSO savings to be paid over to DCMS or received
for Licence Fee stamps–(2)

Cash and cash equivalents
at the end of the year

The BBC’s cash at the end of the year

526

575

12



What has happened this year?

Higher intangible asset purchases in thecurrent year exacerbated by higher
proceeds from property, plant andequipment disposals last year

Adverse movements in exchange rates
impacting the sterling value of our cash

BBC Full Financial Statements 2013/14

Looking forward
As we head into the Charter Review process we face a challenging
three years. In addition to delivering our DQF strategy, ourstrategic context is changing as we respond to pressures fromnew competitors and structural changes in audience behaviour.
Although there are signs of recovery in the UK economy, we
continue to see ongoing challenges in licence fee collection andstrong commercial pressures from global competitors.
Our financial management has provided us with a solid base withwhich to face these future challenges which will be further
boosted as we build on our track record of delivering efficiencies.
We must, however, be mindful that given our constraints andfinancial risks, we cannot deliver these ambitions throughefficiencies alone and we will have to make scope reductions.
This is my first review as Managing Director of Finance andOperations and I look back on my first year as one where we havecontinued to produce outstanding programmes and services
whilst building on our impressive track record of delivering
efficiencies. Delivery of all our savings targets by 2016/17, to enable
us to deal effectively with 26% lower funding in real terms for our
UK public services caused by the freeze in the licence fee and all
the new obligations, whilst continuing to invest in the future of
the BBC, is a very tough challenge requiring difficult choices.
We have made good progress to date and remain on track tomeet our targets.

Anne Bulford
Managing Director, BBC Finance and Operations
19 June 2014

BBC Two’s Peaky Blinders won the BAFTA Television Craft award
for Director – Fiction

BBC Full Financial Statements 2013/14

BBC Natural History Unit production Beyond Human

13

Statement of Executive Board responsibilities
in respect of the Annual Report and Accounts
The Charter requires the BBC to prepare an audited annual
report and statement of accounts.
The Trustees’ responsibilities are detailed in Part One of theAnnual Report and Accounts.
The Executive Board has accepted its responsibility for the
preparation of a strategic report, statements of compliance withapplicable codes and regulations (including the Executive Board
Remuneration Report) and the statement of accounts which areintended by them to give a true and fair view of the state of affairsof the BBC and its subsidiaries (‘the Group’) and of the income
and expenditure for that period. The Executive Board has
prepared the accounts in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU. The Executive
Board must not approve the statement of accounts (or ‘financial
statements’) unless it is satisfied that they give a true and fair viewof the assets, liabilities and financial position of the Group and of
the surplus or deficit for that period.
In preparing the financial statements the Executive Board has:selected suitable accounting policies and applied themconsistently;

Statement of disclosure of information to auditor
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 ofwhich the BBC’s auditor is 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 auditor
is aware of that information.
Going concern
The Executive Board has prepared cash flow forecasts for aperiod in excess of a year from the date of approval of thesefinancial statements, and has reviewed these forecasts, together
with the sensitivities and mitigating factors in the context ofavailable funds. The Executive Board is satisfied that the BBC iswell placed to manage the risks and has adequate resources tocontinue in operation for the foreseeable future. As a result thegoing concern basis has been adopted in the preparation of thefinancial statements.
This statement was approved by the Executive Board.

made judgements and estimates that are reasonable andprudent;
stated whether they have been prepared in accordance withIFRS as adopted by the EU; andprepared the financial statements on the going concern basis
as they believe that the BBC will continue in business.

Tony Hall
Director-General
19 June 2014

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
Report comply with the Charter. It also has a general
responsibility for taking such steps as are reasonably open to it tosafeguard the assets of 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 each of
their knowledge and belief:the financial statements, prepared in accordance with IFRS
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and surplus of the Group;the Annual Report and financial statements includes a fairreview of the development and performance of the businessand the position of the Group, together with a description of
the principal risks and uncertainties that it faces; andthe Annual Report, taken as a whole, is fair, balanced andunderstandable and provides the information necessary toassess the Group’s performance, business model and strategy.

14

BBC Full Financial Statements 2013/14

Independent Auditor’s report to the Trustees of
the British Broadcasting Corporation (BBC) only
Opinions and conclusions arising from our audit
1. Our opinion on the Group financial statements is unmodified
We have audited the Group financial statements of the BBC for
the year ended 31 March 2014 which comprise the consolidated
income statement, consolidated statement of comprehensive
income, consolidated balance sheet, consolidated statement ofchanges in equity, consolidated cash flow statement and related
notes to the accounts. In our opinion the Group financial
statements:
give a true and fair view of the state of the Group’s affairs as at
31 March 2014 and of its surplus for the year then ended; andhave been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion on the financial statements therisks of material misstatement that had the greatest effect on our
audit were as follows:
Restructuring provisions –£53.7million
Refer to page 110 of Part Two of the
BBC Annual Report (Executive Audit
Committee Report), page 85(accounting policy) and page 60(financial disclosures)

The risk

Our response

As part of the ongoing Delivering
Quality First efficiency programme at
the BBC, a number of individuals will
leave the organisation resulting insignificant restructuring costs.

Our audit procedures including analysing the timingof communication of management decisions(through review of board minutes, business plansand public announcements) to individuals at risk,
testing on a sample basis, that a valid expectation
had been communicated and raised by the balance
sheet date.

Accounting standards require the
Executive Board to make provisions
when the Delivering Quality First plans
are sufficiently detailed and theorganisation has raised a valid
expectation in those affected that it
will carry out the plan. At the time ofrecognising provisions, the Executive
Board make judgements regarding thelevel of payments that will be madebased on the level of individuals thatleave the organisation, the BBC’s
redundancy policy and levels of natural
attrition and redeployment.
In addition, estimates and judgements
are made regarding the timing of therecognition of restructuringprovisions. This is therefore aparticular focus area for the audit.

BBC Full Financial Statements 2013/14

On a sample basis we tested the value ofrestructuring provisions by agreeing to approved
business plans. We considered whether postbalance sheet event disclosures were required
for announcements subsequent to year end where
the conditions for recognising a provision were
not met at year end.
We additionally assessed the historical accuracy ofprovisions made in previous years through testing
the level of provisions utilised and released in
2013/14 .
We also considered the adequacy of the Group’s
disclosures about the degree of estimation
involved in arriving at the provision.

15

Independent Auditor’s report to the Trustees of
the British Broadcasting Corporation (BBC) only
Capital projects included in Assets
under construction – £105.2million
Refer to page 110 of Part Two of the
BBC Annual Report (Executive
Audit Committee Report), page 82(accounting policy) and page 45(financial disclosures)

Accounting for the BBC property
portfolio – total value capitalised –£838.9million; annual operating lease
expenditure £70.2million
Refer to page 110 of Part Two of the
BBC Annual Report (Executive
Audit Committee Report), pages 82-83(accounting policy) and pages 45-48(financial disclosures)16The risk

Our response

The BBC is completing a number ofsignificant capital projects for whichamounts have been capitalised on theGroup’s balance sheet.

In this area our audit procedures focused on thestatus of individually significant projects capitalisedin Assets under construction at 31 March 2014.

For these significant projects we considered their
ongoing need and future use within the BBC.
We obtained analysis of costs to complete andcompared this against original business plans.
We agreed significant capitalised costs in the year
to invoices and other third party supporting
documentation and assessed the need for
impairment based on the status of the projects.
We corroborated this information throughinterviews with respective project managers.
Board minutes and relevant committee minutes
were obtained and discussions regarding significant
The majority of the significant ongoing
capital projects considered to identify projects at
capital projects relate to IT fit out andrisk of not completing in line with planned
expenditure. There is an increased risktimescales.
of impairment due to the highly
specialised technology based nature of We also assessed whether the Group’s disclosuresthese projects.
reflected appropriately the status of capitalprojects.
The Group has a significant property
In this area our procedures included, among
portfolio combining freehold
others, analysing all significant property
properties and properties leasedtransactions entered into during the year. We
under both finance and operating
obtained signed agreements and considered terms
leases.
and contractual obligations to support the
proposed accounting treatment.
As part of the Delivering Quality First
strategy, the Group has considered its We assessed the competence of the Group’s third
ongoing portfolio which has resulted
party land management company through whom
in certain properties being sold or
we obtained a list of buildings that were not being
sub-leased.
used at 31 March 2014 (notably the White Citybuilding) and corroborated this through ourGiven the number of properties
understanding of the business. We consideredowned and leased by the BBC and thethe accounting implications for these buildings
changing portfolio, there is a risk thatthrough analysing BBC public announcements,
property transactions may not be
Executive Board papers and the Group’s expert
appropriately accounted for, and thatthird party reports.
property impairments or onerous
lease obligations are not identified or
For significant properties held on balance sheet atmeasured accurately.
year end we tested recoverable amount throughreference to the BBC’s external third party
valuation reports. We considered the results ofthese valuation reports through reference toexternal market factors.
The recoverability of these assets isdependent on the achievement ofproject completion and the assets
being used in the manner intended aspart of the original business case. In
the prior year a significant impairment
was recorded for the Digital Media
Initiative programme capitalised in
Assets under construction following a
critical review of the project status.

BBC Full Financial Statements 2013/14

Other income recognition(from commercial operations) –income recognised – £1,021.5million;
Refer to page 110 of Part Two of the
BBC Annual Report (Executive
Audit Committee Report), pages 80-81(accounting policy) and pages 27-28(financial disclosures)

Defined benefit pension obligations– £1,515.7million
Refer to page 110 of Part Two of the
BBC Annual Report (Executive
Audit Committee Report), page 82(accounting policy) and pages 40-44
and 64-67 (financial disclosures)

The risk

Our response

Revenue recognition in BBC
Worldwide is complex, with a numberof different revenue streams including
sale of content to global broadcasters,
subscription income, carriage
agreements with cable operatorsand revenue from the sale of physicaland digital products.

Our audit procedures in this area included, among
others, testing of controls, using our internal IT
specialists, including the accuracy of data input incomparison to the related contract, interface
of key financial systems and effectiveness ofmanagement oversight and contract review
procedures.

The complexity of individual
contractual terms may require thegroup to make judgements in assessing
when the triggers for revenue
recognition have been met and in
determining the rates that should becharged under the contract. In
particular, whether the group has
sufficiently fulfilled its obligations
under the contract to allow revenue
to be recognised, whether it should berecognised at a single point of delivery
or across the length of the service
period and whether contractual terms
have been appropriately interpreted.
The high concentration of sales
contracts entered into around the year
end as a result of BBC’s Showcase event
in February makes the recognition ofrevenue in the appropriate period on abasis of delivery and licence period acontinued focus.
The Group has a defined benefit
pension scheme. Significant estimates
are made in valuing the Group’s
post-retirement defined benefit
schemes and small changes inassumptions and estimates used tovalue the Group’s net pension deficit
would have a significant effect on the
results and financial position of theGroup.

3. Our application of materiality and an overview of the scopeof our audit
The materiality for the Group financial statements as a whole wasset at £10million. This has been agreed with the Executive Audit
Committee and has been set at a lower level than traditional
materiality measures would suggest, reflecting the unique funding
nature of the entity. For illustration, it represents 0.2% of total
Group income and 0.3% of total Group assets.
We agreed with the Executive Audit Committee to report to it all
corrected and uncorrected misstatements we identified throughour audit with a value in excess of £1million, in addition to otheraudit misstatements below that threshold that we believe
warranted reporting on qualitative grounds.

We compared the revenue recognised against
our expectation, which was formed using existingknowledge of both the Group and the industry,
subscription numbers agreed on a sample basis tothird party supporting evidence, signed contractual
amounts and proof of delivery. We set tolerance
levels and investigated differences outside ofthese, comparing explanations provided toindependent evidence.
We agreed a sample of revenue transactions to
supporting contracts and proof of delivery in thelast month of the year and first month after theyear end, testing the application of the appropriate
revenue recognition criteria in respect of licences
and that delivery had been satisfied.

Using the knowledge and experience of our own
actuarial specialists, our audit procedures included,
among others, challenging the key assumptions
applied to membership data to determine theGroup’s net deficit: discount rate, inflation rate andmortality/life expectancy. This included acomparison of these key assumptions against
externally derived data.
We also considered the adequacy of the Group’s
disclosures in respect of the sensitivity of the
deficits to these assumptions.

Group audit team at a further two key components. All components
are located in the United Kingdom. These audits covered 100% of total
Group income, Group surplus before taxation and total Group assets.
The audits undertaken for Group reporting purposes at the key
reporting components of the Group were all performed tocomponent materiality levels set by the Group audit team. These
were set individually for each component and ranged from
£2.5million to £8million.

Detailed audit instructions were sent to all the auditors in theselocations. These instructions covered the significant audit areasthat should be covered by these audits (which included therelevant risks of material misstatement detailed above) and set
out the information required to be reported back to the Group
Audits for Group reporting purposes were performed byaudit team. The Group audit team visited all component audit
component auditors at two key reporting components and by the teams during the course of the audit.
BBC Full Financial Statements 2013/14

17

Independent Auditor’s report to the Trustees of
the British Broadcasting Corporation (BBC) only
4. Our opinion on other matters prescribed by the terms of
our engagement is unmodified
In addition to our audit of the Group financial statements, theTrustees have engaged us to audit the information in the Trustees
and Executive Board Remuneration Reports that is described ashaving been audited, which the Executive Board has decided toprepare as if the BBC were required to comply with therequirements of Schedule 8 to The Large and Medium-sizedCompanies and Groups (Accounts and Reports) Regulations
2008 (SI 2008 No. 410) made under the Companies Act 2006.
In our opinion:the information given in the Overview Section of the Annual
Report and Accounts, the Chairman’s Foreword and theTrustees’ performance review in Part One of the Annual
Report and Accounts, the Director-General’s Introduction,
the Executive Board’s performance review and financial
overview and highlights, the Corporate GovernanceStatement and the unaudited parts of the Remuneration
Reports in Part Two of the Annual Report and Accounts
is consistent with the Group financial statements; andthe parts of the Remuneration Reports which we were
engaged to audit have been properly prepared in accordancewith Schedule 8 to The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, as if
those requirements were to apply to the BBC.
5. We have nothing to report in respect of the matters on
which we are required to report by exception
Under International Standards on Auditing (ISAs) (UK and
Ireland) we are required to report to you if, based on theknowledge we acquired during our audit, we have identified otherinformation in the annual report that contains a materialinconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise
misleading. In particular, we are required to report to you if:we have identified material inconsistencies between theknowledge we acquired during our audit and the Executive
Board’s statement that they consider that the annual reportand financial statements taken as a whole is fair, balanced andunderstandable and provides the information necessary for
Trustees to assess the Group’s performance, business modeland strategy; orthe part of the Corporate Governance Statement on pages
91-92 of Part Two of the BBC Annual Report relating to theBBC’s compliance with the nine provisions of the 2010 UK
Corporate Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Respective responsibilities of Executive Board and auditor
As explained more fully in the Trustees’ and Executive Board
responsibilities statements set out on page 14, the Executive
Board is responsible for the preparation of Group financial
statements which give a true and fair view.
Our responsibility, in accordance with the terms of ourengagement letter, is to audit the financial statements inaccordance with relevant legal and regulatory requirements and
ISAs (UK and Ireland). Those standards require us to comply with
the UK Ethical Standards for Auditors.
Scope of an audit of financial statements performed inaccordance with ISAs (UK and Ireland)
A description of the scope of an audit of financial statements isprovided on our website at www.kpmg.co.uk/
auditscopeother2013. This report is made subject to important
explanations regarding our responsibilities, as published on thatwebsite, which are incorporated into this report as if set out in fulland should be read to provide an understanding of the purpose ofthis report, the work we have undertaken and the basis of ouropinions.
The purpose of this report and restrictions on its use by
persons other than the Trustees
This report is made solely to the Trustees on terms that havebeen agreed. Our audit work has been undertaken so that wemight state to the Trustees those matters we are required tostate to them in an auditor’s report and, in respect of the separate
opinions in relation to the Remuneration Reports and reportingon Corporate Governance, those matters that we have agreed tostate to them in our report, and for no other purpose. To thefullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the BBC and the Trustees as abody, for our audit work, for this report, or for the opinions wehave formed.

the Executive Audit Committee Report does not
appropriately address matters communicated by us to the
Executive Audit Committee.
Under the terms of our engagement we are required to report toJonathan Downer
you if, in our opinion, we have not received all the information andfor and on behalf of KPMG LLP, Statutory Auditor
explanations we require for our audit.
Chartered Accountants
15 Canada Square, London, E14 5GL
In addition to our audit of the financial statements, the Trustees
have engaged us to review the Corporate Governance statement 19 June 2014
as if the BBC was required to comply with the Listing Rules of the
Financial Conduct Authority in relation to these matters. Under
the terms of our engagement we are required to review:
the Executive Board’s statement, set out on page 14, in relation
to going concern; and18

BBC Full Financial Statements 2013/14

Group financial statements for the year ended 31 March 2014

The BBC’s consolidated
financial statements
These financial statements comprise both the primary statements
and additional supporting disclosure notes. The primarystatements are:Consolidated income statement
The income the BBC receives and expenditure incurred by theGroup’s operations during the financial year.
Consolidated statement of comprehensive income
Items of income and expense, including reclassification
adjustments, that are not directly recognised in the income
statement and hence are charged or credited directly against
or to reserves.
Consolidated balance sheet
The statement of the assets and liabilities of the BBC at a specificpoint in time, the financial year end.
Consolidated statement of changes in equity
Components that make up the capital and reserves of the Groupand the changes to each component during the financial year.
Consolidated cash flow statement
Cash generated by the BBC from its operations and how thosecash flows have been used.

BBC Full Financial Statements 2013/14

19

Group financial statements for the year ended 31 March 2014

Consolidated income statement
Note

Licence fee income
Other income
Total income
Operating costs excluding specific items
Exceptional impairment of tangible and intangible assets
Restructuring costs
Total operating costs
Group operating surplus
Gain on sale and termination of operations
Other gains and losses
Gain on disposal of fixed assets
Share of results of associates and joint ventures
Financing income
Financing costs
Net financing costs
Surplus before taxation
Taxation
Surplus for the year
Attributable to:BBC
Non-controlling interests
Surplus for the year

A1
A1
A1
B1
C3
A1
E3
E4
D3
E4
F9
F9
F9
G2.1

2014
£m

Restated*
2013£m

3,726.1
1,339.9
5,066.0(4,721.9)–(16.5)(4,738.4)
327.6
4.1(16.5)–
22.7
14.6(163.6)(149.0)188.9(35.1)
153.8

3,656.2
1,446.1
5,102.3(4,808.1)(51.7)(43.7)(4,903.5)
198.8
23.3
–
87.2
23.0
10.2
(146.5)(136.3)196.0(38.7)
157.3

153.8
–
153.8

156.4
0.9
157.3

* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated (see page 78).

As the BBC Group is run for the public benefit, the surplus arising does not represent a ‘profit’ that can be distributed, but is retainedfor future investment.

20BBC Full Financial Statements 2013/14

Consolidated statement of comprehensive income
Note

Surplus for the year
Other comprehensive income/(loss):
Remeasurement on defined benefit pension schemes
Total items that will not be reclassified to the income statement in the future
Exchange differences on translation of foreign operations
Loss on foreign currency translation
Gains/(losses) on cash flow hedges
Recycling of translation and hedging reserves on disposal
Fair value (loss)/gain on assets available for trading
Deferred tax on financial instruments
Total items that may be reclassified to the income statement in the future
Other comprehensive income/(loss) net of tax
Total comprehensive income/(loss) for the year
Attributable to:BBC
Non-controlling interests
Total comprehensive income/(loss) for the year

C7.2

G4.3

2014
£m

Restated*
2013
£m

153.8

157.3

125.0
125.0
(7.5)
–
16.4
–
(15.7)(3.7)(10.5)
114.5
268.3(516.6)(516.6)8.9(0.5)(10.8)(49.0)
12.1
2.6(36.7)(553.3)(396.0)

268.3
–
268.3

(396.9)0.9(396.0)* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated (see page 78).

BBC Full Financial Statements 2013/14

21

Group financial statements for the year ended 31 March 2014

Consolidated balance sheet

Note

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

E1
D1
E4
F6.1
D2
G4.2
G2.4

B5
F6.2
G1
G4.2
F1

F7.1
F3.1
F8
G4.2

Non-current liabilities
Other payables
Borrowings
Provisions
Derivative financial instruments
Deferred tax liabilities
Pension liabilities

F7.2
F3.2
F8
G4.2
G2.4
C7.1

Net assets
Attributable to the BBC:Operating reserve
Available for sale reserve
Hedging reserve
Translation reserve
Non-controlling interests
Total capital and reserves

At 31 March2014£m

At 31 March2013(restated)*£m

At 1 April
2012(restated)*
£m

233.2
1,305.6
13.0
25.8
108.9
6.0
9.5
1,702.0

159.5
1,370.3
31.5
80.3
121.5
4.9
15.1
1,783.1

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

730.5
988.7
–
12.9
526.1
2,258.2

645.6
931.3
9.9
4.0
575.2
2,166.0

691.7
875.2
90.9
3.4
407.3
2,068.5(959.7)(7.7)(53.3)(2.8)(14.8)(1,038.3)(1,033.2)(27.0)(66.0)(10.1)(12.5)(1,148.8)(1,118.3)(36.8)(86.1)(4.2)(13.1)(1,258.5)(15.2)(1,008.2)(56.8)(14.4)(3.1)(1,515.7)(2,613.4)
308.5(18.4)(1,043.1)(71.5)(10.6)(0.7)(1,615.8)(2,760.1)
40.2(73.6)(1,052.9)(68.0)(5.9)(6.0)(1,078.6)(2,285.0)
444.7

226.9
91.6
5.4
(15.4)
308.5
–
308.5

(51.9)
107.3
(7.3)
(7.9)
40.2
–
40.2

309.2
95.2
1.0
32.1
437.5
7.2
444.7

* The Group has presented a third balance sheet as at 1 April 2012 because the retrospective changes to IAS 19 (revised) Employee benefits have a material impact on the information
presented in the statement.

The financial statements were approved by the Executive Board on 19 June 2014 and signed on its behalf by:

Tony Hall
Director-General22Anne Bulford
Managing Director Finance and Operations
BBC Full Financial Statements 2013/14

Consolidated statement of changes in equity

Balance at 1 April 2012,as previously reported
Impact of IAS 19 changes
At 1 April 2012 – restated*
Surplus for the year (restated*)
Exchange differences on translationof foreign operations
Loss on foreign currency translation
Cash flow hedges
Recycling of cumulative currencytranslation reserve on disposal
Deferred tax on financial instruments
Remeasurement on defined benefit
pension scheme (restated*)
Fair value gain on asset available
for trading
Total comprehensive (loss)/income
for the year
Dividends paid
Acquisition of non-controllinginterest
At 31 March 2013 – restated*
Surplus for the year
Exchange differences on translationof foreign operations
Cash flow hedges
Deferred tax on financial instruments
Remeasurement on defined benefit
pension scheme
Fair value loss on asset available
for trading
Total comprehensive income/(loss)
for the year
At 31 March 2014
Represented by:General Group reserves
BBC World Service and BBC
Monitoring reserves

Total
£m

Noncontrollinginterests
£m

Total
£m

32.1
–
32.1
–

337.5
100.0
437.5
156.4

7.2
–
7.2
0.9

344.7
100.0
444.7
157.3

–
–
(10.8)

8.9
–
–

8.9
(0.5)
(10.8)

–
–
–

8.9
(0.5)
(10.8)

–
–

(0.1)
2.6

(48.9)–(49.0)
2.6––(49.0)
2.6(516.6)–––(516.6)–(516.6)

–

12.1

–

–

12.1

–

12.1

(360.7)
–

12.1
–

(8.3)
–

(40.0)–(396.9)
–

0.9
(8.1)

(396.0)
(8.1)

(0.4)
(51.9)
153.8

–
107.3
–

–
(7.3)
–

–
(7.9)
–

(0.4)
40.2
153.8

–
–
–

(0.4)
40.2
153.8

–
–
–

–
–
–

–
16.4
(3.7)

(7.5)
–
–

(7.5)
16.4
(3.7)

–
–
–

(7.5)
16.4
(3.7)

125.0

–

–

–

125.0

–

125.0

–

(15.7)––(15.7)–(15.7)

278.8
226.9

(15.7)
91.6

12.7
5.4

(7.5)
(15.4)

268.3
308.5

–
–

268.3
308.5

120.0

91.6

5.4

(15.4)

201.6

–

201.6

106.9
226.9

–
91.6

–
5.4

–
(15.4)

106.9
308.5

–
–

106.9
308.5

Operatingreserve£m

Available forsale reserve£m

Hedging
reserve£m

Translation
reserve
£m

209.2
100.0
309.2
156.4

95.2
–
95.2
–

1.0
–
1.0
–

–
(0.5)
–

–
–
–

–
–

* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

The reserves relating to BBC World Service and BBC Monitoring are maintained separately from the rest of the Group and are
restricted for use solely on BBC World Service and BBC Monitoring activities. From 1 April 2014 both BBC World Service and BBC
Monitoring will be fully licence fee funded.

BBC Full Financial Statements 2013/14

23

Group financial statements for the year ended 31 March 2014

Consolidated cash flow statement
Note

Operating activities
Cash generated from operations
Tax paid
Net cash from operations
Investing activities
Interest received
Dividends received from associates and joint ventures
Proceeds from sale of operations
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available for sale investments
Acquisition of non-controlling interests
Acquisition of investments
Acquisition of interests in associates and joint ventures
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
Dividends paid to non-controlling interests
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes on cash and cash equivalents
Movement in cash held as restricted funds
Cash and cash equivalents at the end of the year

24



F5

F1

F1

2014
£m

2013
£m

373.6
(37.3)
336.3

375.2(37.2)
338.0

5.9
18.2
11.9
19.9
1.8
–
–
(0.4)
(190.2)(110.4)(243.3)

6.0
19.5
40.7
147.7
–
(14.4)(1.7)(0.4)(98.5)(139.4)(40.5)(12.6)
158.5(187.5)(94.9)–(136.5)(43.5)
575.2
(5.6)
–
526.1

(10.3)
189.4(200.7)(98.9)(8.1)(128.6)
168.9
407.3
1.0
(2.0)
575.2

BBC Full Financial Statements 2013/14

Key themes for the BBC
Page
A. Where the BBC’s funding comes from
Income and operating results

26
Contribution of commercial operations

Licence fee income

B. How the BBC spends the funds

30Total operating costs

Analysis of total operating costs by activity

Auditor remuneration

Programme-related assets and other inventories

UK PSB Group expenditure by service

UK PSB ring-fenced expenditure

C. What the BBC spends on its people

37Persons employedKey management personnel compensation

Employee remuneration

Related party transactions with key management personnel

Restructuring costs

Group pension plans

Remuneration of BBC Trust members
and the BBC Executive Board

D. The property, technology and equipment used by the BBC to make its programmes
Property, plant and equipment

Obligations under finance leases

Assets available for tradingOperating leases

Gain on disposal of fixed assets

Property provisions

E. Investments in the BBC’s commercial activities

F.

Intangible assets

Gain on sale and termination of operations

Goodwill

Interests in associates and joint ventures

Managing funding (including future costs)

49

54

Analysis of net funds

Trade and other payables

Borrowings and borrowing facilities

Provisions and contingent liabilities

Cash generated from operations

Net financing income

Trade and other receivables

Long-term commitments not reflected in the balance sheet

BBC Full Financial Statements 2013/14

45

25

Group financial statements for the year ended 31 March 2014

Notes to the accounts
A. Where the BBC’s funding comes fromThe Group generates its income from a number of key sources, each source funding different parts of the BBC’s activity. The notes inthis section provide information on the performance in the year for each segment of the BBC Group.
The distinction between the various income sources is important as the BBC must not cross-subsidise its commercial activities throughits UK PSB Group or Grant-in-Aid and grant funded activities, however the performance of the Group’s commercial activities
generates profits which are distributed back to the BBC and contribute towards the funding of UK PSB Group activities.
The BBC Group’s operating segments are reported in a manner consistent with the internal reports provided to the BBC Executive
Board. The BBC Executive Board is responsible for making strategic decisions, allocating resources and assessing performance of theoperating segments.
Segmental information provided to the BBC Executive Board is aligned to the BBC Group’s income sources. The reportablesegments are:UK PSB Group – This primarily receives licence fee income and is responsible for the Group’s public sector activities. This includes
delivery of its obligations under the Service Licence Operating Framework issued by the BBC Trust.
BBC World Service and BBC Monitoring – These have historically been funded by Grant-in-Aid from the Foreign andCommonwealth Office and the Cabinet Office respectively. From 1 April 2013, BBC Monitoring became licence fee funded
however, it has continued to be reported as part of the BBC World Service and BBC Monitoring segment throughout the year.
BBC World Service will become licence fee funded from 2014/15 from which point both BBC World Service and BBC Monitoring
will be reported as part of the UK PSB Group.
BBC Worldwide – BBC Worldwide generates revenue from exploiting the various assets of the BBC, for example licencing
formats, selling international rights, merchandising and production facilities.
The BBC’s other commercial activities have been aggregated for reporting purposes as they meet the conditions set out in IFRS 8,
Operating segments.
The prices charged for services provided by one segment of the BBC Group to another are determined on an arm’s length basis inaccordance with the BBC’s Fair Trading policy. More information on the BBC’s fair trading requirements and policies can be found inthe ‘Managing the business’ section in Part Two of the ‘BBC Annual Report and Accounts 2014’.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 80).

26

BBC Full Financial Statements 2013/14

A1 Income and operating results

2014

Licence fee income
Other revenue
Intra-group trading
Grant-in-Aid and other grant income
Royalties
Rental income
Other income
Total income
Restructuring costs
Depreciation and amortisation
Pension deficit reduction payment
Other operating costs
Total operating costs
Group operating surplus/(deficit)
Gain on sale and termination ofoperations
Other gains and losses
Share of results of associates andjoint ventures
Operating segment result
Financing income
Financing costs
Net financing costs
Surplus before taxation
Taxation
Surplus for the year

Note
A2

C3

B3, B4E3E4E4UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Othercommercials
£m

Group
adjustments*
£m

Group
£m

3,726.1
67.8
167.5
5.1
20.5
7.9
268.8
3,994.9(9.6)(122.1)(48.6)(3,597.5)(3,777.8)
217.1

–
8.7
7.8
238.5
–
0.1
255.1
255.1
0.8
(24.7)(7.6)(240.7)(272.2)(17.1)

–
838.1
9.6
1.0
42.5
0.8
892.0
892.0
(7.0)
(115.8)(2.3)(653.0)(778.1)
113.9

–
108.6
20.6
–
0.3
–
129.5
129.5
(0.7)
(4.6)
(1.5)
(123.3)(130.1)(0.6)––(205.5)–––(205.5)(205.5)
–
–
60.0
159.8
219.8
14.3

3,726.1
1,023.2
–
244.6
63.3
8.8
1,339.9
5,066.0(16.5)(267.2)–(4,454.7)(4,738.4)
327.6

–
–

–
–

4.1
(16.5)

–
–

–
–

4.1
(16.5)

(3.2)
213.9

–
(17.1)

25.9
127.4

–
(0.6)

–
14.3

22.7
337.9
14.6
(163.6)(149.0)188.9(35.1)
153.8

F9
F9
F9
G2.1

* Group adjustments include costs of £125.0million for the defined benefit pension scheme. The remaining adjustments relate to intra-group transactions.

Additional information on total operating costs for the UK PSB Group can be found in note B3 and note B4 for the Commercial and
Grant-in-Aid funded activities. Total operating costs for the Group are also analysed further in note B1.

BBC Full Financial Statements 2013/14

27

Group financial statements for the year ended 31 March 2014

Notes to the accounts
A. Where the BBC’s funding comes from continued
A1 Income and operating results continued

2013

Licence fee income
Other revenue
Intra-group trading
Grant-in-Aid and other grant income
Royalties
Rental income
Other income
Total income
Restructuring costs
Depreciation and amortisation
Impairment of tangible and intangible
fixed assets
Pension deficit reduction payment
Other operating costs
Total operating costs
Group operating surplus
Gain on sale and termination ofoperations
Gain on disposal of fixed assets
Share of results of associates andjoint ventures
Operating segment result
Financing income
Financing costs
Net financing costs
Surplus before taxation
Taxation
Surplus for the year

Note
A2

C3

B3, B4E3
D3
E4UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Othercommercials£m3,656.2
86.1
164.4
4.5
13.2
8.9
277.1
3,933.3(23.1)(139.7)

–
10.1
1.9
264.7
–
0.1
276.8
276.8
(6.8)
(33.2)

–
898.9
16.4
0.5
52.0
0.8
968.6
968.6
(10.9)(130.4)(51.7)(48.6)(3,554.2)(3,817.3)
116.0

–
(7.6)
(260.0)(307.6)(30.8)

–
87.2
(3.1)
200.1

Restated*Groupadjustments**£m

Restated*
Group
£m

–
106.1
23.0
–
0.2
–
129.3
129.3
(2.9)
(2.9)

–
–
(205.7)–––(205.7)(205.7)––3,656.2
1,101.2
–
269.7
65.4
9.8
1,446.1
5,102.3(43.7)(306.2)–(2.3)(719.1)(862.7)
105.9

–
(1.5)
(134.3)(141.6)(12.3)

–
60.0
165.7
225.7
20.0

(51.7)–(4,501.9)(4,903.5)
198.8

–
–

35.7
–

–
–

(12.4)
–

23.3
87.2

–
(30.8)

26.1
167.7

–
(12.3)

–
7.6

23.0
332.3
10.2
(146.5)(136.3)196.0(38.7)
157.3

F9
F9
F9
G2.1

* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** Group adjustments include income of £90.4million for the defined benefit pension scheme. The remaining adjustments relate to intra-group trading.

28

BBC Full Financial Statements 2013/14

A2 Licence fee income
Licence fee
2014£

Colour
Monochrome
Concessionary
Over 75s
Quarterly payment scheme premium
Digital Switchover Help Scheme overspend/(underspend) (note B6)
Total licence fee income

145.50
49.00
7.50
–

Licencesin force
2014
Number’000

21,367
8
176
4,328
25,879

Total
income2014£m

3,096.1
0.4
1.4
607.8
3,705.7
16.4
4.0
3,726.1

Licence fee
2013£

145.50
49.00
7.50
–

Licencesin force
2013
Number’000

21,3519
172
4,251
25,783

Total
income2013£m3,089.9
0.5
1.3
597.3
3,689.0
16.8(49.6)
3,656.2

During the year 3.3 million (2013: 3.4 million) colour licences were issued under the quarterly payment scheme at a premium of£5 each (2013: £5).
Households in which one or more persons over the age of 75 reside, as their primary residence, are entitled to a free licence. The BBC
is reimbursed for these free licences by the relevant Government department.
A3 Contribution of commercial operations
In the year ended 31 March 2014, a dividend of £66.8million (2013: £49.5million) was generated by BBC Worldwide and paid/proposed
to UK PSB Group. The dividends paid by BBC Worldwide are not identifiable in the consolidated primary statements as the amounts
paid by BBC Worldwide and received by UK PSB Group are eliminated during the consolidation process.

BBC Full Financial Statements 2013/14

29

Group financial statements for the year ended 31 March 2014

Notes to the accounts
B. How the BBC spends the funds
This section analyses the total operating costs incurred by the BBC Group. It also analyses the UK PSB Group’s expenditure by service
licence as required to be reported to the BBC Trust.
Service Licences
In accordance with the Charter, service licences are used by the BBC Trust to regulate the BBC’s licence fee funded services andensure that each service provides public value and contributes to delivering the BBC’s public purposes.
The Trust’s annual assessment of performance against service licences compares actual costs for content against an agreed andauthorised baseline budget. Actual costs may vary by up to 10% of the baseline budget to permit management flexibility in its
commissioning decisions. When a service licence budget is breached by more than the threshold, the matter is referred to the
BBC Trust.
BBC Parliament was under the baseline budget by more than the 10% tolerance due to early delivery of efficiency savings under theBBC’s Delivering Quality First strategy.
Service licences show the cost to the licence fee payer of providing the relevant service and therefore exclude any costs funded by aco-producer. The table presented in note B3 sets out the UK PSB Group content expenditure by service.
Where a programme is broadcast on more than one channel, the full cost of the programme is recognised as a cost of the channel
where the programme is first broadcast. Where a programme is commissioned by two channels however, the cost of the programmeis recognised as a cost of the primary channel irrespective of the channel holding the first transmission.
For 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 two services.
This means the costs reported against individual service licences are not necessarily equivalent to the costs which would be incurred bysuch a service on a stand-alone basis.
Digital Switchover
The Group was granted specific funds to cover the costs of the Digital Switchover. These funds were ring-fenced from the licence feewith underspend against the budgeted cost being repayable to the Department for Culture, Media and Sport (DCMS). Included within
this note are disclosures on the costs incurred to date against these ring-fenced amounts.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 81).

30

BBC Full Financial Statements 2013/14

B1 Total operating costs
Total operating costs have been arrived at after charging/(crediting) the following items:
NoteIntangible fixed assets, property, plant and equipment and other investments
Depreciation– owned assets– leased assets
Exceptional impairment of tangible and intangible fixed assets
Other impairments
Amortisation of intangible fixed assets
Impairment of investments in joint ventures and associates

D1
D1
D1, E1D1
E1Inventories
Write-downs of programme-related assets recognised as an expense
Other operating costs
Payments under operating leases– land and buildings– plant and machinery– other
Net (profit)/loss on disposal of tangible fixed assets**
Research costs
Audit and non-audit fees paid to KPMG (see below)
Fair trading auditor’s remuneration (Deloitte LLP)Net exchange differences on settled transactions
Impairment of trade debtors
Staff costs

F6.2
C2

2014
£m

Restated*
2013
£m

115.0
39.5
–
0.4
112.7
2.8

116.7
41.4
51.7
–
148.1
1.9

8.3

7.5

70.2
35.6
46.5
(1.2)
81.9
2.5
0.2
9.0
5.5
1,224.7

76.0
24.5
34.1
1.0
68.5
3.6
0.3
(1.0)
8.0
1,292.3* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** The profit on disposal of tangible fixed assets represent adjustments to depreciation on disposals made in the ordinary course of business. Profit on disposals classified as ‘exceptional’ isdisclosed separately in note D3.

A review in October 2012 of the Digital Media Initiative (DMI) concluded that it would not deliver its full scope and consequently atotal impairment of £51.7million was recognised in 2012/13 within Plant and Machinery (£8.8million) and Other Intangible assets(£42.9million). Assets were written down to nil value as there was a significant risk that they would not be utilised within theorganisation and could not be re-used elsewhere within the BBC.

BBC Full Financial Statements 2013/14

31

Group financial statements for the year ended 31 March 2014

Notes to the accounts
B. How the BBC spends the funds continued
B2 Auditor remuneration
Fees paid during the year to KPMG LLP and its associates are as follows:

For the audit of the BBC’s annual accounts
For the audit of subsidiaries of the BBC
Audit related assurance services
Total audit and audit related assurance services
Taxation compliance services
Services related to corporate finance transactions
Services related to actuarial advice*
All other services
Total non-audit services
Total fees paid

2014
£m

2013
£m

0.6
0.8
0.3
1.7
0.1
–
0.2
0.5
0.8
2.5

0.6
0.9
0.2
1.7
0.2
0.2
0.9
0.6
1.9
3.6

* The actuarial services provided relate primarily to advice regarding the changes to the BBC Pension Scheme.

32BBC Full Financial Statements 2013/14

B3 UK PSB Group expenditure
B3.1 UK PSB Group expenditure by service
2014 Service

Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC ALBA
BBC News Channel*
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio 5 LiveBBC Radio 5 Live Sports Extra
BBC 1Xtra
BBC 6MusicBBC 4 Extra
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidhael
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online**
Spend regulated by service licence
Licence fee collection costs
Orchestras and performing groups
S4C
Development spend
BBC Monitoring
UK PSB Group pension deficit reduction payment
Costs incurred to generate intra-group income
Costs incurred to generate third party income
Other content related spent
Restructuring costs
Total UK PSB Group content expenditure
Digital switchover (DSHS Limited)
Local TV***
Broadband rollout***
Total UK PSB Group expenditure
Lease reclassification****UK PSB Group expenditure

1,023.7
400.0
81.0
48.9
76.1
28.7
5.2
48.7
1.7
13.5
1,727.5
40.2
47.8
40.8
91.8
49.2
2.4
5.6
7.9
4.1
6.6
115.4
22.6
3.8
13.4
11.7
17.4
480.7
106.5
2,314.7
–
22.8
23.4
45.2
–
–
–
–
91.4
–
2,406.1–––
2,406.1–
2,406.1

51.0
28.8
5.9
4.3
5.5
4.6
1.3
8.0
7.2
21.9
138.5
5.8
5.7
5.8
9.0
5.7
1.4
1.6
1.6
1.6
1.8
10.8
3.2
1.4
1.4
1.6
1.3
59.7
18.8
217.0
–
–
–
–
–
–
–
–
–
–
217.0
–
–
–
217.0
–
217.0

236.4
93.0
22.4
12.7
19.3
9.3
1.5
9.5
1.5
4.1
409.7
6.8
7.3
10.1
19.8
11.6
1.4
2.6
2.5
1.7
2.4
23.4
6.4
1.0
3.8
3.5
4.9
109.2
49.1
568.0
–
5.1
5.7
10.0
–
–
–
–
20.8
–
588.8
–
–
–
588.8
–
588.8

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
102.1
–
76.3
–
7.2
48.6
169.3
60.6
464.1
9.6
473.7
7.2
16.0
150.0
646.9
(81.0)
565.9

1,311.1
521.8
109.3
65.9
100.9
42.6
8.0
66.2
10.4
39.5
2,275.7
52.8
60.8
56.7
120.6
66.5
5.2
9.8
12.0
7.4
10.8
149.6
32.2
6.2
18.6
16.8
23.6
649.6
174.4
3,099.7
102.1
27.9
105.4
55.2
7.2
48.6
169.3
60.6
576.3
9.6
3,685.6
7.2
16.0
150.0
3,858.8(81.0)
3,777.8

BBC Full Financial Statements 2013/14

33

Group financial statements for the year ended 31 March 2014

Notes to the accounts
B. How the BBC spends the funds continued
B3.1 UK PSB Group expenditure by service continued
2013 Service

Content£m

Distribution£m

Infrastructure/
support£m

Other items
£m

Total
£m

BBC One
BBC Two
BBC Three
BBC Four
CBBC
CBeebies
BBC ALBA
BBC News Channel*
BBC Parliament
BBC Red Button
Television
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio 5 LiveBBC Radio 5 Live Sports Extra
BBC 1Xtra
BBC 6MusicBBC 4 Extra
BBC Asian Network
BBC Local RadioBBC Radio Scotland
BBC Radio nan Gàidhael
BBC Radio Wales
BBC Radio Cymru
BBC Radio Ulster/BBC Radio Foyle
Radio
BBC Online**
Spend regulated by service licence
Licence fee collection costs
Orchestras and performing groups
S4C
Development spend
UK PSB Group pension deficit reduction payment
Costs incurred to generate intra-group income
Costs incurred to generate third party income
Other content related spend
Restructuring costs
Total UK PSB Group content expenditure
Digital switchover (Digital UK Limited)
Digital switchover (DSHS Limited)
Total UK PSB Group expenditure
Lease reclassification****UK PSB Group expenditure

1,129.2
404.8
89.7
50.0
81.6
28.9
4.9
45.2
1.9
15.6
1,851.8
40.7
47.8
38.3
91.1
55.0
2.7
7.5
7.4
4.0
8.3
114.7
23.2
3.8
13.9
12.5
17.0
487.9
103.0
2,442.7
–
23.4
23.6
40.4
–
–
–
87.4
–
2,530.1––
2,530.1–
2,530.1

52.9
31.7
4.6
4.2
4.0
4.5
1.5
7.5
7.2
22.3
140.4
5.4
5.3
5.3
9.8
6.8
1.4
1.5
1.5
1.5
1.7
9.9
3.2
1.4
1.2
1.6
2.1
59.6
21.8
221.8
–
–
–
–
–
–
–
–
–
221.8
–
–
221.8
–
221.8

281.1
106.6
27.4
16.0
23.1
9.6
1.4
8.8
1.4
3.9
479.3
8.1
9.0
10.7
21.2
14.2
1.5
2.8
2.6
1.7
3.0
27.9
6.3
1.1
3.7
3.5
4.7
122.0
51.8
653.1
–
5.8
6.4
10.1
–
–
–
22.3
–
675.4
–
–
675.4
–
675.4

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111.1
–
–
–
48.6
164.8
67.4
391.9
23.1
415.0
12.5
44.4
471.9
(81.9)
390.0

1,463.2
543.1
121.7
70.2
108.7
43.0
7.8
61.5
10.5
41.8
2,471.5
54.2
62.1
54.3
122.1
76.0
5.6
11.8
11.5
7.2
13.0
152.5
32.7
6.3
18.8
17.6
23.8
669.5
176.6
3,317.6
111.1
29.2
30.0
50.5
48.6
164.8
67.4
501.6
23.1
3,842.3
12.5
44.4
3,899.2(81.9)
3,817.334

BBC Full Financial Statements 2013/14

*Included within BBC News channel are production costs of £26.8million, Newsgathering costs of £21.2million and other costs of £0.7million (2013: production costs of £27.2million,
Newsgathering costs of £17.8million and other costs of £0.2million).
** BBC Online spend is monitored by annexe (relating to editorial areas of the service). Non-annexe spend covers costs relating to central editorial activities such as the BBC Homepage,technologies which operate across the service and overheads. The spend for each annexe was: News, Sport & Weather £47.8million (2013: £43.8million), Childrens £9.3million (2013:£8.5million), Knowledge & Learning £15.7million (2013: £18.7million), TV & iPlayer £11.1million (2013: £12.2million) and Audio & Music £11.7million (2013: £13.3million), giving a total
annexe spend of £95.6million (2013: £96.5million). Non-annexe spend was £10.9million (2013: £6.5million).
*** Under the terms of the latest licence fee agreement, the BBC has committed to contribute funding toward broadband rollout across the UK and funding for the development of Local
TV channels.
**** In order to reflect the full cost of the UK PSB Group expenditure by service, finance lease interest is included, although it is not included in the Group operating expenditure.

B3.2 UK PSB Group infrastructure/support costs
Infrastructure/support costs include the following:

Property
HR and training
Policy and strategy
Finance and operations
Marketing, audiences and communication
Total central costs
Technology*
Libraries, learning support and community events
Divisional running costs
BBC Trust Unit
Other
Total infrastructure/support costs

2014
£m

2013
£m

141.2
38.6
9.1
70.3
71.9
331.1
130.3
32.0
62.7
12.0
20.7
588.8

181.6
45.4
12.0
67.7
68.7
375.4
175.1
33.6
64.5
11.9
14.9
675.4

* Comparatives include the £51.7million impairment of DMI. See Note B1 for further details.

B4 Analysis of total operating costs by non-UK PSB entities
B4.1 Commercial activities

Note

BBC
Worldwide
2014
£m

BBC
Worldwide
2013
£m

Other
Commercials
2014
£m

Other
Commercials
2013
£m

Total
Commercials
2014
£m

Total
Commercials
2013
£m

A1

524.7
86.1
167.3
778.1

557.7
126.7
178.3
862.7

118.9
–
11.2
130.1

121.6
–
20.0
141.6

643.6
86.1
178.5
908.2

679.3
126.7
198.3
1,004.3

Note

2014
£m

2013
£m

A1

1.4
27.3
243.5
272.2

1.4
33.8
272.4
307.6

Cost of sales
Distribution costs
Administrative expenses
Total operating costs
B4.2 BBC World Service and BBC Monitoring

Cost of sales
Distribution costs
Administrative expenses
Total operating costs

BBC Full Financial Statements 2013/14

35

Group financial statements for the year ended 31 March 2014

Notes to the accounts
B. How the BBC spends the funds continued
B5 Programme-related assets and other inventories
The main output of the BBC Group is the production of programmes for broadcast and the sale of rights for others to broadcast. This
note discloses the amounts for those programmes that are in production, completed programmes that are ready for broadcast, but
not yet aired, and rights secured to broadcast programmes produced independently of the BBC Group. Other inventory for our
Commercial activities are also contained in this note.
Originated programmes are stated at the lower of cost and net realisable value, and the full value is written off on first transmission.
The costs of acquired programmes and films are also 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.
2014
£m

2013
£m

146.8
255.3
73.5
232.5
708.1
15.1
7.3
730.5

144.4
224.2
67.3
195.4
631.3
14.3
–
645.6

Total
to date£m

Six-yearring-fenced
funding£m

Remainingfundingavailable

599.5
200.0
799.5

603.0
200.0
803.0

3.5
–
3.5

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
Work-in-progress
Total programme-related assets and other inventories
B6 UK PSB ring-fenced expenditure
DCMS ring-fenced the following amounts within the Charter and six-year licence fee settlement (2008-2013):

Digital Switchover

Help for the elderly and disabled (DSHS Limited)
Digital UK Limited
Total

Cumulative
spend to 2014
£m

249.0
118.9
367.9

Outstanding
Cumulative
amountamountrepayable repaid to date
£m
£m

4.5
2.8
7.3

346.0
78.3
424.3

The Secretary of State agreed with the BBC that the £603million estimated cost of the Digital Switchover Help Scheme (operated by
DSHS Limited) would be ring-fenced and set aside from the licence fee for the purpose of funding the Scheme over the six-year life of
the licence fee settlement.
The Framework Agreement between the BBC and DCMS stated that the BBC was committed to leading certain aspects of the Digital
Switchover programme, through Digital UK, and the licence fee settlement included a ring-fenced amount of up to £200million fromthe inception of Digital UK until the end of the six-year life of the licence fee settlement for communication activities. The ring-fenced
amount was only part of the BBC’s annual contribution to Digital UK.
Digital underspend

At 1 April 2013
Overspend in the year
Repayment of underspend to DCMS
At 31 March 2014

Note
A2

£m

32.7
(4.0)
(17.9)
10.8

The £10.8million consists of underspend which is yet to be repaid to DCMS of £7.3million and spend of £3.5million on after-care andwarranties which the BBC expects to spend through 2014/15. The underspend which has yet to be repaid to DCMS will be repaid
as follows:
Anticipated digital underspend repayment profile

Note

£m

2014/15

F7.1

7.3

36



BBC Full Financial Statements 2013/14

C. What the BBC spends on its people
The BBC Group employs a significant number of people. It also provides pension benefits to both current and past employees. Thissection is broken into two main sections: the first section details employee numbers (excluding freelancers and agency staff), costs andtransactions with BBC Trust members and the BBC Executive Board; the second section presents the key information relating to the
BBC Group’s pension plans.
The movement in the IAS 19 Employee benefits estimate of the defined benefit scheme liability during the year, specifically the BBC
Pension Scheme, is the item which singularly has the greatest impact on the balance sheet position of the Group. The pension note inthis section explains in further detail the reasons behind the movements in the defined benefit pension liability in the year and its
degree of sensitivity to changes in the underlying assumptions used.
Further information on the analysis of the BBC Pension Scheme assets and the assumptions underlying the liabilities are set out innote G3.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 82).
C1 Persons employed
The average number of persons employed in the year was:Average for the year

UK PSB GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Group total

2014
Number

2013
Number

16,672
1,975
1,816
273
20,736

16,534
2,149
2,326
273
21,282

Within the averages above 3,135 (2013: 3,112) part-time employees have been included at their full-time equivalent of 1,574 (2013: 1,539).
In addition to the above, the Group employed an average full-time equivalent of 774 (2013: 739) persons on a casual basis and the BBC
Orchestra and BBC Singers, employed on programme contracts, totalled 366 (2013: 378) full-time equivalents.

BBC Full Financial Statements 2013/14

37

Group financial statements for the year ended 31 March 2014

Notes to the accounts
C. What the BBC spends on its people continued
C2 Employee remuneration
Note

Salaries and wages
Social security costs
Pension costs– Main scheme (defined benefit)– Other schemes
Restructuring costs

C7.3
C7.3
C3

Comprising:
UK PSB GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses
Group adjustments**

2014
£m

Restated*
2013
£m

937.4
94.2

998.5
96.5

155.2
21.4
16.5
1,224.7

136.4
17.2
43.7
1,292.3

922.3
83.6
153.8
19.9
45.1
1,224.7

961.2
96.6
192.2
24.2
18.1
1,292.3

2014
£m

2013
£m

9.6
(0.8)
7.0
0.7
16.5

23.1
6.8
10.9
2.9
43.7

* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** Includes Group adjustments for the BBC Pension Scheme.

The actual employer cash contributions to the defined benefit pension scheme are borne by each business.
C3 Restructuring costs

UK PSB GroupBBC World Service and BBC Monitoring
BBC Worldwide
Other commercial businesses

The UK PSB Group, BBC World Service and BBC Monitoring restructuring costs include the Delivering Quality First Programme,
Continuous Improvement Programme and costs resulting from the commitment to relocate and increase investment out of London.
BBC Worldwide includes reorganisation costs arising as a result of changes within the Group’s organisation structure.
The credit in the year relates to the release of a provision.
C4 Remuneration of the BBC Trust members and the BBC Executive Board
The total emoluments of the members of the BBC Executive Board and the BBC Trust are disclosed in the BBC Executive Board
Remuneration Report in Part Two of the Annual Report and Accounts. The details of emoluments of the members of the BBC Trust
are disclosed in Part One of the Annual Report and Accounts.

38

BBC Full Financial Statements 2013/14

C5 Key management personnel compensation
Key management personnel are those people who have authority and responsibility for planning, directing and controlling the activitiesof the BBC. This includes all members of the BBC Executive Board, including the non-executive Directors (see the BBC Executive
remuneration report), the Trustees and the Director of the Trust Unit (see the Trustees’ remuneration report) and BBC Worldwide
Limited’s Chief Executive Officer and Director, Global (see the BBC Worldwide Annual Report and Accounts).
Information about the BBC’s structure, senior staff salaries and expenses are published on the BBC’s website. This unaudited
information can be found at www.bbc.co.uk/aboutthebbc/insidethebbc/managementstructure.
Key management personnel compensation is as follows:

Short-term employee benefits
Post-employment benefits
Other long-term benefits
Compensation for loss of office

2014
£m

2013
£m

4.6
0.4
–
–
5.0

5.6
0.5
0.2
1.4
7.7

C6 Related party1 transactions with key management personnel
Executive Directors:
James Purnell has a close family member employed by the BBC on standard terms and conditions.
Danny Cohen has a close family member who contributes on an ad-hoc basis to BBC programmes and all transactions are at an arms
length basis.
Trustees:
Diane Coyle has a close family member employed by the BBC on standard terms and conditions.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

39

Group financial statements for the year ended 31 March 2014

Notes to the accounts
C. What the BBC spends on its people continued
C7 Group pension plans
The following section includes the key notes relating to BBC Group pension plans and more specifically the BBC Pension SchemeI.
Further supplementary notes on the assumptions underpinning the value of the BBC Pension Scheme asset and liability are disclosed innote G3.
As the BBC Group has two defined benefit pension schemes, the BBC Pension Scheme and the Unfunded Scheme, the information inthis section first analyses the liability and income statement charge between the two schemes (note C7). Separate analysis then follows
in respect of the BBC Pension Scheme to highlight the points outlined below (note C8).
The defined benefit pension schemes give rise to liabilities which are included on the BBC Group balance sheet as the BBC bears therisk on investment returns, life expectancy (mortality) and inflation related to meeting future pension payments. The net liability
consists of two component parts:
Scheme liabilities: These are the present value of the future pension payments the BBC is required to pay in respect of employee
service performed up to the balance sheet date.
Scheme assets: These are the assets held by the pension fund, into which the BBC pays annual contributions. The assets are used tofund the payments to retired members and to generate returns to fund future pension payments.
The analysis provided in the following notes is based on the IAS 19 estimate of the Scheme’s assets and liabilities as at 31 March 2014.
The most recent actuarial valuation of the pension scheme completed in 2013 by Towers Watson showed a funding shortfall of£2,054million.
The deficit of the BBC Pension Scheme can change significantly. In this section we provide information to explain the following:why the pension liabilities on the balance sheet have changed from one year to anotherwhat makes up the charge in the income statement in the yearthe amount of the scheme assets and liabilities totalling the net defined benefit pension liability on the balance sheethow sensitive the liabilities are to changes in key assumptions
the steps being undertaken by the BBC to fund the defined benefit pension liability
The BBC Group’s defined contribution plans do not give rise to balance sheet pension assets/liabilities as there is no ongoing liability forthe employer from these plans once the contributions due for the year have been settled. The expenditure on the defined
contribution scheme shown in these accounts represents the BBC’s contributions payable in this financial year.
C7.1 Pension liabilities included in the balance sheet
The pension liabilities included in the BBC Group balance sheet comprise both the BBC Pension Scheme and the Unfunded Scheme
and are analysed below:
Pension liabilities

BBC Pension Scheme
Unfunded Scheme
Total

2014
£m

Restated*
2013£m(1,508.5)(7.2)(1,515.7)(1,608.7)(7.1)(1,615.8)* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

1

See Glossary for further details40



BBC Full Financial Statements 2013/14

C7.2 Movement in deficit during the year

Deficit in scheme at the start of the year
Movement in the year:
Current service cost1
Contributions (from employer)**
Past service costs1
Administration costs incurred
Net finance cost1
Remeasurement1 recognised in the consolidated
statement of comprehensive income
Deficit in scheme at the end of the year

Total
2014
£m

Restated*
BBC Pension
Scheme2013£mUnfunded
Scheme2013£mRestated*
Total
2013
£m

(7.1)

(1,615.8)(1,072.0)(6.6)(1,078.6)(167.2)
222.5
(2.4)
(8.3)
(69.6)

–
0.4
–
–
(0.3)

(167.2)
222.9
(2.4)
(8.3)
(69.9)(149.8)
192.8
(3.4)
(8.0)
(52.2)

–
0.3
–
–
(0.3)

(149.8)
193.1
(3.4)
(8.0)
(52.5)

125.2(1,508.5)

(0.2)
(7.2)

125.0
(1,515.7)(516.1)(1,608.7)

(0.5)
(7.1)

(516.6)(1,615.8)

BBC Pension
Scheme2014£mUnfunded
Scheme2014£m(1,608.7)* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** The contribution shown for the unfunded scheme represents the pensions paid to members during the year.

The assumptions for pension scheme liabilities of the Unfunded Scheme are the same as the main scheme. As the scheme is unfunded
there are no assets.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

41

Group financial statements for the year ended 31 March 2014

Notes to the accounts
C. What the BBC spends on its people continued
C7.3 Pension charges in consolidated income statement
Defined benefit schemes

Note

2014
Current service cost
Past service costs
Administration costs
Total operating charge**
Net finance cost
Net cost in consolidated income statement
2013 restated*
Current service cost
Past service costs
Administration costs
Total operating charge**
Net finance cost
Net cost in consolidated income statement

F9

F9BBC Pension
Scheme£m

Unfunded
Scheme£m

Definedcontribution
scheme£m

All schemes£m(167.2)(2.4)(8.3)(177.9)(69.6)(247.5)

–
–
–
–
(0.3)
(0.3)

(21.4)––(21.4)–(21.4)(188.6)(2.4)(8.3)(199.3)(69.9)(269.2)(149.8)(3.4)(8.0)(161.2)(52.2)(213.4)

–
–
–
–
(0.3)
(0.3)

(17.2)––(17.2)–(17.2)(167.0)(3.4)(8.0)(178.4)(52.5)(230.9)* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** Of the total net operating charge of £177.9million for 2014 (2013 restated*: £161.2million), £22.7million (2013: £24.8million) was recognised as an expense in earlier years as part ofredundancy costs in accordance with IAS 37. The remaining charge of £155.2million (2013 restated*: £136.4million) was recognised in the current year.

C8 BBC Pension Scheme
The BBC Pension Scheme, a defined benefit scheme, is now closed to new entrants. This plan provides pensionable salary related
benefits on a defined benefit basis funded from assets held in separate 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 are undertaken at least every
three years.

42

BBC Full Financial Statements 2013/14

C8.1 Scheme financial position
IAS 19 valuation1

Note

Scheme assets**
Scheme liabilities
Deficit
Percentage by which scheme assets cover liabilities

G3.2
G3.1

2014
£m

Restated*
2013£m

Restated*
2012£m

Restated*
2011£m

Restated*
2010£m

10,684.2(12,192.7)(1,508.5)
88%

10,201.1(11,809.8)(1,608.7)
86%

9,198.5(10,270.5)(1,072.0)90%8,835.8(9,656.3)(820.5)92%

8,154.8(9,695.7)(1,540.9)
84%* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the previous comparatives have been restated.
** Excluding Additional Voluntary Contribution (AVC) funds.

Key movements in the year are shown in note C7.2.
A deferred tax asset or liability in relation to the scheme does not arise for the BBC Group because most of the BBC Group’s public
service activity is not subject to taxation.
The sensitivities of the Scheme’s liabilities to changes in the principal assumptions are set out below:

Discount rate
Discount rate
Retail price inflation rate
Retail price inflation rate
Mortality rate
Mortality rate

Assumption used

Movement

Impacton Scheme
liabilities
%

4.4%
4.4%
3.4%
3.4%
See note G3.6
See note G3.6

decrease 0.1%
increase 0.1%
decrease 0.1%
increase 0.1%
decrease 0.1%
increase 0.1%

2.1%
1.6%
1.8%
1.8%
3.3%
3.4%

(Increase)/decreaseon Scheme
liabilities
£m

(258)
195
215
(220)
404
(418)

C8.2 Funding the Scheme
The 2013 actuarial valuation by Towers Watson of the pension scheme showed a funding shortfall of £2,054million. Consequently, arecovery plan was agreed between the BBC and the pension scheme Trustees which details the contribution amounts to be paid by
the BBC over a 12 year period commencing in 2014.
The next formal actuarial valuation is expected to be performed as at 1 April 2016.
Contribution rates

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

Projections
2015
%

2014
%

2013
%

2012
%

2011
%

16.7
7.5
4.0
6.0

14.5
7.5
4.0
6.0

14.5
7.5
4.0
6.0

14.5/15.5
7.5
4.0
6.0

18.15
7.5
4.0
–

* Includes an allowance for BBC AVC matching contributions of 0.1% (2013: 0.1%) but excludes the cost effectively paid for by the employee via the salary sacrifice arrangement.

The contributions to the scheme by members are mainly paid via a salary sacrifice arrangement. These have been treated as employer
contributions.
On the basis of the pension assumptions made above, contributions totalling £242.4million are expected to be paid in 2014/15.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

43

Group financial statements for the year ended 31 March 2014

Notes to the accounts
C. What the BBC spends on its people continued
C8.3 Scheme cash flows (day-to-day liquidity)
Below are the cash flows related to the BBC Pension Scheme (not included in the Group results). The contributions paid haveincreased due to an accelerated £100million contribution paid in March 2014 (2013: additional £60million). As the scheme is now
closed to new entrants the level of contribution from employees will decrease (as members retire, there are no new entrants to
replace the reduction in employee contributions).

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

44



2014
£m

2013
£m

226.8
208.4
435.2
(367.2)(34.2)
33.8

197.0
212.3
409.3
(356.2)(33.9)
19.2

BBC Full Financial Statements 2013/14

D. The property, technology and equipment used by the BBC to make its programmes
The BBC Group uses a significant number of assets in its operations. This section sets out those assets the BBC Group intends tocontinue to use, those which it is in the course of disposing of and any disposals which have been completed in the year.
Certain assets which are shown on the balance sheet are not legally owned by the BBC Group, but instead are leased under financeleases. Under such arrangements, the BBC Group obtains substantially all the risks and benefits of ownership and therefore records
such assets as if they were legally owned. This section also deals with the financing costs and obligations associated with such assets.
The BBC Group has certain obligations to restore leased properties to their original condition at the end of the lease term. The BBCGroup makes provisions for the cost of such restoration works. The amounts provided are included within this section of the notes.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 82).
D1 Property, plant and equipment

Cost
At 1 April 2012
Additions
Transfer to intangible assets
Brought into service
Disposals
Exchange movements
At 31 March 2013
Additions
Transfer to intangible assets
Brought into service
Disposals
Exchange movements
At 31 March 2014
Depreciation
At 1 April 2012
Charge for the year
Transfer to intangible assets
Disposals
Impairment*
Exchange adjustments
At 31 March 2013
Charge for the year
Disposals
Impairment
Exchange adjustments
At 31 March 2014
Net book value
At 31 March 2014
At 31 March 2013Land andbuildings£mPlant andmachinery£m

Furnitureand fittings£m

Assets underconstruction
£m

Total
£m

1,156.4
1.6–
18.0(36.7)
0.3
1,139.6
–
–
8.4
(2.9)
(0.8)
1,144.3

1,063.8
18.1
(5.6)
132.4
(172.9)0.6
1,036.4
4.8–
70.5(86.2)(0.9)
1,024.6

167.2
2.1
–
2.7
(21.3)
0.3
151.0
1.9
–
4.1
(6.9)
(0.4)
149.7

138.4
117.6
(10.6)(153.1)
(1.2)
–
91.1
103.7
(0.5)
(83.0)
(6.1)
–
105.2

2,525.8
139.4(16.2)–(232.1)
1.2
2,418.1
110.4
(0.5)
–
(102.1)(2.1)
2,423.8

245.0
47.8
–
(32.5)
–
0.2
260.5
48.1
(3.0)
0.2
(0.4)
305.4

730.9
96.0
(2.4)
(141.1)
8.8
0.6
692.8
91.6
(73.0)
0.1
(0.7)
710.8

98.1
14.3
–
(18.1)
–
0.2
94.5
14.8
(7.2)
0.1
(0.2)
102.0

–
–
–
–
–
–
–
–
–
–
–
–

1,074.0
158.1(2.4)(191.7)8.8
1.0
1,047.8
154.5(83.2)
0.4(1.3)
1,118.2

838.9
879.1

313.8
343.6

47.7
56.5

105.2
91.1

1,305.6
1,370.3* Relates to the impairment of DMI. See note B1 for further information.

BBC Full Financial Statements 2013/14

45

Group financial statements for the year ended 31 March 2014

Notes to the accounts
D. The property, technology and equipment used by the BBC to make its programmes continued
D2 Assets available for trading1

Assets held at fair value

Note

2014
£m

2013
£m

G4.3

108.9

121.5

The BBC Group holds an asset available for trading of £104.5million (2013: £116.4million) relating to Daunus Limited that is carried atfair value. The principle activity of Daunus Limited is property development, see note G4.3 for further information.
D3 Gain on disposal of fixed assets

Disposal of properties

2014
£m

2013
£m

–

87.2

In the prior year, the Group disposed of BBC Television Centre (£77.9million) and Centre House (£9.3million).
Gains or losses on the disposal of property, plant and equipment in the ordinary course of business, that represent an adjustment todepreciation are recognised within operating surplus and disclosed in aggregate in note B1.

1

See Glossary for further details

46



BBC Full Financial Statements 2013/14

D4 Obligations under finance leases1
2014
£m

2013
£m

7.0
851.7
858.7

27.0
855.6
882.6

Minimum
lease
payments£m

Interest£mPrincipal
£m

85.5
342.2
1,585.5
2,013.2

78.5
310.0
766.0
1,154.5

7.0
32.2
819.5
858.7

109.3
334.5
1,681.1
2,124.9

82.3
311.6
848.4
1,242.3

27.0
22.9
832.7
882.6

Due within one year
Due after more than one year
See note F3 for full analysis of borrowings, including obligations under finance leases.
Finance lease liabilities are payable as follows:

2014
Not later than one year
Later than one year but not later than five years
Later than five years
2013
Not later than one year
Later than one year but not later than five years
Later than five years

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 leasearrangement, or a reduction in rentals if the lease agreement is extended for a further term. In addition, the BBC has the right torepurchase each property at the end of the respective lease agreement.
Interest rates are fixed at the contract date. Leases with a carrying value of £851.6million (2013: £852.1million) have contingent elements
included within their contracts and result in contingent rents of £8.2million (2013: £7.0million) being reflected in operating costs.
Included within the carrying amount of assets in note D1 are amounts held under finance leases. Set out below is the analysis of thecarrying amount of assets held under finance leases by asset category:

Net book value
At 31 March 2014
At 31 March 20131

Land andbuildings£mPlant andmachinery
£m

Total
£m

712.2
747.4

3.5
17.3

715.7
764.7

See Glossary for further details

BBC Full Financial Statements 2013/14

47

Group financial statements for the year ended 31 March 2014

Notes to the accounts
D. The property, technology and equipment used by the BBC to make its programmes continued
D5 Financing costs of leasing arrangements
Interest costs relating to the finance lease obligations are recognised in the income statement at a constant rate over the term of
the lease.

Financing costs of leasing arrangements

Note

2014
£m

2013
£m

F9

81.0

81.9

2014
£m

2013
£m

118.5
351.5
639.6
1,109.6

101.9
250.3
568.0
920.2

D6 Operating leases1
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

The BBC Group’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 are accounted for on a straight line basis) or periodic rent
reviews. All leases have been entered into on commercial terms.
The BBC Group has entered into a number of sublease arrangements. The total future minimum sublease income expected to bereceived under non-cancellable subleases at 31 March 2014 is:Due within one year
Due after one year and not later than five years
Due after more than five years

2014
£m

2013
£m

5.9
11.4
0.9
18.2

7.4
17.6
3.3
28.3

D7 Property provisions
Property provisions relate to the cost of returning leasehold properties (accounted for as operating leases) to their original conditionat the end of the lease. The average life of these leases is 12 years, and the actual amount payable will depend on the extent ofleasehold improvements made over the remainder of the lease. For full analysis of provisions and contingent liabilities see note F8.

2014
2013

1

At
1 April£m

Charge forthe year£m

Utilisedduringthe year£m

Releasedduringthe year£m

At
31 March
£m

20.3
20.3

2.4
1.3

(0.1)
(1.2)

(0.4)
(0.1)

22.2
20.3

See Glossary for further details48



BBC Full Financial Statements 2013/14

E. Investments in the BBC’s commercial activities
The following section is primarily driven by the commercial activities of the BBC Group and includes information on what assets areused to generate economic benefits for the BBC Group. The section also includes intangible assets such as goodwill and programmeacquisitions, balances held to represent the BBC’s interests in associates and joint ventures and the results of any sale of operations thathave occurred.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 83).
E1 Intangible assets

Cost
At 1 April 2012
AdditionsElimination of fully amortised programme rights
Disposals
Transfer from property, plant and equipment
Exchange differences
At 31 March 2013
Additions
Disposals
Transfer from property, plant and equipment
Exchange differences
At 31 March 2014
Amortisation and impairment
At 1 April 2012
Charge for the year
Elimination of fully amortised programme rights
Transfer from property, plant and equipment
Disposals
Impairment
Exchange differences
At 31 March 2013
Charge for the year
Disposals
Exchange differences
At 31 March 2014
Net book value
At 31 March 2014
At 31 March 2013

Goodwill£m

Programmerights£m

Otherintangibles
£m

Total
£m

126.3
–
–
(96.1)
–
5.9
36.1
–
–
–
(2.0)
34.1

309.9
74.5
(92.8)––(10.4)
281.2
145.1
–
–
5.5
431.8

262.0
24.0
–
(96.5)
16.2
4.3
210.0
45.1
(60.1)
0.5
(2.2)
193.3

698.2
98.5
(92.8)(192.6)
16.2
(0.2)
527.3
190.2
(60.1)
0.5
1.3
659.2

68.1
–
–
–
(72.1)
–
4.0
–
–
–
–
–

192.7
104.5
(92.8)
–
–
–
(9.1)
195.3
103.4
–
5.8
304.5

148.0
43.6
–
2.4
(66.4)
42.9
2.0
172.5
9.3
(59.6)
(0.7)
121.5

408.8
148.1
(92.8)
2.4(138.5)
42.9
(3.1)
367.8
112.7
(59.6)
5.1
426.0

34.1
36.1

127.3
85.9

71.8
37.5

233.2
159.5

2014
£m

2013
£m

65.6
6.1
0.1
71.8

29.1
8.2
0.2
37.5

Other intangibles include:
Net book value

SoftwareAcquired carrier agreements
Other

BBC Full Financial Statements 2013/14

49

Group financial statements for the year ended 31 March 2014

Notes to the accounts
E. Investments in the BBC’s commercial activities continued
E2 Goodwill
All goodwill is recognised in BBC Worldwide.
Goodwill, allocated by cash generating unit1 (CGU), is analysed as follows:
Goodwill by cash generating unit

Consumer Distribution
Australian Channels

2014
£m

2013
£m

25.4
8.7
34.1

25.4
10.7
36.1

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions used for these calculations
are those regarding discount rates and growth rates. Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to each CGU.
BBC Worldwide tests goodwill for impairment in the accounting period in which a business combination takes place, thereafter
annually or more frequently, if there are indications that goodwill might be impaired.
Consumer Distribution business
The goodwill in this CGU arose as a result of the acquisition of 2entertain on 6 August 2009. The cash flow projections used indetermining value in use are based on the current business plan approved by management, which covers a five year period after whichcash flows have been extrapolated using an expected growth rate of -6% (2013: -5%).
A discount rate of 14.4% (2013: 12.8%) has been applied to the cash flows.
Management are of the view that any reasonably possible change in key assumptions would not cause the carrying amount to exceed
its recoverable amount.
Australian Channels business
The goodwill in this CGU arose as a result of the acquisition of UKTV on 1 July 2008. Cash flow projections used in the recoverable
amount calculation are based on financial budgets approved by management covering a period of five years (2013: five years) and a
discount rate of 14.9% (2013: 11.7%). Cash flows beyond the forecast period have been extrapolated using an expected growth rate of
1% (2013: 1%). The terminal growth rate assumes contractual rates remaining in place and a modest growth of subscribers as perexternal sources. Cash flow projections are consistent with the business acquisition plans and those used in the previous year.
The main assumption on which the forecast cash flows are based is licence fee rates. In forming its assumptions about licence fee rates,
the Group has used a combination of long-term trends and recent contracted terms.
Management believe that any reasonably possible change in the key assumptions on which the value in use of UKTV is based would not
result in any impairment.

1

See Glossary for further details

50

BBC Full Financial Statements 2013/14

E3 Gain on sale and termination of operations
As part of the normal course of business, the commercial entities may decide to sell or terminate a particular part of their operations.
This note shows the impact of such a decision on the income statement. A gain is recognised when the fair value of consideration
received or receivable is greater than the carrying value of the assets of that operation, at the point of sale.

Lonely Planet
Left Bank
Other
Gain on sale and termination of operations

2014
£m

2013
£m

–
–
4.1
4.1

15.0
8.0
0.3
23.3

On 13 September 2013, the Group disposed of its interest in Ragdoll Worldwide Limited for cash consideration of £8.7million and a£3.5million dividend immediately prior to disposal, resulting in a gain on disposal of £2.3million. Net assets at the date of disposal were
£9.9million.
In September 2012, the Group disposed of distribution rights relating to Ragdoll properties back to its Ragdoll joint venture.
Distribution rights with a book value of £2.0million were disposed of for cash proceeds of £1.8million, resulting in a loss on disposal of£0.2million.
On 26 July 2013, the Group disposed of its interest in Big Talk Productions Limited for cash consideration of £3.1million and £1.3million
loan settlement, resulting in a gain on disposal of £1.7million. Net assets at the date of disposal were £1.5million.
On 12 August 2013, the Group disposed of its interest in BBC Haymarket Exhibitions Limited for cash consideration of £0.1million
resulting in a gain on disposal of £0.1million. Net assets at the date of disposal were £nil.
On 31 March 2013, BBC Worldwide completed the disposal of its Lonely Planet group of companies for cash consideration of£41.2million and deferred consideration of £10.3million. As a result of the disposal, cumulative currency translation gains of£48.4million and hedged derivative gains of £0.1million were removed from reserves and recorded in the income statement. Together
with transaction costs of £3.0million, a gain on disposal of £15.0million was recognised overall.
On 17 August 2012, BBC Worldwide disposed of its interest in Left Bank Pictures for a total consideration of £10.1million, giving rise toa gain on disposal of £8.0million.
On 30 April 2012, the Group disposed of its interest in Freehand International Pty Ltd, by way of a share buyback, for proceeds of
AUS$0.8million. Net assets at the date of disposal were AUS$0.8million (March 2012: AUS$0.8million). Translation gains of £0.5million
were reclassified from reserves to the income statement as a result of the disposal giving rise to a gain on disposal of £0.5million.

BBC Full Financial Statements 2013/14

51

Group financial statements for the year ended 31 March 2014

Notes to the accounts
E. Investments in the BBC’s commercial activities continued
E4 Interests in associates1 and joint ventures1
This note details the BBC Group’s share of net assets in associates and joint ventures, along with the impact that they have on theincome statement. Details of significant associates and joint ventures along with principal subsidiary undertakings, including theiractivities, are provided in note G5.
2014
£m

2013
£m

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

0.8
12.2
13.0

15.4
16.1
31.5

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

22.2
0.5
22.7

21.7
1.3
23.0

2014
£m

2013
£m

8.5
111.4
(76.3)(54.6)(11.0)
12.7
(6.1)
–
(4.4)

10.9
115.0
(79.0)(54.2)
(7.3)
27.1
(5.9)
1.4
15.3

0.8
–
(5.2)
(4.4)
153.9
31.3
(9.1)
22.2

15.4
9.9
(10.0)
15.3
152.7
32.7
(11.0)
21.7

The following table represents the BBC Group’s aggregate share of joint ventures:

Non-current assets
Current assets
Current liabilities
Non-current liabilities
Shareholder’s equity
Adjustment to reflect effective obligation
Provision for unrealised profit
GoodwillGroup’s share of net (liabilities)/assets of joint ventures
The net book value is presented within:
Interest in associates and joint ventures
Assets held for sale
Provisions1
IncomeProfit after tax
Adjustment to reflect effective obligation

1

See Glossary for further details

52



BBC Full Financial Statements 2013/14

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

Total assets
Total liabilities
Net assets
Group share of net assets
Provision for unrealised profit
Goodwill
Total net book value
IncomeProfit after tax
Adjustment to reflect effective obligation
Group share of results

2014
£m

2013
£m

95.6
(79.8)
15.8
4.4
(0.4)
8.2
12.2
101.1
5.9
(5.4)
0.5

93.2
(80.8)
12.4
4.9
(0.8)
12.0
16.1
159.6
9.2
(7.9)
1.3

UKTV
The Group’s 100% owned subsidiary, BBC Worldwide has a major partnership deal with Scripps Networks Interactive (Scripps)
for the production, marketing and supply on a wholesale basis of free-to-air and subscription channels in the UK. The partnership
operates through the joint venture company UKTV Media Limited (UKTV).
UKTV is financed by Scripps and has both trade and debt in a number of subsidiary operating companies. These companies previously
formed a number of discrete legal groups with ownership of each held directly by the joint venture partners. In accordance withIAS 28 Joint ventures and associates, BBC Worldwide equity accounted only for those joint ventures which were cumulatively profitable.
Accordingly, the Group did not account for two companies within the UKTV group which had net liabilities and where
BBC Worldwide had no obligation to provide further funding.
During the current year, UKTV management agreed in principle a reorganisation of the unified UKTV Group, which will involve
collapsing the disparate trading subsidiaries into a single trading entity. As a result of this change, BBC Worldwide has recognised a 50%
share of those net liabilities not previously recognised.
A charge of £16.5m (2013: £Nil) has been recorded in other gains and losses in the income statement as a result of this change. As at 31
March 2014, the consolidated UKTV group was in an overall net asset position.
In April 2006, BBC Worldwide entered into an agreement with Ragdoll Limited to form a joint venture. The purpose of the joint
venture was to exploit and manage existing Children’s intellectual properties and to invest in the development of new intellectual
property rights. In May 2011, the Board resolved to dispose of the Group’s interest in the joint venture. The joint venture was classified
as held for sale at 31 March 2013 and disposed of in the year ended 31 March 2014.

BBC Full Financial Statements 2013/14

53

Group financial statements for the year ended 31 March 2014

Notes to the accounts
F. Managing funding (including future costs)
This section contains the notes to the balance sheet that detail the funding of the BBC Group as well as the assets and liabilities that areprimarily used in the day-to-day trading transactions of the BBC Group.
It also sets out the external borrowings of the BBC Group. The BBC Group is subject to two (2013: three) specific constraints on its
borrowing levels as set out below:
the Public Service borrowing limit of £200million is set by the Secretary of State in accordance with the Framework Agreement
between the BBC and DCMS.
under a direction granted by the Secretary of State for the DCMS a borrowing limit of £350million has been set for the BBCcommercial group.
Digital Switchover Help Scheme – in the prior year £25million could 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).
Included within this section are certain disclosures required to be provided to DCMS in respect of the above borrowing thresholds.
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 85).
F1 Analysis of net funds for DCMS borrowing1 ceilings

Total cash and cash equivalents
Loans and loan notes
Derivatives associated with loans
Finance leases
Leases not included in DCMS borrowing limits
Net funds
Made up of:
UK PSB Group
Centre House Productions
BBC Worldwide
Other commercial businesses
Net funds

At 1 April
2013
£m

Cash
flows
£m

Non-cashchanges£m

Exchange£m

575.2(187.5)(5.0)(882.6)(499.9)
849.6
349.7

(43.5)
30.3
–
94.9
81.7

–
–
(6.8)
(71.0)(77.8)

(5.6)
–
–
–
(5.6)

470.1
(3.5)
(7.7)
(109.2)349.7

At 31 March
2014
£m

526.1
(157.2)(11.8)(858.7)(501.6)
849.7
348.1
458.0
(1.7)
43.8
(152.0)348.1

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

1

See Glossary for further details

54



BBC Full Financial Statements 2013/14

F2 Reconciliation of net funds to the DCMS borrowing ceilings
Public Services1

2014
Net funds/(debt)
Borrowing ceiling
Headroom
2013
Net funds/(debt)
Borrowing ceiling
Headroom

Capitalor current
expenditure£mCurrent
expenditure
on Digital
Switchover
Help Scheme*£mCommercial
businesses**
£m

458.0
(200.0)
658.0

–
–
–

(108.2)(350.0)
241.8

470.1
(200.0)670.1–(25.0)
25.0(116.9)(350.0)233.1* In the year ended 31 March 2013 a borrowing ceiling of £25million was in place in respect of borrowing to fund 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. These covenants are required to be met at 31 March each year. As at
31 March 2014 and 31 March 2013, BBC Commercial Holdings Limited was in compliance with both of these covenants.

As at 31 March 2014, 31 March 2013, and throughout both financial years, the BBC Group did not breach the borrowing ceilings.
F3 Borrowings
F3.1 Borrowings due within one year

Bank loan
Obligations under finance leases
Total

2014
£m

2013
£m

0.7
7.0
7.7

–
27.0
27.0

2014
£m

2013
£m

156.5
851.7
1,008.2

187.5
855.6
1,043.1

F3.2 Borrowings due after more than one year

Bank loan
Obligations under finance leases
Total
Analysis of the BBC Group’s borrowing facilities is set out in note F4.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

55

Group financial statements for the year ended 31 March 2014

Notes to the accounts
F. Managing funding (including future costs) continued
F4 Borrowing facilities

Facility

Interest rate

UK PSB Group
Sterling revolving credit LIBOR* plus 0.55% rising to LIBOR*
facility agreement
plus 0.70% on utilisations over 1/3 and
LIBOR* plus 0.85% on utilisations
over 2/3
Uncommitted money Margin of 0.45% over LIBOR*
market lines (shortterm borrowings)
Uncommitted money Margin of 0.5% over LIBOR*
market lines (shortterm borrowings)
GBP overdraft
Bank base rates plus 1.5%
Multicurrency
overdraft
Overdraft*

Banks short-term offered rates for the
relevant currency plus 1%
Bank base rate plus 1%. Excess usage atbank base rate plus 2%
BBC Commercial Holdings Limited
Multicurrency,
LIBOR* plus 0.8% rising to LIBOR*
revolving credit facility plus 1.0% on utilisations over 1/3
agreement for loans
and LIBOR* plus 1.2% on utilisations
and letters of credit
over 2/3.
Letter of credit fee is the same as thebank lending margin, but does notinclude LIBOR*
Overdraft or money
Money market line – margin of 1.0%
market lines(2013: 1.0%)
US Private Placement Fixed interest at 2.36%
US Private Placement** Fixed interest at 2.71%
BBC Worldwide
Overdraft*
Bank base rate plus 1% up to £100k,bank base rate plus 3% over £100k
Overdraft or working Market rate at drawdown
capital loan for Indian
RupeesTotal
available
31 March
2014
£m

Drawn
down at
31 March
2014
£m

Total
available
31 March
2013
£m

Drawn
down at
31 March
2013
£m

150

–

200

–

31 March
2017

25

–

–

–

July 2014

25

–

5

–

Reviewed
annually

5

–

5

–

5

–

5

–

1

–

1

–

Reviewed
annually
Reviewed
annually
Reviewed
annually

210

–

380

172

July 2016

20

–

20

17

28
130

28
130

–
–

–
–

Reviewed
annually
June 2020
June 2020

2

–

2

–

1

1

–

–

Expiryor review
date

Reviewed
annually
Reviewed
annually* The base rate used varies according to the currency drawn. GBP drawings are linked to LIBOR. At 31 March 2013, £27.6million was drawn down in AUS$ and consequently linked to
BBSW rather than LIBOR. These were repaid during the current year.
** The $216million US placement is valued at £130million as at 31 March 2014 and is hedged to a sterling value of £143million.

There have been no defaults or breaches of covenants on these facilities during the year (2013: none).

56



BBC Full Financial Statements 2013/14

F5 Cash generated from operations

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

2014
£m

Restated*
2013
£m

188.9
270.4
(45.0)
6.8
(7.6)
(1.2)
0.5
(1.1)
(4.1)
16.5
(22.7)(14.6)
163.6(84.9)
0.7(65.2)(27.4)
373.6

196.0
359.8
(31.9)(0.6)(0.2)(87.2)
7.2–(23.3)–(23.0)(10.2)
146.5
21.3(53.2)(110.5)(15.5)
375.2* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

F6 Trade and other receivables
This note discloses the balances that are owed to the BBC Group by third parties and balances that have been pre-paid by the BBCGroup.
F6.1 Other receivables due after more than one year

Other prepayments and receivables
Loans to other entities
Amounts owed by associates and joint ventures
Total

BBC Full Financial Statements 2013/14

2014
£m

2013
£m

21.7
3.7
0.4
25.8

76.9
1.7
1.7
80.3

57

Group financial statements for the year ended 31 March 2014

Notes to the accounts
F. Managing funding (including future costs) continued
F6.2 Trade and other receivables due within one year

Trade receivables
Licence fee receivables
Amounts owed by associates and joint ventures
VAT recoverable
Other receivables
Prepayments and other assets
Total

2014
£m

2013
£m

217.9
407.3
19.4
43.2
103.5
197.4
988.7

224.3
404.9
27.7
46.4
64.1
163.9
931.3

Included in the BBC Group’s trade and other receivables at 31 March 2014 are balances of £42.9million (2013: £43.9million) which are
past due at the reporting date but not impaired. The aged analysis of these balances is as follows:
Trade receivables past due but not impaired

Up to 3 months
3 to 6 months
Over 6 months

2014
£m

2013
£m

31.5
4.6
6.8
42.9

33.1
8.3
2.5
43.9

In determining the recoverability (likelihood of receiving payment) of a trade receivable the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. Trade receivables are provided forbased on estimated irrecoverable amounts, determined by reference to past default experience of the counterparty and an analysis of
the counterparty’s financial situation.
There are no significant impairment provisions relating to balances of any individual debtor. Amounts charged to the impairment
provision are written off when there is no expectation of recovery. Subsequent recoveries of amounts previously written off are
credited to the income statement. The impairment provision stands at £5.5million at 31 March 2014 (2013: £11.8million).
The movement in the allowance for doubtful debts is set out below:

Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectable
Amounts recovered during the year
Exchange differences on revaluation
Balance at the end of the year

2014
£m

2013
£m

11.8
5.5
(10.8)
(1.0)
–
5.5

5.5
8.0
(0.6)
(1.0)
(0.1)
11.8

No significant amount has been provided for items that are not yet due for payment.

58



BBC Full Financial Statements 2013/14

F7 Trade and other payables
This note details the amounts payable to third parties by the BBC Group.
F7.1 Trade and other payables due within one year
Note

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

B6

2014
£m

2013
£m

424.6
5.9
26.3
19.9
422.7
7.3
53.0
959.7

444.2
5.9
26.5
35.6
442.7
17.9
60.4
1,033.2

2014
£m

2013
£m

15.2
15.2

18.4
18.4

F7.2 Other payables due after more than one year

Other payables
Total

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 their contracted terms and conditions. The BBC monitors compliance against the terms of this code.
Payments for programme acquisitions are made in accordance with contractual terms. The Group’s number of days outstanding inrespect of other trade payables at 31 March 2014 was 23 days (2013: 25 days).

BBC Full Financial Statements 2013/14

59

Group financial statements for the year ended 31 March 2014

Notes to the accounts
F. Managing funding (including future costs) continued
F8 Provisions and contingent liabilities

Note

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

D7
E4

Note

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

D7
E4

E4

At
1 April
2013
£m

80.9
19.1
20.3
6.0
10.0
1.2
137.5
66.0
71.5
137.5
At
1 April
2012
£m

107.4
11.8
20.3
–
11.1
3.5
154.1
86.1
68.0
154.1

Charge forthe year£m

Utilisedduringthe year£m

Releasedduringthe year£m

At
31 March
2014
£m

23.6
3.8
2.4
–
1.1
2.8
33.7

(40.0)
(0.5)
(0.1)
–
(5.9)
(0.5)
(47.0)(10.8)
(2.1)
(0.4)
(0.6)
–
(0.2)
(14.1)

53.7
20.3
22.2
5.4
5.2
3.3
110.1
53.3
56.8
110.1

Charge forthe year£m

Utilisedduringthe year£m

Releasedduringthe year£m

At
31 March
2013
£m

46.6
12.1
1.3
6.0
0.8
–
66.8

(59.2)
(2.6)
(1.2)
–
(1.9)
(1.9)
(66.8)(13.9)
(2.2)
(0.1)
–
–
(0.4)
(16.6)

80.9
19.1
20.3
6.0
10.0
1.2
137.5
66.0
71.5
137.5

The restructuring charge for the year mainly relates to the restructuring programmes within the UK PSB Group and BBC Worldwide.
The balance at 31 March 2014 predominantly relates to the Delivering Quality First strategy which is due to complete in 2016/17.
Following a reassessment of the level of restructuring provisions required and a reassessment of the amounts to be paid, £10.8million
has been released to the income statement during the year.
Litigation and insurance provisions relate to ongoing legal, insurance and compensation claims against the BBC. The BBC Group has anumber of contingent liabilities arising from litigation. The BBC makes specific provision for its best estimate of any damages and costs
which may be awarded. A provision is only made to the extent that the BBC Group considers it probable that there will be an outflow
of economic benefits and the amount can be reliably estimated. There are currently no known individually material outstanding
litigations.
The decommissioning provision was created at 31 March 2013 for the costs of decommissioning the Cyprus shortwave transmission
site in BBC World Service.
Other provisions consist of a number of items arising across the BBC Group in the normal course of business, none material inthemselves.
There were no other significant contingent liabilities known at the year end (2013: no significant).

1

See Glossary for further details

60



BBC Full Financial Statements 2013/14

F9 Net financing costs
Set out below is an analysis of the finance income and expenses incurred in the year. These amounts include interest relating to financelease liabilities (see note D5) and defined benefit pension schemes (see note C7).
Note

Financing income
Interest income
Investment income on assets available for trading
Fair value gains on interest rate swaps and caps

G4.3

Financing costs
Interest expense
Investment expense on liabilities available for trading
Interest on obligations under finance leases
Fair value movement on financial liabilities

G4.3

Interest cost on pension plan liabilitiesI

C7.3

Net financing cost

D5

2014
£m

Restated*
2013
£m

5.9
3.8
4.9
14.6

6.0
3.9
0.3
10.2

(12.6)(0.1)(81.0)–(93.7)(69.9)(163.6)(149.0)(10.3)–(81.9)(1.8)(94.0)(52.5)(146.5)(136.3)

2014
£m

2013
£m

(81.0)(69.9)
1.9(149.0)(81.9)(52.5)(1.9)(136.3)The net impact of financing can be analysed as follows:

Net financing costs of leasing arrangements
Net financing costs related to pension obligations
Net financing income/(costs) related to loans and financial instruments* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

F10 Long-term commitments not reflected in the balance sheet – contracts placed for future expenditureThis note shows amounts to which the BBC Group is contractually committed, but which do not meet the criteria for inclusion in thebalance sheet. The BBC has chosen to include fixed (but not variable) payments due under outsourcing contracts for the life of thosecontracts, as this matches the BBC’s interpretation of the requirements of s.410A of the Companies Act 2006.
Functions covered by these long-term outsourcing contracts include IT support, content distribution and transmission, facilities
management and elements of finance support.

Fixed asset additions
Programme acquisitions and sports rights
Independent programmes
Other fixed payments on long-term outsourcing arrangements

1

2014
£m

2013
£m

33.3
743.1
186.4
2,476.0
3,438.8

24.6
903.2
195.1
2,469.5
3,592.4

See Glossary for further details

BBC Full Financial Statements 2013/14

61

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other
For additional information on the relevant accounting policies applied in this section please see section H. Basis of preparation of thefinancial statements and other accounting policies (page 85).
G1 Assets held for saleNon-current assets (and assets and liabilities of a group earmarked for disposal) are classified as held for sale if their carrying amount(amount held on the balance sheet) will be recovered principally through sale rather than continuing use, they are available for
immediate sale and the sale is highly probable, normally within the next 12 months.
When non-current assets or disposal groups are re-categorised to this note, they are stated at the lower of their previous carrying
amount and fair value less costs to sell. No amortisation or depreciation is charged on non-current assets (including those in disposalgroups) classified as held for sale.
Note

Non-current assets:
Interests in associates and joint ventures
Total assets classified as held for sale

E4

2014
£m

2013
£m

–
–

9.9
9.9

In the prior year, the major classes of assets and liabilities comprising operations classified as held for sale related to the BBC Group’s
investment in the Ragdoll joint venture. These were disposed of in 2013/14.

62

BBC Full Financial Statements 2013/14

G2 Taxation
G2.1 Recognised in the income statement
The charge for the year, based on the rate of corporation tax of 23% (2013: 24%) comprised:
Note

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

G2.4
G2.2

2014
£m

2013
£m

8.9
(0.1)
8.8
22.1
30.9

16.3
(1.2)
15.1
24.2
39.3

2.6
0.7
0.9
4.2
35.1

(0.6)
0.5
(0.5)
(0.6)
38.7

G2.2 Reconciliation of taxation expense
The BBC Group is only liable to taxation on those activities carried out with a view to making a profit and on rent, royalties andinterest receivable. The BBC does not therefore receive relief for all its expenditure, and the tax assessed for the year consequently
differs from the standard rate of corporation tax in the UK. The differences are explained below:
Note

Surplus before tax
Share of associates and joint ventures
Surplus before tax multiplied by standard rate of corporation tax in the UK of 23% (2013: 24%)
Effects of
Public Service activities
Public service taxable external income
Non-taxable public service activities
Commercial activities
Disallowed expenditure (including goodwill impairment)
Production tax credits
Tax exempt investment saleTax differential on overseas earnings
Tax differential in associates and joint ventures
Tax rate increase
Adjustments in respect of prior years
Total tax charge for the year
Share of tax of associates and joint ventures
G2.1

2014
£m

Restated*
2013
£m

188.9
7.7
196.6
45.2

196.0
7.9
203.9
48.9

7.9
(18.1)

7.2
(4.1)

4.3
(5.1)
(1.2)
3.9
4.4
0.7
0.8
42.8
(7.7)
35.1

8.8
–
(21.4)
8.2
0.3
0.4
(1.7)
46.6
(7.9)
38.7

* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

The tax charge is driven by the results of the commercial businesses, as the BBC Group’s public sector ‘free-to-air’ broadcasting
activities are not subject to taxation.
The reduction in effective tax rate (total tax charge for the year as a percentage of Group profit excluding tax) arises from film tax
credits available on high-end drama productions.
1

See Glossary for further details

BBC Full Financial Statements 2013/14

63

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G2.3 Factors that may affect future tax charges
The UK Government has announced a phased reduction in the main rate of corporation tax in the UK. On 1 April 2013, the rate was
reduced from 24% to 23%. Two further annual reductions are expected to follow in subsequent years, reducing the corporation tax
rate to 21% from 1 April 2014 and 20% from 1 April 2015. The impact of the future rate reductions will be accounted for in future
periods, to the extent that they are enacted at the balance sheet date, however, it is estimated that this will not have a material effecton the BBC Group.
G2.4 Deferred tax assets/(liabilities)

At 1 April 2013
Net charge to the income statement
Charge to reserves
Exchange differences
At 31 March 2014

Fixed asset
temporarydifferences
£m

6.1
(1.0)
–
0.4
5.5

Provisions£mFinancial
instruments
£m

Other
£m

Net deferred
tax asset/(liability)
£m

3.3
(0.1)
–
1.2
4.4

3.1
(1.6)
(3.7)
(0.1)
(2.3)

1.9
(1.5)
–
(1.6)
(1.2)

14.4
(4.2)
(3.7)
(0.1)
6.4

2014
£m

2013
£m

9.5
(3.1)
6.4

15.1
(0.7)
14.4

Deferred tax asset/(liability) presented within:

Non-current assets
Non-current liabilities

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit throughfuture taxable profit is probable. The BBC Group has unrecognised deferred tax assets arising on capital losses totalling £22.2million(2013: £22.4million). These assets are not recognised on the basis that there is insufficient certainty that capital or operating gains willarise against which the BBC Group can utilise these losses.
G3 Pension plans
Note G3 sets out the additional detailed disclosures related to the BBC Pension Scheme which were not included in note C7 or C8.
G3.1 Changes in the present value of plan liabilities1
The table below illustrates the movement on the scheme liabilities during the year. The key items which affect this are the additional
year of pension benefits earned, any gains or losses relating to participants leaving the pension scheme, changes in assumptions madeand benefits paid out during the year.

Opening present value of plan liabilities
Current service cost
Past service cost
Administration cost
Interest on pension plan liabilities
Experience gains arising on plan liabilities
Changes in assumptions underlying plan liabilities1
Contributions by plan participants
Benefits paid and expenses
Closing present value of plan liabilities

2014
£m

Restated*
2013£m

11,809.8
167.2
2.4
8.3
523.1
(62.3)
114.1
1.1(371.0)12,192.7

10,270.5
149.8
3.4
8.0
524.9
(12.7)
1,224.4
0.8(359.3)
11,809.8* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

1

See Glossary for further details

64

BBC Full Financial Statements 2013/14

G3.2 Changes in the fair value of plan assets
The table below illustrates the movement on the plan assets during the year. The key items which affect this are the additional year ofcontributions made, changes in the value of the pension plan assets (including the investment return) and benefits paid during the year.
The employee contributions to the scheme by members are mainly paid via a salary sacrifice arrangement. These have been treated as
employer contributions.

Opening fair value of plan assets**
Interest income on assets
Remeasurements on plan assets1
Contributions by employer
Contributions by plan participants
Benefits paid and expenses
Closing fair value of plan assets**

2014
£m

Restated*
2013£m

10,201.1
453.5
177.0
222.5
1.1
(371.0)10,684.2

9,198.5
472.7
695.6
192.8
0.8
(359.3)
10,201.1* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.
** Excluding AVC funds.

G3.3 Plan assets
The allocation of assets by the Pension Trust Trustees is governed by the need to manage risk against the desire for high returns andany liquidity needs. A high percentage of assets are held in equities which the Trustees expect will produce higher returns in the longterm. For more information on the Scheme, including target assets allocations, see www.bbc.co.uk/mypension.
2013

2014
Type of asset

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

£m

%

£m

%

3,487
3,793
1,029
1,965
410
10,684
631

33
35
10
18
4

3,948
3,229
1,060
1,801
163
10,201
1,168

39
31
10
18
2

* Alternatives include private equity, debt and currency.
** This constitutes realised gains from the receipt of investment income (e.g. dividends and rent), transactions where assets are sold and unrealised fair value changes.

G3.4 BBC Pension Scheme gains/(losses)1 in the consolidated statement of comprehensive income

Actual return less return on pension plan assets included within the income statement
Experience gains arising on plan liabilities
Changes in assumptions underlying the present value of plan liabilities
Net gain/(loss) recognised in the consolidated statement of comprehensive income
Cumulative loss recognised in the consolidated statement of comprehensive income

2014
£m

Restated*
2013
£m

177.0
62.3
(114.1)
125.2(4,942.9)

695.6
12.7
(1,224.4)(516.1)(5,068.1)* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

65

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G3.5 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
Remeasurement recognised in the consolidated statement ofcomprehensive income:Amount (£million)
Percentage of plan liabilities

2014

Restated*
2013

2012

2011

2010

177.0
1.7%

695.6
6.8%

(157.8)
1.7%

93.1
1.1%

1,363.0
16.7%

62.3
0.5%

12.7
0.1%

(113.3)
1.1%

71.7
0.7%

33.2
0.3%

125.2
1.0%

(516.1)4.4%(460.4)
4.4%

303.7
3.1%

(1,869.9)
19.1%* IAS 19 (revised) Employee benefits has been adopted for 2014 and accordingly the 2013 comparatives have been restated.

G3.6 Principal actuarial assumptions
The calculation of the scheme liabilities and pension charges, for IAS 19 purposes, requires a number of financial and demographic
assumptions to be made. The principal assumptions used by the actuaries, 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 (2006)
Career Average Benefits (2011)
Inflation assumption (RPI)
Inflation assumption (CPI)
Discount rateI

2014
%

2013
%

1.0

1.0

3.4
3.2
2.4
2.3
3.4
2.4
4.4

3.4
3.2
2.4
2.3
3.4
2.4
4.5

2014
Number of
years

2013
Number of
years

27.4
29.8

28.0
28.6

29.3
31.8

30.5
30.3

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
FemaleThe mortality assumptions have been selected to reflect the characteristics and experience of the membership of the scheme and are
based on those used for the actuarial investigation which was carried out for funding purposes as at 1 April 2013. The standard ‘S1’
series of tables, published by the CMI, reflect recent research into mortality experience in the UK. A subset of these tables have beenused for males and females, with a multiplier of 122% for males and 107% for females. For the allowance for future improvements, theCMI 2012 core projection has been adopted with a long-term trend of 1.25% for both males and females.

1

See Glossary for further details

66



BBC Full Financial Statements 2013/14

G3.7 Scheme membership analysis and maturity1 profile

Contributors
Pensioners
Dependants
Deferred pensioners

2014
Number

2013
Number13,10019,214
4,151
29,34914,20319,055
4,094
28,957

The total number of Scheme beneficiaries as at 31 March 2014 was 52,447 (2013: 57,062). Membership numbers in the table above arehigher as members can hold more than one record. For example, contributing members who have transferred to the Career Average
Benefits 2011 section from another section of the Scheme may have a deferred pensioner record for their benefits built up in the
Old Benefits, New Benefits or Career Average Benefits 2006 sections and a contributing record for their Career Average Benefits
2011 benefits.
G4 Financial instruments
This section details the financial instruments held by the BBC Group. A financial instrument is a contract that results in one entity
recording a financial asset (a contractual right to receive financial assets e.g. cash) in their accounts and another entity recording afinancial liability.
The BBC Group’s financial instruments, other than those used for treasury risk management purposes, comprise cash and cash
equivalents, borrowings and various items such as trade receivables and payables that arise directly from its operations.
G4.1 Financial risk management
The BBC Group’s financial risk management operations are carried out by a BBC Group Treasury function, within parameters definedformally within the policies and procedures manual agreed by the BBC Executive Board. BBC Group Treasury’s activity is routinely
reported and is subject to review by internal and external auditors.
The BBC Group Treasury function uses financial instruments to raise finance and to manage financial risk arising from the BBC’s
operations in accordance with its objectives which are:to ensure the business of the BBC Group, both UK PSB Group and Commercial, is funded in the most efficient manner andremains 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; andto maximise the return on surplus funds, whilst ensuring sufficient cash is retained to meet foreseeable liquidity requirements.
The BBC Group takes a risk averse approach to the management of foreign currency trading and has implemented a clear economic
hedging policy to minimise volatility in the financial results. A small number of the forward foreign currency contracts entered into by
the BBC Group were designated as hedging instruments in effective cash flow hedges. Hedge accounting is only applied where there isappropriate designation and documentation.
The BBC Group is exposed to the following areas of risk arising from financial instruments:
market risk, principally currency and interest rate risk;
liquidity risk; andcredit riskI. The largest element is the licence fee debtor, £407.3million (2013: £404.9million). The amount of income that the BBC
receives is directly related to the amount of licence fee collected from households in the UK.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

67

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G4.1 Financial risk management continued
The material risks to the BBC Group are:
Currency risk
The BBC Group is principally a UK based organisation with the majority of transactions, assets and liabilities being sterling based,
however, the BBC Group undertakes some transactions in currencies other than sterling. Due to movements in exchange rates overtime, the amount the BBC Group expects to receive or pay when it enters into a transaction may differ from the amount that it
actually receives or pays when it settles the transaction.
The most significant currency exposure by total value of transactions is to US dollars. Due to the relative size of this exposure incomparison to the BBC Group’s sterling-denominated business, the BBC does not consider this to be significant for the BBC Group,
but does, however, generally enter into forward currency contracts to manage, or hedge, this currency risk, which allows the BBCGroup to settle transactions at known exchange rates, reducing uncertainty.
The overall income or expenditure to be recognised in relation to contracts denominated in foreign currency (and the related hedges)
is therefore fixed, however, where these contracts span financial years, the recognition of the fair value of the forward currency
contracts results in timing gains/losses in each financial year. These timing gains/losses are therefore a result of market conditions andnot variances in underlying contract value.
As a result of this certainty of cash flows the BBC Group has mitigated its underlying sensitivity to currency fluctuations and therefore
has not presented sensitivity analysis as any potential variation is insignificant.
At 31 March 2014, the BBC Group had entered into a net commitment to sell foreign currencies amounting to £372.6million (2013: net
commitment to sell £312.2million) that mature in the period through to 2017 in order to fix the sterling cost of commitments throughthis period (mainly euros and US dollars). These forward foreign exchange contracts mean the BBC Group had no significant currency
exposure.
Interest rate risk
The Group’s main exposure to interest rate fluctuations arises on external borrowings. BBC Commercial Holding’s 2013 private
placement included a tranche of fixed rate sterling debt alongside a tranche of fixed rate US dollar debt, with the latter swapped to
fixed rate sterling to eliminate the associated interest rate risk throughout the period of the instrument. Since March 2003, the Grouphas been borrowing under its revolving credit facilities at floating rates of interest and then using interest rate swaps, caps and collars
to manage the Group’s exposure to interest rate fluctuations and provide greater certainty of cash flows. Interest rate swaps, caps andcollars are taken out based on projected borrowing requirements, therefore differences will occur between the notional amount of
the swaps, caps and collars and the actual borrowing requirements. The effect of taking out the interest rate swaps, caps and collars isthat in the longer term the Group has no significant underlying sensitivity to interest rate fluctuations and hence no sensitivity analysis
has been presented.
Sterling fixed rate borrowings are achieved by entering into interest rate swap transactions; all outstanding swaps mature by June
2020. The impact of a change in interest rates can also be limited by entering into interest rate cap and collar transactions; there are no
outstanding caps and collars as at 31 March 2014. In total, £260.2million (2013: £282.0million) of swaps were entered into. No caps andcollars were entered into during the year ended 31 March 2014 (2013: £40.0million). All swaps were effective at 31 March 2014 toensure borrowings are suitably covered for the foreseeable future. The coverage is £101.7million higher (2013: £132.6million higher)
than the current level of borrowings of £158.5million (2013: £189.4million).
Fair value movements in respect of interest rate swaps and interest rate options are recorded through the income statement within
financing income/financing costs.
Liquidity risk
Liquidity risk is the risk that the BBC Group will not be able to meet its financial obligations as they fall due. The BBC is subject toceilings on its borrowings set by the Secretary of State in accordance with the Agreement between the BBC and DCMS (see note F1).
In order to comply with these ceilings, together with the terms of any individual debt instruments, the BBC’s Group Treasury function
manages the BBC Group’s borrowings by regularly monitoring BBC Group cash flow forecasts. The BBC holds its surplus liquidity interm deposit accounts with highly rated financial institutions.

68

BBC Full Financial Statements 2013/14

G4.2 Fair values of financial instruments
The following table shows the fair value of the BBC Group’s financial instruments, in categories according to how the financial
instrument is measured. It also shows the maturity profile for each category of financial asset and liability.
Amountsdue inless than
one year£m

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

Total
£m

5.7
7.2

2.8
3.2

–
–

8.5
10.4

Loans and receivables
Trade and other receivables

625.5

–

10.7

636.2

Cash and cash equivalents

526.1

–

–

526.1

–

–

108.9

108.9

(0.5)
(2.3)
(0.3)

(0.8)
(13.6)
(0.2)

–
–
–

(1.3)
(15.9)(0.5)(0.7)(360.0)(28.7)––(126.3)(157.8)–(1,226.3)(158.5)(360.0)(1,381.3)

2014 – Fair value
Financial assets at fair value through income and expenditure
Derivative financial instruments:
Derivatives that are designated in effective hedges
Derivatives held for trading

Available for sale financial assets
Other investments
Financial liabilities at fair value through income and expenditure
Derivative financial instruments:
Derivatives that are designated in effective hedges
Derivatives held for trading
Trade and other payables
Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases

BBC Full Financial Statements 2013/14

69

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G4.2 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

0.5
3.5

0.1
4.8

–
–

0.6
8.3

Loans and receivables
Trade and other receivables

629.5

–

9.3

638.8

Cash and cash equivalents

575.2

–

–

575.2

–

–

121.5

121.5

(5.4)
(4.7)
(0.4)

(4.4)
(6.2)
–

–
–
–

(9.8)
(10.9)(0.4)–(369.9)(52.3)(189.4)–(150.4)––(1,263.1)(189.4)(369.9)(1,465.8)

2013 – Fair value
Financial assets at fair value through income and expenditure
Derivative financial instruments:
Derivatives that are designated in effective hedges
Derivatives held for trading

Available for sale financial assets
Other investments
Financial liabilities at fair value through income and expenditure
Derivative financial instruments:
Derivatives that are designated in effective hedges
Derivatives held for trading
Trade and other payables
Financial liabilities measured at amortised cost
Bank loans, overdrafts and loan notes
Trade and other payables
Obligations under finance leases

The fair value and carrying value of financial instruments was the same with the exception of finance leases. At 31 March 2014, the fairvalue of the Group’s obligations under finance leases was £522.6million higher (2013: £583.2million higher) than their carrying value.
The fair value at 31 March 2014 was determined by recalculating the finance lease liability using the current market interest rates,
adjusted for an appropriate risk premium. The movement in the interest rates between the inception of each finance lease (used togenerate the finance lease models) and 31 March 2014 creates a difference between the carrying value and the fair value.
The finance leases include £2.8million (2013: £4.8million) relating to Centre House Productions Limited. Centre House Productions
Limited enters into finance leases as a means of financing drama productions which result in lower production costs for the BBC.
These finance leases are matched by defeasance deposits1 which may only be used to settle the finance lease liabilities and therefore do
not represent separate assets and liabilities. The BBC has a right of offset which meets the criteria as set out in IAS 32 Financial
instruments presentation; therefore, the finance lease creditor is presented net of defeasance deposits to arrive at the net unmatchedliability at the year end. These defeasance deposits, £61.1million at 31 March 2014 (2013: £94.0million), are structured such that the
principal on deposit and interest earned will be sufficient to cover the rental obligations on the finance leases until the end of the lease.
Accordingly, it is not included as borrowing for the purposes of compliance with the BBC’s borrowing ceilings.

1

See Glossary for further details

70



BBC Full Financial Statements 2013/14

G4.3 Derivative financial instruments
When calculating the fair value of the BBC Group’s financial instruments (subsequent to the initial recognition), the technique used ineach calculation has to be allocated to the relevant level of hierarchy in the table below. This disclosure helps to show the level ofjudgement that the BBC Group has used in calculating fair values, subsequent to the initial recognition.
Categorisation into the following headings is based on the inputs used for the valuation technique as opposed to the technique itself:Level 1 fair value measurements are those derived from quoted market prices (unadjusted) in active markets (where transactions
occur on a frequent basis and in sufficient volumes for the pricing information to be available on an ongoing basis). The prices are
therefore available to the general public for identical instruments and occur on a regular basis, thus ensuring they are continually up
to date;Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Instruments that would
typically fall into this category include those where quoted prices are available for similar, but not identical instruments andinstruments where a quoted price is available, but in a non-active market i.e. the price may be out of date and therefore require
some limited adjustments; andLevel 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs). This can include methods such as projected future cash flows andoccur where there is little, or no, market activity.
Fair value
hierarchy level

Assets£m

Liabilities£m

2014
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Assets available for trading
Other payables
Finance leases

2
2
2
3
3
3

5.9
–
0.1
108.9
–
–
114.9

(1.6)
(11.7)
(1.1)
–
(0.2)
(1,352.6)(1,367.2)

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

2
2
3
3

12.9
–
–
–
12.9

(2.7)
(0.1)
(0.3)
(28.7)(31.8)

2013
Greater than one year
Forward foreign currency contracts
Interest rate swaps, caps and collars
Embedded derivatives
Assets available for trading
Finance leases

2
2
2
3
3

4.8
–
0.1
121.5
–
126.4

(5.5)
(3.7)
(1.4)
–
(1,413.5)(1,424.1)

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

2
2
3
3

4.0
–
–
–
4.0

(8.8)
(1.3)
(0.4)
(52.3)(62.8)BBC Full Financial Statements 2013/14

71

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G4.3 Derivative financial instruments continued
Level 3 financial assets recorded at fair value and included within available for sale investments include £104.5million (2013:£116.4million) for the shares held in Daunus Limited, the entity that redeveloped Broadcasting House. The BBC holds a 10% share of
the issued share capital (preferential in nature) of that company which it classes as an available for sale investment, due to mature in2033 at which point in time the BBC receives certain rights in respect of Broadcasting House. The BBC’s shares in Daunus Limited
entitles it to the first £90million (plus RPI from the start of the lease) of any proceeds on termination of the lease. The fair value
estimate has been based on the £90million, inflated by RPI, and discounted back to present day. The estimated interest rate used
(linked to RPI) was 3.1% (2013: 2.6%) and the rate used to discount the future cash flows was 3.4% (2013: 2.7%).
Level 3 financial liabilities recorded at fair value and included within other payables relate to written put optionsI issued to noncontrolling interests in the BBC Group’s subsidiaries. The fair value of such instruments is calculated based on the strike price1 of theoptions and management’s best estimate of the date at which options will be exercisedI. Where the strike price of an option is basedon the fair value of the underlying business, this has been estimated based on forecasts of future cash flows prepared by management.
The change in fair value of Level 3 financial instruments is reconciled as follows:
2013
£m

2014
£m
Note

Opening balance
Additions
Settlements
Unwinding of discount recorded within finance expense
Unwinding of discount recorded within finance income
Change in fair value recorded in operating costs
Change in fair value recorded in the consolidated statement ofcomprehensive income
Foreign exchange translation gains and losses
D2

FinancialassetsFinancialliabilities

FinancialassetsFinancialliabilities

121.5
–
(1.8)
–
3.8
1.1

(0.4)
–
–
(0.1)
–
–

100.9
5.0
–
–
3.9
(0.6)

(14.0)
1.4
14.0
–
–
–

(15.7)
–
108.9

–
–
(0.5)

12.1
0.2
121.5

(1.8)
–
(0.4)

Level 3 financial assets settled in the year relate to the Group’s minority investment in Viki Inc, which was acquired in the year by a third
party. The prior year settlement in financial liabilities related to written put options issued over non-controlling interests in the Group’s
subsidiary, Bedder 6 Limited.
The BBC Group applies cash flow hedge accounting for trades taken out by certain of its commercial subsidiaries in respect of theirforecasted foreign currency transactions. Hedge accounting is only applied where appropriate designation and documentation exists.
Net gains (before tax and non-controlling interests) recognised in the hedging reserve on forward foreign exchange contracts in cash
flow hedge relationships at 31 March 2014 were £16.4million (2013: £10.8million net losses). These amounts will be recognised in theincome statement in the period when the hedged forecast transaction affects the income statement, at various dates over the next
twelve months.

1

See Glossary for further details

72



BBC Full Financial Statements 2013/14

The following table details the BBC Group’s remaining contractual maturity for its non-derivative financial liabilities (including
obligations under finance leases) but excludes trade and other payables that were settled in the normal course of business and are due
within one year. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the BBC Group can be required to pay:

2014
Variable interest rate instruments
Not later than one year
Fixed interest rate instruments
Not later than one year
Later than one year but not later than five years
Later than five years
2013
Variable interest rate instruments
Not later than one year
Fixed interest rate instruments
Not later than one year
Later than one year but not later than five years
Later than five years

BBC Full Financial Statements 2013/14

Cash flow£mInterest£mPrincipal
£m

0.7

–

0.7

89.7
361.0
1,749.6
2,201.0

82.7
328.8
772.3
1,183.8

7.0
32.2
977.3
1,017.2

190.2

0.8

189.4

109.3
334.5
1,681.1
2,315.1

82.3
311.6
848.4
1,243.1

27.0
22.9
832.7
1,072.073

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G5 Interests in joint ventures, associates and subsidiaries
The BBC Group holds (directly and indirectly) interests in the following significant joint ventures, associates and subsidiaries listed
below which, except where otherwise stated, are incorporated in Great Britain and registered in England and Wales. A full list of joint
ventures, associates and subsidiaries is available on request from the General Counsel and Secretary, BBC, Broadcast Centre, 201
Wood Lane, London W12 7TP.
G5.1 Significant joint ventures and their activities
The BBC Group has a 50% equity interest in the following joint ventures which are all incorporated in Great Britain and registered inEngland and Wales, unless otherwise stated:
Name of entity

Activity

Commercial joint ventures:
UKTV Media Limited
JV Programmes LLC

TV channel operator
Programme distributor

G5.2 Significant associates and their activities

Digital UK Limited
YouView Limited
3sixtymedia Limited

Holding of issued
ordinary shares%

Activity

25
14.2
10*

Digital Switchover
Multiplatform broadcasting
Production* The BBC holds 10% of the total share capital of 3sixtymedia Limited but 20% of the Class A ordinary shares which gives it significant influence.

74



BBC Full Financial Statements 2013/14

G5.3 Subsidiary undertakings1
Name of entity

Commercial Subsidiaries (all 100% owned unless stated):
BBC Commercial Holdings Limited
BBC Worldwide Limited
BBC Global News Holdings Limited
BBC Ventures Group Limited
BBC Studios and Post Production Limited
2entertain Limited
BBC Worldwide Australia Pty Limited (incorporated in Australia)
BBC Worldwide Americas Inc. (incorporated in the USA)BBC Global News Limited
BBC.com Limited
BBC World Distribution Limited
Grafton House Productions Limited
Subsidiaries incorporated to act on behalf of the UK PSB Group:
BBC Property Development Limited
Centre House Productions Limited
Media Application Technologies Limited
DSHS Limited

Activity

*
**
**
**
**
**
**
**
**
**
**
**

Holding company and TVC re-development
management
Publishing, channels and programme distribution
Holding company
Holding company
Programme making facilities and services
DVD/video publisher
Investment company
Holding company
Broadcaster
Programme distribution
Programme distribution
Programme making

*
*
*
*

Property
Production financing
Applications technology development
Digital switchover* Directly owned.
** Indirectly owned.

Except where noted above all entities are incorporated in England and Wales.
G6 Reserves
G6.1 Operating reserve
At 31 March 2014, the cumulative goodwill written off to reserves on acquisitions prior to 1999 amounted to £6.8million. This amountis unchanged from the prior year and remained in equity upon transition to IFRS as permitted by IFRS1 First time adoption of IFRS.
G6.2 Available for sale reserve
The balance as at 31 March 2014 relates to the fair value of the BBC’s investment in Daunus Limited (see note D2).
G7 Post balance sheet events
There are no material events after the balance sheet date to disclose.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

75

Group financial statements for the year ended 31 March 2014

Notes to the accounts
G. Other continued
G8 Related party transactions
The following table represents transactions with related parties excluding key management personnel.
Associates, joint ventures andother investments

Rendering of services
Receiving of services
Pension contributions
Dividends received

BBC Pension Scheme

2014
£m

2013
£m

2014
£m

2013
£m

49.8
(16.5)
–
18.5
51.8

62.6
(15.7)
–
19.5
66.4

–
–
222.5
–
222.5

–
–
192.8
–
192.8

Amounts owed byrelated parties

BBC Pension Scheme
Associates, joint ventures and other investments

Amounts owed torelated parties

2014
£m

2013
£m

2014
£m

2013
£m

–
19.8
19.8

–
29.4
29.4

(0.6)
(5.9)
(6.5)

(1.1)
(5.9)
(7.0)

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. Thesetransactions include council tax agreements and corporation tax payments.
Related party transactions with key management personnel are disclosed in note C6.

76



BBC Full Financial Statements 2013/14

G9 Segment reporting
Geographical location of income and non-current assets

2014

Non-current assets excluding deferred tax
and financial instruments:
UK
Rest of world
Additions included in fixed assets and investments
External income:UK
Rest of world2013

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

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Othercommercials
£m

Group
adjustments
£m

Group
£m

1,334.6
2.3
1,336.9
119.8

54.6
60.2
114.8
22.9

241.6
28.6
270.2
197.9

7.0
0.4
7.4
3.9

(42.8)–(42.8)(42.8)

1,595.0
91.5
1,686.5
301.7

3,991.6
3.3
3,994.9

249.1
6.0
255.1

222.0
670.0
892.0

28.6
100.9
129.5

(203.5)(2.0)(205.5)

4,287.8
778.2
5,066.0

UK PSBGroup£m

BBC World
Serviceand BBC
Monitoring£m

BBCWorldwide£m

Othercommercials
£m

Group
adjustments
£m

Group
£m

1,426.2
1.0
1,427.2
139.3

59.7
62.8
122.5
6.0

211.6
39.0
250.6
131.8

8.1
0.4
8.5
4.6

(45.7)–(45.7)(38.4)

1,659.9
103.2
1,763.1
243.3

3,926.0
7.3
3,933.3

272.2
4.6
276.8

257.7
710.9
968.6

37.6
91.7
129.3

(205.7)–(205.7)

4,287.8
814.5
5,102.3

G10 Contingent liabilities
The Group has a number of contingent liabilities arising from litigation and from the rights of customers and suppliers to undertake
routine audits. These arise from trading activities undertaken in the ordinary course of business. The Group makes specific provision
for the best estimate of any amounts which might be awarded as a result of these. A provision is only made to the extent that the
Directors consider it probable that there will be an outflow of economic benefits and the amount can be reliably estimated.

BBC Full Financial Statements 2013/14

77

Group financial statements for the year ended 31 March 2014

Notes to the accounts
H. Basis of preparation of the financial statements and other accounting policies
The BBC is incorporated in the United Kingdom under the Charter.
IFRS 13 Fair value measurement

Statement of accounting policies
The BBC Group is required to select and apply accounting
policies for each type of transaction entered into throughout theyear and in the preceding year. An accounting policy will specify
the timing for recognising and derecognising assets, liabilities,
income and expenditure, how those items will subsequently bemeasured and where they are presented in the statement of
total income and expenditure, balance sheet and statement ofcash flows.

The Group has applied IFRS 13 for the first time in the current
year. IFRS 13 establishes a single source of guidance for fair value
measurements and their disclosures. The application of IFRS 13
has not had a material impact on the amounts recognised in the
consolidated financial statements apart from some additional
disclosures.

For ease of reference, the accounting policies are grouped
below into the section headings used above for the notes to theaccounts.

In the current year, the Group has applied IAS 19 (as revised inJune 2011) Employee benefits. There are three specific impacts
on the income statement:

Use of estimates and judgement
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the BBC Executive Board to exercise judgement inapplying the BBC Group’s accounting policies. These areas
involve a higher degree of judgement or complexity, or areas
where assumptions or estimates are significant to theconsolidated financial statements. We have presented such
estimates or judgements alongside the related accounting policy
within the relevant section of the notes.
Basis of preparation
These consolidated financial statements for the BBC Group
have been prepared in accordance with EU (IFRS).
The financial statements are principally prepared on thehistorical cost basis, meaning that after initial recognition, thecarrying amount of assets and liabilities are determined byreference to their original cost. Areas where other bases areapplied are identified in the accounting policies within therelevant section of the notes.
Where items are sufficiently significant by virtue of their size or
nature, they are disclosed separately in the financial statements
in order to aid the reader’s understanding of the BBC Group’s
financial position and performance.
Adoption of new and revised accounting standards
The following new and revised Standards and Interpretations
have been adopted for the first time, as they became effective
for this financial year. They have been applied since 1 April 2013.
Amendments to IAS 1 Presentation of financial statements
Amendments that are relevant to the Group are theamendments to IAS 1 regarding when a statement of financial
position as at the beginning of the preceding period (thirdstatement of financial position) and the related notes are
required to be presented. The amendments specify that related
notes are not required to accompany the third statement offinancial position.

78



IAS 19 (revised) Employee benefitsfuture administration costs are no longer permitted to be
included in the measurement of the defined benefit
obligation. Instead they are now charged to operating profit
as the related services are received;
a change in the calculation of the interest income on plan
assets. This was previously based on the expected returns on
the various asset types held within the investment portfolio.
It is now calculated at the same rate used to calculate theinterest expense on the pension liability (a discount rate
derived from corporate bonds). The difference between thiscalculated return and the actual return is reported as aremeasurement through the consolidated statement ofcomprehensive income; andthe reporting of a combined net figure within financeexpense, rather than showing the pension interest income
and pension interest expense separately.
The effect of adopting IAS 19 (revised) on the Group’s result for
the year ended 31 March 2013 was to reduce the surplus by£171million. The full impact on the income statement is set out inthe table below:

Group operating surplus
Other non-operating income
Financing income
Financing costs
Surplus before taxation2013
Restated

2013
Reported

198.8
133.5
10.2
(146.5)
196.0

206.8
133.5
651.1
(624.4)367.0

The impact on the statement of comprehensive loss, for theyear ended 31 March 2013, is as follows:

Group surplus for the year
Remeasurement on defined
benefit pension schemes
Other comprehensive loss
for the year
Total comprehensive loss
for the year

2013
Restated

2013
Reported

157.3

328.3

(516.6)(687.6)(36.7)(36.7)(396.0)(396.0)BBC Full Financial Statements 2013/14

The impact on the balance sheet is as follows:

Total assets less current liabilities
Other non-current liabilities
Pension liabilities
Total non-current liabilities
Net assets/(liabilities)
Operating reserve
Other reserves
Total capital and reserves/(deficit)

2013
Restated

2013
Reported

2,800.3(1,144.3)(1,615.8)(2,760.1)
40.2(51.9)
92.1
40.2

2,800.3(1,144.3)(1,715.8)(2,860.1)(59.8)(151.9)92.1(59.8)

Going concern1
The financial statements are prepared on a going concern basis.
The Directors believe this to be appropriate for the reasons set
out below.
The Directors have prepared and reviewed cash flow forecasts
for the 24 month period to 31 March 2016, a period in excess ofa year from the date of approval of these financial statements. In
the Directors’ judgement, the key factors in these forecasts are
the continuity of the Charter and licence fee (the quantum ofwhich has been agreed until 2017), the BBC Pension Scheme
deficit and the resultant deficit recovery payments agreed withthe pension scheme Trustees and the realisation of planned costsavings under the Delivering Quality First programme.
The Charter and licence fee give the BBC Group a securesource of income, however the timing of cash flows is an
important factor in the consideration of going concern given the
borrowing restrictions agreed with the DCMS for both the UK
PSB Group (£200million) and the commercial operations of the
BBC (£350million).
The BBC Group has external funding available, including a£150million sterling revolving credit facility which expires on
31 March 2017, which is currently unutilised. UK PSB net funds at
31 March 2014 were £458.0million, this equates to a headroomof £658.0million. The UK PSB cash position is expected toremain positive for at least the duration of 12 months from thedate of signing which the Directors consider to be theforeseeable future.

Basis of consolidation
The BBC Group accounts include the results of the BBC and allbusinesses controlled by the BBC (subsidiaries1) together with
the BBC’s share of the results of businesses over which the BBC
has significant influence but not control (associates1) and thosewhich the BBC jointly controls (joint ventures1).
The BBC Group accounts for its interests in associates and joint
ventures using the equity method. The equity method meansthat the BBC presents its interest in the associates or joint
ventures as a single line item in the balance sheet, measured at
the cost of the investment plus the share of the net result, lessdividends received. The equity accounted result for the year ispresented as a single line item in the statement of income andexpenditure.
Changes in the BBC Group’s interests in subsidiaries that do not
result in a loss of control are accounted for as equity
transactions, being movements between reserves attributable
to the BBC and non-controlling interests. A non-controllinginterest is the interest in a subsidiary that is not owned, directly
or indirectly, by the BBC. The non-controlling interest reflects
the amount of the net result for the year and the net assets/(liabilities) which are not attributable to the BBC. The carrying
amounts of non-controlling interests are adjusted to reflect any
changes in their, and the BBC Group’s, relative interests in thesubsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of theconsideration paid or received is recognised directly in equity
and attributed to the BBC.
When the BBC Group loses control of a subsidiary, the profit orloss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and thefair value of any retained interest and (ii) the previous carrying
amount of the net assets of the subsidiary (including attributable
goodwill) and any non-controlling interests. Amounts previously
recognised in other comprehensive income in relation to thesubsidiary are reclassified to the income statement ortransferred directly to retained earnings as appropriate. The fairvalue of any interest retained in the former subsidiary at thedate when control is lost is regarded as the cost on initialrecognition of an investment in an associate or joint venture.

The BBC Group also has a £380million multicurrency revolving
credit facility available to the BBC commercial operations, withfunding split between a US$259million US Private Placement(fixed through foreign exchange swap transactions at £170million)
until June 2020 and a £210million facility until July 2016. As at theyear end the Group had drawn down £158.5million of the
facilities available (2013: £172.0million).
The Directors of the BBC Group have reviewed these forecasts
and taking all above factors into consideration, together with thesensitivities and mitigating factors in the context of available
funds, they expect the BBC Group to be able to meet its debts
as they fall due for the foreseeable future.
As a result, the Directors are satisfied that the going concern basis
is appropriate for the preparation of these financial statements.

BBC Full Financial Statements 2013/14

1

See Glossary for further details

79

Group financial statements for the year ended 31 March 2014

Notes to the accounts
H. Basis of preparation of the financial statements and other accounting policies continued
Business combinations
Accounting policies relevant to section A
The acquisition of subsidiaries is accounted for using the
Licence fee income
acquisition method. The cost of an acquisition is measured at the
Income from television licences is treated as an amount due
aggregate of the fair values, at the date of exchange, of assets
from the relevant Government department, principally thegiven by the BBC Group in exchange for control of the acquiree.
DCMS. This represents the value of licences issued in the year,
The acquiree’s identifiable assets, liabilities and contingent
less a deduction for refunds and cancellations.
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
Where an element of the licence fee income has been ringSubsequent adjustments to the fair values of net assets acquired
fenced by the Government for a specific purpose, that income isare made within 12 months of the acquisition date whererecognised when it is due, except if it becomes virtually certain
original fair values were determined provisionally. These
that the BBC’s expenditure on the ring-fenced purposes will be
adjustments are accounted for from the date of acquisition.
less than the ring-fenced income already received. In this case,Transaction costs that the BBC Group incurs in connection withthe relevant amount of licence fee income, as agreed with thea business combination, such as legal fees, due diligence fees andGovernment, will be repayable and recognised as such in theother professional and consulting fees, are expensed as incurred. year the obligation to repay arises.
On acquisition, the BBC Group recognises any non-controllinginterest either at fair value or at the non-controlling interest’s
Other income
proportionate share of net assets.
Other income arises from activities such as the sale of goods,
provision of services and granting of licences. Revenue isWhen control is obtained in successive share purchases (a ‘step
measured after deductions for value added tax, any other salesacquisition’) it is accounted for using the acquisition method attaxes, trade discounts and sales between BBC Groupthe acquisition date. The previously held interest is remeasured
companies.
to fair value at the acquisition date and a gain or loss isrecognised in the income statement.

Foreign currency transactions1
Transactions in foreign currencies are translated into sterling at
the rates of exchange ruling at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated into sterling at the rateof exchange ruling at that date. Foreign currency gains or losses
arising from the translation of assets and liabilities at these rates
of exchange, together with exchange differences arising fromtransactions settled during the year, are included in the income
statement. Non-monetary assets and liabilities measured athistorical cost are translated into sterling at the rate of exchangeon the date of initial recognition.
Financial statements of foreign operations
The assets and liabilities of foreign operations are translated into
sterling at the rate of exchange ruling at the balance sheet date.
The income and expenses of foreign operations are translated
into sterling at average monthly rates of exchange ruling during
the financial period, which is a good approximation for the actual
rate. Exchange differences arising on translation are recognised
directly in the translation reserve.
On disposal of an investment in a foreign operation theassociated translation reserve balance is released to the income
statement.

1

80

Sale of goods
Revenue is recognised once the significant risks and rewards ofownership of the goods have been passed to the customer andthe BBC has released all managerial involvement surrounding
the goods. Sales of goods 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 beendelivered and the receipt of the income is probable. Where thedelivery is over a period of time, the revenue is recognised on astraight line basis. Examples of services sold include advertisingand commercial licences for specific rights associated with TV
programmes.
Royalties
Royalty income is recognised on an accruals basis in accordancewith the detail of the relevant agreements.
Rental income
Rental income is recognised on a straight line basis over the termof the lease.
Grants from Government departments
For the year ended 31 March 2014, the BBC World Service
received Grant-in-Aid from the Foreign and Commonwealth
Office. Previously, BBC Monitoring also received a grant fromthe Cabinet Office. These grants have been drawn down tomeet estimated expenditure in the year but unspent amounts
do not have to be repaid, as long as they fall withinpredetermined limits. The grants are recognised as income in
the financial year that they relate to.

See Glossary for further details



BBC Full Financial Statements 2013/14

Accounting policies relevant to section A continued

Accounting policies relevant to section B

Grants from other public bodies
Grants from other public bodies are recognised as income
consistently with the related costs, provided that there isreasonable assurance that the BBC will comply with any
conditions attached to the grant and that the grant will
be received.

Completed originated programmes1, programmes
in production and prepayments to acquire future
programme‑related rights
Completed originated programmes and programmes in
production are held at cost.

Use of estimates and judgements – commercial income
Revenue recognition in the BBC’s commercial operations iscomplex, with a number of different revenue streams including
sale of content to global broadcasters, subscription income andrevenue from the sale of physical and digital products.
The complexity of individual contractual terms may require theGroup to make judgements in assessing when the triggers forrevenue recognition have been met, particularly whether theGroup has sufficiently fulfilled its obligations under the contract
to allow revenue to be recognised.

Cost includes all direct costs, production overheads and a
proportion of other attributable overheads. The proportion ofprogrammes necessarily taking a substantial period of time to
produce is small and as such no borrowing costs are included
in cost.
Where, exceptionally, a programme is unable to be broadcast,as soon as it is virtually certain that this is the case, the full valueof 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 thedevelopment work will result in a commissioned programme1,
when any further costs are recognised as programme-related
assets.
Originated programmes that are still in production at thebalance 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 (forexample, rights to broadcast sporting events), to receive theprogramme on completion.
Rights to broadcast acquired programmes and films
The rights to broadcast acquired programmes and films arerecognised at cost. The costs of acquired programmes and films
are written off on first transmission except to the extent thatthe numbers of further showings are contractually agreed, when
they are written off according to the expected transmission
profile. Assets and liabilities relating to acquired programmes arerecognised at the point of payment or commencement of thelicence period, whichever is earlier. Agreements for the futurepurchase of rights whose licence period has not commenced
and where there has been no payment by the balance sheet dateare disclosed as purchase commitments.
Where the BBC has invested in independent productions, inaddition to broadcasting rights, the BBC may obtain rights tofuture 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 andimpaired if anticipated royalties do not materialise.
Other inventories
Raw materials and other physical inventory, including finishedgoods, are stated at the lower of cost and net realisable value.
Works in progress comprises direct materials and, whereapplicable, direct labour costs and those overheads that havebeen incurred in bringing the assets to their present location andcondition. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be
incurred in selling and distribution.
1

BBC Full Financial Statements 2013/14

See Glossary for further details

81

Group financial statements for the year ended 31 March 2014

Notes to the accounts
H. Basis of preparation of the financial statements and other accounting policies continued
Accounting policies relevant to section C continued

Accounting policies relevant to section D

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

Owned assets
Other than as noted below, items of property, plant andequipment are stated at cost less accumulated depreciation andany accumulated impairment losses.

Termination benefits
Termination benefits are expensed at the earlier of when theGroup can no longer withdraw the offer of those benefits andwhen the Group recognises costs for a restructure. If benefits
are not expected to be settled wholly within 12 months of theend of the reporting period, then they are discounted.
Defined contribution plans
The amounts charged as expenditure for the defined
contribution plans represent the contributions payable by the
BBC for the accounting period.
Defined benefit plans
The defined benefit plans, of which the majority of staff are
members, provide benefits based on pensionable pay. The
assets of the BBC’s Pension Scheme are held separately fromthose of the BBC Group.
Pension Scheme assets are measured at fair value. Pension
Scheme liabilities are measured using a projected unit credit
method. The present value of scheme liabilities is calculated bydiscounting estimated future cash outflows at the current rateof return on a high quality corporate bond of equivalent term
and currency to the liabilities.
The difference between the fair value of the Pension Scheme
assets and the present value of the Pension Scheme liabilities is asurplus or a deficit. A pension scheme surplus is recognised tothe extent that it is recoverable and a pension scheme deficit isrecognised in full.
Remeasurement comprising gains and losses and the return on
scheme assets (excluding interest) are recognised immediately inthe balance sheet with a charge or credit to the statement ofcomprehensive income in the period in which they occur.
Remeasurement recorded in the statement of comprehensive
income is not recycled. Past service cost is recognised in theincome statement in the period of scheme amendment. Net
interest is calculated by applying a discount rate to the net
defined benefit liability or asset. When the benefits of a plan arechanged the resulting change in benefit that relates to past
service is recognised immediately in the income statement. The
Group recognises gains and losses on the settlement of a defined
benefit plan when the settlement occurs.
Use of estimates and judgement – post-retirement benefits
The pension costs and obligations of the BBC Group’s defined
benefit schemes are calculated on the basis of a range ofassumptions, 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
the assumptions will be reflected in subsequent periods. A smallchange in assumptions can have a significant impact on thevaluation of the liabilities. Further analysis on the sensitivity ofpension assumptions is given in note C8.1.

82



Cost includes expenditure that is directly attributable to theacquisition of the asset.
Leased assets
Assets held under finance leases1 are capitalised within property,
plant and equipment and depreciation is provided as
appropriate. On initial recognition the asset is measured at thelower of its fair value and the present value of the minimum
lease payments.
Depreciation
Depreciation is provided to write off the cost of each item ofproperty, plant and equipment, less its estimated residual value,
on a straight line basis over its estimated useful life. The major
categories of property, plant and equipment are depreciatedas follows:Land and buildings
Freehold land – not depreciatedFreehold buildings – 50 years
Freehold building improvements – 10-50 years
Long leasehold buildings – shorter of 50 years or life of lease
Long leasehold building improvements – 10-50 years
Short leasehold land and buildings – within unexpired lease termPlant and machinery
Computer equipment – 3-5 years
Electrical and mechanical infrastructure – 10-25 years
Other – 3-10 years
Furniture and fittings – 3-10 years
Depreciation methods, estimated useful lives and residual values
are reviewed at each reporting date.
Use of estimates and judgements – capital projects
The BBC is completing a number of significant capital projects
for which amounts have been capitalised on the Group’s balance
sheet.
The recoverability of these assets is dependent on theachievement of project completion and the assets being used in
the manner intended as part of the original business case.

1

See Glossary for further details

BBC Full Financial Statements 2013/14

Accounting policies relevant to section D continued

Accounting policies relevant to section E

Lease payments
Payments made under operating leases are recognised in theincome statement on a straight-line basis over the lease term.

Programme-related intangible assets
Programme-related intangible assets, which include programme
rights1 and residual programme rights, are stated at cost, after
writing off the costs of programmes that are consideredirrecoverable, less accumulated amortisation. The cost andaccumulated amortisation of programme-related intangible
assets are reduced by programmes which are fully written off.

Payments made under finance leases are apportioned between
financing costs and the reduction of the outstanding liability. The
financing costs are allocated to each period so as to produce a
constant periodic rate of interest on the remaining balance ofthe liability.
Use of estimates and judgement – leases
In assessing whether a lease is an operating lease or a financelease, judgement needs to be exercised in determining whether
or not substantially all the risks and rewards of ownership of theleased asset are held by the BBC Group. Given that financeleases are recognised as liabilities, and operating leases are not,this can have a significant effect on the reported financial
position of the BBC. Other key judgements include thedetermination of the commencement date of a lease and theestimate of RPI to be included in the minimum lease payments.
When determining the accounting for a finance lease, the BBC
has assessed whether it has the right to use the leased asset atthe inception of the lease, or whether this right passes at a later
date (‘the commencement date’).
Where a significant site is being redeveloped, occupation may
occur in distinct phases. Consequently, the leased asset andliabilities are recognised based on the proportion of the site
occupied at each commencement date.
Non-current assets held for saleNon-current assets (and disposal groups comprising assets andliabilities) are classified as held for sale if their carrying amountwill be recovered principally through sale rather than continuinguse, 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.

Research and development1 expenditure – internallygenerated intangible assets
Expenditure on research activities is written off in the income
statement when incurred.
Expenditure on development activities is included on thebalance sheet as an asset only if both of the following conditions
are met:it is probable that the asset will generate future economic
benefits; andthe development costs of the asset can be measured reliably.
The assets are measured at cost less accumulated amortisation
and any accumulated impairment losses.
For the UK PSB Group it is generally unlikely that future
economic benefits in the form of cash inflows will be received,
and as a result, other than assets created for use by the businessin delivering its public purposes, development costs are only
capitalised by the BBC Group’s commercial businesses.
Other intangible assets
Other intangible assets acquired separately by the BBC Groupare stated at cost less accumulated amortisation and any
accumulated impairment losses. The identifiable intangible assets
acquired as part of a business combination are shown at fairvalue at the date of acquisition (in accordance with IFRS 3
Business combinations) less accumulated amortisation and any
accumulated impairment losses.

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

1

BBC Full Financial Statements 2013/14

See Glossary for further details

83

Group financial statements for the year ended 31 March 2014

Notes to the accounts
H. Basis of preparation of the financial statements and other accounting policies continued
Accounting policies relevant to section E continued
Amortisation1
Amortisation is charged to the income statement on asystematic basis over the estimated useful lives1 of intangible
assets, from the date that they are available for use, unless such
lives are indefinite. The useful lives and amortisation methods
for each major class of intangible asset are as follows:programme rights and residual programme rights – charged
to the income statement to match the average revenue
profile of the programme genre over the estimated average
marketable life, generally between 2 and 10 years; andother intangibles:
Lonely Planet masthead
UKTV carrier agreements

Straight line
Straight line

Software
Other

Straight line
Straight line

20 years
unexpired termof agreement
2 – 5 years
3 – 8 years

Amortisation methods, useful lives and residual values arereviewed at each balance sheet date and adjusted if appropriate.
Impairment1: Non-financial assets
At each balance sheet date, the BBC Group reviews the carrying
amount (net amount held on the balance sheet) of those assetsthat are subject to amortisation to determine whether there isan indication that any of those assets has suffered an impairment
loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of any
impairment loss.

Goodwill1
Goodwill is recorded in the balance sheet as the difference
between the fair value of the consideration transferred by the
BBC and the recognised amount of non-controlling interests inthe acquiree compared to the fair value of the identifiable assets
and liabilities acquired. These are all measured at the date ofacquisition. Where the consideration is less than the net assets
acquired, the difference is recognised immediately in the income
statement
Acquisitions prior to 1 April 2007 – as part of the adoption of
IFRS, in accordance with IFRS 1 First-time adoption of IFRS, theGroup 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 arising on the acquisition of associates and joint
ventures is included in the carrying amount of the joint venture
or associate and is tested for impairment as part of the overallbalance.
Subsequent measurement of separately recognised goodwill– goodwill is tested annually for impairment and is measured atcost less any accumulated impairment losses. For the purposesof impairment testing the goodwill is allocated to cashgenerating units on the basis of those expected to benefit fromthe relevant business combination.

For goodwill the recoverable amount is estimated each year at
the same time.
The recoverable amount of an asset is the higher of fair valueless costs to sell and value in use. For the purposes of
impairment testing, assets are grouped at the lowest level atwhich they generate separately identifiable cash flows (cashgenerating units). In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of thetime value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
An impairment loss is recognised in the income statement for
the amount by which the asset’s carrying amount exceeds its
recoverable amount. Where a cash-generating unit is impaired
the impairment loss will first be allocated to reduce goodwill andthen 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 isreversed if there has been a change in the estimates used todetermine the recoverable amount. An impairment loss isreversed 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 noimpairment loss has been recognised.

84



1

See Glossary for further details

BBC Full Financial Statements 2013/14

Accounting policies relevant to section F

Accounting policies relevant to section G

Trade and other receivables
Trade receivables are recognised initially at fair value andsubsequently measured at fair value less an allowance for
estimated impairment. The allowance is based on objective
evidence that the BBC Group will not be able to recover allamounts due.

Taxation
The tax charge for the period comprises both tax currently
payable and deferred tax1. Taxation is recognised in the income
statement except to the extent that it relates to items
recognised directly in reserves, in which case it is recognised inreserves.

Changes in the carrying amount of the allowance are recognisedin the income statement.

Current tax is the expected tax payable for the year, using tax
rates that are enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect ofprevious years. In respect of tax currently payable:

Trade and other payables
Trade and other payables are recognised initially at fair value andsubsequently measured at amortised cost1 using the effective
interest method.
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 thosenecessarily taking a substantial period of time to get ready forbroadcast are a small proportion of overall programme
investment. Any borrowing costs that could be attributed tothose programmes are not significant and, therefore, noborrowing costs are capitalised.
All finance income and other borrowing costs are recognised inincome and expense in the period in which they are incurred.
Use of estimates and judgements – provisions
Judgement and estimation techniques are employed in thecalculation of the best estimate of the amount required to settle
obligations, including determining how likely it is that
expenditure will be required by the BBC. This can be very
complex, especially when there is a wide range of possible
outcomes.
The BBC Group recognises decommissioning liabilities as part ofthe initial cost of the asset, discounted to present value. The
Group reassesses whether there has been a change in thisliability based on the facts and circumstances at each balance
sheet date.

the BBC (UK PSB Group, BBC World Service and BBC
Monitoring) is not liable to corporation tax on any surplus
licence fee income or grants received from Government
departments, however, it is fully liable for corporation tax on
capital gains and on all its other external income. Expenditureon capital assets is not eligible for capital allowances giving
rise to temporary differences that would lead to deferred tax
assets or liabilities. Movements of fair value adjustments in
the income statement give rise to deferred tax balances.
the BBC’s commercial subsidiaries are liable for corporation
tax based on taxable profit for the year.
Deferred tax is provided using the balance sheet liability method
on any temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and theamounts 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 the balance sheet
date.
Deferred tax assets and liabilities are disclosed net to the extent
that they relate to taxes levied by the same authority and the
BBC Group has the right of offset.
Financial instruments
The BBC Group holds various derivative1 and non-derivative
financial instruments (including assets such as trade investments
and liabilities such as borrowings). The accounting policy for the
major categories of financial instruments is set out below.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and calldeposits with maturities of less than three months. Cash andcash equivalents also includes licence fee funds collected onbehalf of HM Treasury, which are excluded from the Group’s
net funds and in respect of which a separate creditor isrecognised.

1

BBC Full Financial Statements 2013/14

See Glossary for further details

85

Group financial statements for the year ended 31 March 2014

Notes to the accounts
H. Basis of preparation of the financial statements and other accounting policies continued
Accounting policies relevant to section G continued
Derivative financial instruments
The BBC Group does not enter into speculative derivative
contracts, however, some derivative financial instruments areused to manage the BBC’s exposure to fluctuations in interest
rates (interest rate swaps1, caps1 and collars1) and foreign
currency exchange rates (foreign currency forwards contracts1
and currency options).
Derivative financial instruments, excluding derivatives held as
qualifying hedges, are initially recognised at fair value and aresubsequently remeasured to fair value at the balance sheet datewith movements recorded in the income statement.
The fair value of interest rate swaps, caps and collars is theestimated amount that the BBC Group would receive or pay toterminate the swap, cap or collar at the balance sheet date,taking into account current interest rates, the current
creditworthiness of swap, cap or collar counterparties and thecreditworthiness of the BBC.
The fair value of foreign currency forward contract rates isdetermined using forward exchange rates at the balance sheetdate.
Put option1
Equity put options held by non-controlling interest holders arerecognised as financial liabilities at the present value of the fairvalue of amounts payable on their exercise. The Group
continues to recognise non-controlling interests in respect ofthese equity investments where the risks and rewards ofownership are deemed to have been retained by the noncontrolling interest holders.

Impairment of financial assets
Financial assets are assessed at each balance sheet date todetermine whether there is any objective evidence ofimpairment. Factors considered in determining whether there is
objective evidence of an impairment include significant financial
difficulty of the counterparty and breach of contract. Individuallysignificant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessedcollectively in groups that share similar credit risk characteristics.
The amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimatedfuture cash flows discounted at the financial asset’s original
effective interest rate1. All impairment losses are recognised in
the income statement.
Reserves
The operating reserve is the accumulated surplus/deficit to date.
Available for sale reserve includes fair value gains and losses onavailable for sale financial assets.
The hedging reserve is used to record the effective portion of
the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet
occurred (net of tax).
The translation reserve is used to record exchange differences
arising from the retranslation of the net assets and results ofoverseas subsidiaries.

Hedge accounting
The BBC Group designates certain derivatives as cash flow
hedges by documenting the relationship between the hedging
instrument and the hedged item along with the risk management
objectives and its strategy for undertaking various hedgetransactions. Where the hedge is deemed to have beeneffective, the effective portion of any changes in the fair value ofthe derivatives that are designated in the hedge are recognisedin other comprehensive income. Any ineffective portion isrecognised immediately in the income statement.
Embedded derivatives
These derivatives are found embedded within other financial
instruments or other host contracts. Once identified they aretreated as derivatives in their own right if their risks andcharacteristics are not closely related to those of the hostcontract and the host contract is not carried at fair value.
Embedded derivatives are carried on the balance sheet at fairvalue from inception1 of the host contract. Unrealised changes1
in fair value are recognised as gains/losses within the income
statement during the period in which they arise.

1

86



See Glossary for further details

BBC Full Financial Statements 2013/14

New standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied inthese financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):IFRS 9IFRS 10IFRS 11IFRS 12IFRS 10 and 12 and IAS 27 (amendments)
IFRS 15
IAS 16 (amendments)
IAS 27 (amendments)
IAS 28
IAS 32 (amendments)
IAS 36 (amendments)
IAS 38 (amendments)
IAS 39 (amendments)

Financial instruments
Consolidated financial statements
Joint arrangements
Disclosures of interests in other entities
Investment entities
Revenue from contracts with customers
Property, plant and equipment
Separate financial statements (2011)
Investment in associates and joint ventures (2011)
Offsetting financial assets and liabilities
Recoverable amount disclosures for non-financial assets
Intangible assets
Novation of derivatives and continuation of hedge accounting

The directors do not expect that the adoption of the Standards and Interpretations listed above would have a material impact on thefinancial statements of the Group in future periods, with the exception of IFRS 9 and IFRS 15.
IFRS 9 is likely to impact both the measurement and disclosures of financial instruments but the standard has already been revised
twice since the first version was introduced in 2009. Entities can effectively choose which parts of IFRS 9 they apply, meaning they canchoose to apply: (1) the classification and measurement requirements for financial assets, (2) the classification and measurement
requirements for both financial assets and financial liabilities, or (3) the classification and measurement requirements and the hedge
accounting requirements. In addition, entities may choose to apply only the requirements for presenting in other comprehensive
income the ‘own credit’ gains or losses on financial liabilities designated under the fair value option without the early application of theother requirements of IFRS 9. The IASB currently has an active project to make limited amendments to the classification andmeasurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting.
Until the project is finalised, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 on the Group financial
statements in future periods.
IFRS 15 will impact revenue recognition, in particular royalty based income.

BBC Full Financial Statements 2013/14

87

Group financial statements for the year ended 31 March 2014

Glossary
With the aim of improving comprehension, the table below explains the financial terms used within the financial statements:
Note

Term

Definition

C6

Related parties

C7

Pension Scheme

C7.2

Current service cost

C7.2

Net finance income/(cost)

C7.2

Remeasurements

C7.2

Past service cost

C8.1

IAS 19 valuation

D2

Assets available for trading

D4

Finance lease

D6

Operating lease

E2

Cash Generating Units (CGU)

E4

Joint venture

E4
E4

Provisions in relation to associates
and joint ventures
Associate

F1

DCMS borrowings

F2

Public Services

F9Interest cost on pension
plan liabilities

Related parties include key management personnel, their immediate families andexternal entities controlled by them.
On retirement, members of the BBC’s defined benefit Pension Scheme are paid
their pensions from a fund which is kept separate from the Group to which the
BBC makes cash contributions.
The current service cost is the underlying cost to the BBC of pension rights
earned by employees during the year.
Net finance income/(cost) is the difference between the expected return on
assets and the interest liabilities.
Remeasurements which arise from actual performance being different from thatpredicted give rise to gains and losses in the statement of comprehensive income.
The past service charges arise from changes to the terms and conditions relating
to member’s defined retirement benefits, resulting in a credit for years of service
already given.
The IAS 19 valuation takes assets at their market value and discounts the accrued
liabilities by reference to the discount rate of an AA rated corporate bond.
Assets available for trading are interests in entities in which the BBC has neither
control nor a significant interest.
A finance lease is a lease where the lessee has substantially taken on the risks andrewards of ownership and operating the asset. As such, both the asset and future
liability are recognised on the balance sheet.
An operating lease is a lease where the lessee has not taken on the risks andrewards of owning and operating the asset. The lessee (the BBC) is hiring rather
than buying an asset.
Cash generating units are the smallest group of assets that can independently
generate cash flows.
A joint venture is where the BBC Group has joint control over an entity withanother partner(s).
Where the BBC has an obligation to settle an individual net liability of a joint
venture, this is reflected within provisions.
An associate is an entity that the BBC Group has significant influence over,
but that does not meet the definition of a joint venture or subsidiary.
The DCMS definition of ‘borrowings’ excludes leases which would be classified
as operating under UK GAAP, but which are classified as finance leases under
IFRS at the date of transition to IFRS. These leases are therefore excluded whencomparing net debt/funds to DCMS borrowing ceilings.
Public Services in this context represent the UK PSB Group (excluding Centre House
Productions Limited – see note G4.2), BBC World Service and BBC Monitoring.
The interest cost on pension plan liabilities represents the increase during theyear in the value of the plan liabilities because the benefits are one year closer
to settlement.

88BBC Full Financial Statements 2013/14

Note

Term

Definition

G2.1

Deferred tax

G3.1

Plan liability

G3.1

Changes in assumptions
underlying plan liabilities

G3.2

Remeasurements on plan assets

G3.4

Gains and losses

G3.6

Discount rate

G3.7

Maturity

G4.1

Credit risk

G4.2

Defeasance deposits

G4.3

Put option

G4.3
G4.3
G5.3

Strike price
Exercise
Subsidiary undertakings

Deferred tax is corporation tax which is expected to be payable (or receivable)in the future as a result of differences between the carrying amounts of assets
and liabilities, for financial reporting purposes, and the corresponding tax bases
used to calculate the corporation tax currently payable.
The plan liability represents the expected amount of money that will be needed in
the future to pay employees for their current and future service to the company.
Changes in assumptions underlying plan liabilities represent the changes in
estimates used to value the future liability. Key assumptions include the discountrate and mortality.
Remeasurements on plan assets represent the amount by which the assets heldby the scheme (such as equities, bonds and property) have performed better orworse than the expected prior year value.
These gains and losses arise from actual performance being different from thatpredicted. Only defined benefit schemes give rise to gains and losses in thestatement of comprehensive income.
The discount rate for the IAS 19 valuation is taken as the rate for an AA rated
corporate bond.
The maturity of a scheme provides an indication of the cash requirements of thescheme and the likely attitude of the Trustees to risk within their investment
policy. The more mature a scheme, the more likely that Trustees will favour low
risk investments.
Credit risk is the risk of financial loss to the Group if a customer or counterparty
to a financial instrument fails to meet its contractual obligation.
Defeasance deposits are amounts deposited with banks which earn the exact
amount of interest needed to cover the capital repayment and interest elementof each of the finance leases. The defeasance deposits are ring-fenced andtherefore cannot be used for any transactions apart from the agreed capital andinterest payments.
A put option is a contract that gives the holder the right, but not the obligation,
to sell an asset at a specific point in time.
The strike price is the price the option will sell at.
Exercise is the point at which the rights in the option are implemented or acted upon.
Subsidiary undertakings are businesses the BBC controls.

BBC Full Financial Statements 2013/14

89

Group financial statements for the year ended 31 March 2014

Glossary
The following terms are used within the section H. Basis of preparation of the financial statements and other accounting policies:
SectionTerm

Definition

Going concern

The Directors are required to make a statement that the BBC is a going concern
which means it can meet its debts and continue trading for a period of at least
12 months from the date on which these financial statements were signed.
A subsidiary is an entity that is directly or indirectly controlled by the Group.
Control exists where the Group has the power to govern the financial andoperating policies of the entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that are currently exercisable
or convertible are taken into account.
An associate is an entity other than a subsidiary or joint venture, over which theGroup has significant influence. Significant influence is the power to participate
in the financial and operating decisions of an entity but is not control or joint
control over those policies.
A joint venture is an entity in which the Group holds an interest under acontractual arrangement where the Group and one or more other parties
undertake an economic activity that is subject to joint control.
As these financial statements are prepared in sterling the BBC’s foreign currencytransactions and balances must be translated at appropriate exchange rates, into
sterling. This means that variations in exchange rates can cause the valuation of
investments to fluctuate even when there has been no change in the health of theunderlying business.
Originated programmes are programmes produced internally by the BBC Groupfor broadcasting and/or sale of the rights to broadcast.
A commissioned programme is where an agreement has been made for the
programme to be produced for broadcast.
A finance lease is a lease that transfers substantially all the risks and rewards ofownership of the leased asset to the lessee, which is accounted for as if it werean asset of the lessee. As such, both the asset and future liability are recognisedon the balance sheet.
An operating lease is a lease in which the lessee has not taken on substantially all
the risks and rewards of ownership of the leased asset.
Programme rights are rights held by the BBC that permit a future transmissionof a particular programme or event.
Useful economic life is the period over which the BBC Group will be utilising
the asset.
Research and development costs are incurred to explore ideas for new
programmes or assets, such as the BBC iPlayer. Research costs are where theideas are generated, some of which are then developed further into a plan ordesign where the costs are then categorised as development.

Subsidiary

Associate

Joint venture
Foreign currency transactions

B

Originated programmes

B

Commissioned programmeD

Finance lease

D

Operating lease

E

Programme rights

E

Useful economic lifeE

Research and development

90



BBC Full Financial Statements 2013/14

Section

Term

Definition

E

Amortisation

E

Impairment

E

Fair value

E

GoodwillF

Amortised costG

Deferred tax

G

DerivativeG

Forward exchange contracts

GInterest rate caps

GInterest rate collars

GInterest rate swaps

G

Put option

G

Inception

G

Unrealised changes

G

Effective interest rate

Amortisation is the reduction reflected in the carrying value of the asset as aconsequence of the regular use of that asset by the organisation.
An impairment occurs when the carrying value of an asset is higher than theamount that is recoverable from its use or sale.
The fair value of an asset is the amount for which the asset could be exchanged
between knowledgeable, willing parties in an arm’s length transaction.
Goodwill is the difference between the value paid for a business and the fair valueof its net assets. It represents the premium the purchaser is prepared to pay forthe business.
Consideration, in this context, is the monetary value transferred in exchange forthe share in ownership of another entity.
Where the BBC does not own an entity outright, the other shareholders are
known/disclosed as non-controlling interests.
Amortised cost is the initial value of the transaction that has been amended for
subsequent payments, the time value of money and any impairment that may
be required.
Deferred tax is corporation tax which is expected to be payable (or receivable)in the future as a result of differences between the carrying amounts of assets
and liabilities, for financial reporting purposes, and the corresponding tax bases
used to calculate the corporation tax currently payable.
A derivative is an asset or liability that is dependent on, or derives its value from,another asset or liability and is to be settled in the future.
Under forward exchange contracts you buy or sell a currency at a fixed exchange
rate with delivery made on a given 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, whilst still allowing the benefit of falling interest
rates.
Interest rate collars are the same as interest rate caps except that there is also
a lower limit set to the floating interest rate.
Interest rate swaps effectively swap a floating rate loan into a fixed rate loan,
or vice versa.
A put option issued by the BBC provides the holder the rights, but not the
obligation to require the BBC to buy shares at a future date and price determinedby the option agreement.
Inception is the point at which a contract is confirmed, this is normally the point
at which the contract is signed.
Unrealised changes are those changes that occur to the value of the embedded
derivative prior to the point at which the derivative is exercised.
An effective interest rate is the rate used to discount future cash flows over thelife of the contract back to present value.

BBC Full Financial Statements 2013/14

91

92



BBC Full Financial Statements 2013/14

Copyright credits
Front cover/Back coverBirdsong – BBC/Working Title
Page 02
Ambassadors – BBC/Big Talk
Page 05
My Life: Race for Rio – BBC/CTVC/Asim Ali
Page 07
Line of Duty – BBC/World Productions
Page 07
Radio 5 live Sport – Graham McMillan
Page 13
Peaky Blinders – BAFTA/Richard Kendal

Designed by Fishburn™
thisisfishburn.com

British Broadcasting Corporation
Broadcasting House
London W1A 1AA
bbc.co.uk© BBC 2014