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"ifrs-full:DividendsPaidClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-471": { "value": "709000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestPaidClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-472": { "value": "755000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestPaidClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-473": { "value": "513000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RepaymentsOfBorrowingsClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-474": { "value": "1374000000", 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"2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-478": { "value": "659000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:PaymentsOfLeaseLiabilitiesClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-479": { "value": "17000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:CashFlowsFromDerivativesRelatedToNetDebtClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-480": { "value": "29000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:CashFlowsFromDerivativesRelatedToNetDebtClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-481": { "value": "-0", "decimals": -6, "dimensions": { "concept": "btgroupplc:ChangesInOwnershipInterestsInSubsidiariesClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-482": { "value": "86000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:ChangesInOwnershipInterestsInSubsidiariesClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-483": { "value": "5000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:ProceedsFromIssuingShares", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-484": { "value": "13000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:ProceedsFromIssuingShares", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-485": { "value": "138000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:PaymentsToAcquireOrRedeemEntitysShares", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-486": { "value": "184000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:PaymentsToAcquireOrRedeemEntitysShares", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-487": { "value": "11000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:IncreaseDecreaseInAmountsOwedToJointVenturesClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-488": { "value": "0", "decimals": -6, "dimensions": { "concept": "btgroupplc:IncreaseDecreaseInAmountsOwedToJointVenturesClassifiedAsFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-489": { "value": "-636000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashFlowsFromUsedInFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-490": { "value": "-2558000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashFlowsFromUsedInFinancingActivities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-491": { "value": "-308000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalentsBeforeEffectOfExchangeRateChanges", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-492": { "value": "-208000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalentsBeforeEffectOfExchangeRateChanges", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-493": { "value": "692000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-494": { "value": "896000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-495": { "value": "-308000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalentsBeforeEffectOfExchangeRateChanges", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-496": { "value": "-208000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalentsBeforeEffectOfExchangeRateChanges", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-497": { "value": "-3000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:EffectOfExchangeRateChangesOnCashAndCashEquivalents", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-498": { "value": "4000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:EffectOfExchangeRateChangesOnCashAndCashEquivalents", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-499": { "value": "381000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-500": { "value": "692000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-6": { "value": "994000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:PensionDeficitPaymentIncludedInAdjustmentsForOtherLiabilities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-7": { "value": "1121000000", "decimals": -6, "dimensions": { "concept": "btgroupplc:PensionDeficitPaymentIncludedInAdjustmentsForOtherLiabilities", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-8": { "value": "5056000000", "decimals": -6, "dimensions": { "concept": 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1. Basis of preparation
Preparation of the financial statements
The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards
and with the requirements of the Companies Act 2006.
The consolidated financial statements are prepared on a going
concern basis.
This assessment is consistent with the assessment of our viability,
as set out on pages 81 to 82, in estimating the financial impact of
a severe but plausible outcome for each risk, both individually, in
combination and through stochastic risk modelling. This stress
testing confirmed that existing projected cash flows and cash
management activities provide us with adequate headroom over
the going concern assessment period.
Having assessed the principal and emerging risks, the directors
considered it appropriate to adopt the going concern basis of
accounting when preparing the group and parent company
financial statements. This assessment covers the period to May
2024, which is consistent with the FRC guidance. When reaching
this conclusion, the directors took into account the group\u2019s and
parent company\u2019s overall financial position (including trading
results and ability to repay term debt as it matures without
recourse to refinancing) and the exposure to principal risks.
In preparing the financial statements, the directors have
considered the impact of climate change, particularly in
the context of the risks identified in the TCFD disclosure on
pages 71 to 80 this year. There has been no material impact
identified on the financial reporting judgements and estimates.
These financial statements consolidate BT Group plc, the parent
company, and its subsidiaries (together the \u2018group\u2019, \u2018us\u2019, \u2018we\u2019 or \u2018our\u2019).
The consolidated financial statements are prepared on the
historical cost basis, except for certain financial and equity
instruments that have been measured at fair value. The
consolidated financial statements are presented in sterling,
the functional currency of BT Group plc.
These financial statements cover the financial year from 1 April
2022 to 31 March 2023 (\u2018FY23\u2019), with comparative figures for the
financial year from 1 April 2021 to 31 March 2022 (\u2018FY22\u2019).
New and amended accounting standards effective
during the year
The following amended standards were effective during the year:
Amendments to IAS 37 for onerous contracts
The group adopted Onerous Contracts \u2013 Costs of Fulfilling a
Contract (Amendments to IAS 37) from 1 April 2022. This resulted
in a change in accounting policy for performing an onerous
contracts assessment. Previously, only incremental costs to fulfil
a contract were included when determining whether that contract
was onerous. The revised policy is to include both incremental
costs and an allocation of other costs directly attributable to the
fulfilment of a contract.
The amendments apply prospectively to contracts existing at
the date when the amendments are first applied. We analysed
contracts existing at 1 April 2022 and identified the cumulative
effect of applying the revised policy to be a \u00a312m increase in the
onerous contract provision. This has been recorded as an opening
balance adjustment to retained earnings. Comparative figures
have not been restated.
IFRS Interpretations Committee agenda decisions
The IFRS Interpretations Committee (IFRIC) periodically issues
agenda decisions which explain and clarify how to apply the
principles and requirements of IFRS standards. Agenda decisions are
authoritative and may require the group to revise accounting policies
or practice to align with the interpretations set out in the decision.
We regularly review IFRIC updates and assess the impact
of agenda decisions. The following were identified as being
potentially significant to the group:
Demand Deposits with Restrictions on Use arising from a
Contract with a Third Party
In its agenda decision, the IFRIC concluded that restrictions on the
use of demand deposits arising from a contract with a third party
do not result in the deposits being declassified as cash and cash
equivalents, unless those restrictions change the nature of the
deposit in a way such that it would no longer meet the definition
of cash in IAS 7. Application of this agenda decision to deposits
held by the group identified one bank account with restrictions
on use that nonetheless meets the IAS 7 definition of cash. This
bank account was subsequently recognised on the group balance
sheet and is now reflected in the cash and cash equivalents balance
presented throughout the financial statements. An equal and
opposite amount was recognised in trade payables.
The balance on this account was \u00a396m at 31 March 2023 and
\u00a3148m at 31 March 2022. Prior period comparatives have not been
restated as the impact is not considered material, having regard
to the fact that a corresponding liability is recognised within trade
payables and therefore has no bearing on the group\u2019s net assets.
The impact on the cash flow statement is not considered to be
material and recognition of the balance is presented as an increase
in trade and other payables. Cash flows relating to the account
which have already been accounted for within normalised cash flow
(including its initial recognition) will be excluded from this metric.
Other
The following changes have not had a significant impact on our
consolidated financial statements:
\u2013 Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
\u2013 Annual Improvements to IFRS Standards 2018-2020
\u2013 Reference to the Conceptual Framework \u2013 Amendments to IFRS 3
New and amended accounting standards that have been
issued but are not yet effective
The following new or amended standards and interpretations are
applicable in future periods:
IFRS 17 Insurance Contracts
BT adopted IFRS 17 with retrospective application on 1 April 2023.
It is therefore effective from FY24 onwards.
The standard establishes principles for the recognition,
measurement, presentation and disclosure of insurance contracts.
The measurement method for insurance contracts required by
IFRS 17 is a probability weighted discounted cash flow model,
including a best estimate and an adjustment for non-financial risk
calculated for groups of similar contracts.
IFRS 17 primarily impacts insurance entities, however as it applies
to individual contracts it is possible that non-insurers could
issue contracts that are in scope of the standard such as product
breakdown contracts or warranties.
We have assessed the impact of the standard on the group and
the BT Group plc legal entity, and concluded that its impact is not
material. Contracts in scope of the standard entered into by the
group are restricted to intragroup insurance arrangements, and
the group does not issue external insurance contracts. Contracts
in scope of the standard entered into by the BT Group plc legal
entity are restricted to parent company guarantees, which we have
assessed to have no material impact.
The following are not expected to have a significant impact on the
consolidated financial statements:
\u2013 Classification of Liabilities as Current or Non-current
(Amendments to IAS 1)
\u2013 Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)
\u2013 Definition of Accounting Estimate (Amendments to IAS 8)
\u2013 Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
\u2013 Non-Current Liabilities with Covenants (Amendments to IAS 1)
\u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
Presentation of specific items
Our income statement and segmental analysis separately identify
trading results before specific items (\u2018adjusted\u2019). The directors
believe that presentation of our results in this way is relevant to an
understanding of our financial performance, as specific items are
identified by virtue of their size, nature or incidence.
This presentation is consistent with the way that financial
performance is measured by management and reported to the
Board and the Executive Committee and assists in providing a
meaningful analysis of our trading results. In determining whether
an event or transaction is specific, management considers
quantitative as well as qualitative factors such as the frequency or
predictability of occurrence.
Specific items may not be comparable to similarly titled measures
used by other companies. Examples of charges or credits
which meet the above definition include significant business
restructuring programmes such as the current group-wide cost
transformation and modernisation programme, acquisitions
and disposals of businesses and investments, charges or
credits relating to retrospective regulatory matters, property
rationalisation programmes, significant out of period contract
settlements, net interest on our pension obligation, and the impact
of remeasuring deferred tax balances. In the event that other items
meet the criteria, which are applied consistently from year to year,
they are also treated as specific items. Any releases to provisions
originally booked as a specific item are also classified as specific.
Conversely, when a reversal occurs in relation to a prior year item
not classified as specific, the reversal is not classified as specific in
the current year.
Specific items for the current and prior year are disclosed in note 9.
2. Critical & key accounting estimates and
significant judgements
The preparation of financial statements in conformity with IFRS
requires the use of accounting estimates and assumptions. It also
requires management to exercise its judgement in the process
of applying our accounting policies. We continually evaluate
our estimates, assumptions and judgements based on available
information and experience. As the use of estimates is inherent in
financial reporting, actual results could differ from these estimates.
Our critical accounting estimates are those estimates that carry
a significant risk of resulting in a material adjustment to the
carrying amount of assets and liabilities within the next financial
year. We also make other key estimates when preparing the
financial statements, which, while not meeting the definition of a
critical estimate, involve a higher degree of complexity and can
reasonably be expected to be of relevance to a user of the financial
statements. Management has discussed its critical and other key
accounting estimates and associated disclosures with the Audit
and Risk Committee.
Significant judgements are those made by management in
applying our significant accounting policies that have a material
impact on the amounts presented in the financial statements.
We may exercise significant judgement in our critical and key
accounting estimates.
Our critical and key accounting estimates and significant
judgements are described in the following notes to the financial
statements. They can be identified by the following symbol
.
Note
Critical
estimate
Key
estimate
Significant
judgement
10. Current and deferred
income tax \u00fc \u00fc
13. Goodwill impairment \u00fc \u00fc
15. Reasonable certainty and
determination of lease terms \u00fc
19. Contingent liabilities
associated with litigation \u00fc \u00fc
19. Other provisions and
contingent liabilities \u00fc \u00fc
20. Valuation of pension assets
and liabilities \u00fc \u00fc
25. BT Sport joint venture \u00fc \u00fc
3. Significant accounting policies that apply to the
overall financial statements
The significant accounting policies applied in the preparation of
our consolidated financial statements are set out below. Other
significant accounting policies applicable to a particular area are
disclosed in the most relevant note. They can be identified by the
following symbol
.
We have applied all policies consistently to all the years presented,
unless otherwise stated.
Basis of consolidation
The group financial statements consolidate the financial
statements of BT Group plc and its subsidiaries, and include its
share of the results of associates and joint ventures using the
equity method of accounting. The group recognises its direct
rights to (and its share of) jointly held assets, liabilities, revenues
and expenses of joint operations under the appropriate headings
in the consolidated financial statements.
All business combinations are accounted for using the acquisition
method regardless of whether equity instruments or other assets
are acquired.
A subsidiary is an entity that is controlled by another entity, known
as the parent or investor. An investor controls an investee when
the investor is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee.
Non-controlling interests in the net assets of consolidated
subsidiaries, which consist of the amounts of those interests at
the date of the original business combination and non-controlling
share of changes in equity since the date of the combination, are
not material to the group\u2019s financial statements.
The results of subsidiaries acquired or disposed of during the year
are consolidated from and up to the date of change of control.
Where necessary, accounting policies of subsidiaries have been
aligned with the policies adopted by the group. All intra-group
transactions including any gains or losses, balances, income or
expenses are eliminated on consolidation.
When the group loses control of a subsidiary, the profit or loss on
disposal is calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value
of any retained interest and (ii) the previous carrying amount of
the assets (including goodwill), and liabilities of the subsidiary
and any non-controlling interests. The profit or loss on disposal
is recognised as a specific item.
Associates are those entities in which the group has significant
influence, but not control or joint control, over the financial and
operating policies.
A joint venture is an arrangement in which the group has joint
control, whereby the group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for
its liabilities. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about
the activities that significantly affect the returns of the arrangement
require the unanimous consent of the parties sharing control.
Interests in associates and joint ventures are initially recognised
at cost (including transaction costs) except where they relate
to a retained non-controlling interest in a former subsidiary,
which is initially recognised at a deemed cost being the fair value
of the retained interest. Subsequent to initial recognition, the
consolidated financial statements include the group\u2019s share of the
profit or loss and other comprehensive income of equity-accounted
investees, until the date on which significant influence or joint
control ceases.
Inventories
Network maintenance equipment and equipment to be sold to
customers are stated at the lower of cost or net realisable value,
taking into account expected revenue from the sale of packages
comprising a mobile handset and a subscription. Cost corresponds
to purchase or production cost determined by either the first in
first out (FIFO) or average cost method.
Government grants
Government grants are recognised when there is reasonable
assurance that the conditions associated with the grants have
been complied with and the grants will be received.
Grants for the purchase or production of property, plant and
equipment are deducted from the cost of the related assets and
reduce future depreciation expense accordingly. Grants for the
reimbursement of operating expenditure are deducted from the
related category of costs in the income statement. Estimates and
judgements applied in accounting for government grants received
in respect of Building Digital UK (BDUK) and other rural superfast
broadband contracts are described in note 14.
Once a government grant is recognised, any related deferred
income is treated in accordance with IAS 20 \u2018Accounting for
Government Grants and Disclosure of Government Assistance\u2019.
Foreign currencies
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transaction. The functional currency of the group is sterling.
Foreign exchange gains and losses resulting from the settlement
of transactions and the translation of monetary assets and
liabilities denominated in foreign currencies at period end
exchange rates are recognised in the income statement line which
most appropriately reflects the nature of the item or transaction.
On consolidation, assets and liabilities of foreign undertakings are
translated into sterling at year end exchange rates. The results
of foreign undertakings are translated into sterling at the rates
prevailing on the transaction dates. Foreign exchange differences
arising on the retranslation of foreign undertakings are recognised
directly in a separate component of equity, the translation reserve.
In the event of the disposal of an undertaking with assets and
liabilities denominated in a foreign currency, the cumulative
translation difference associated with the undertaking in the
translation reserve is charged or credited to the gain or loss on
disposal recognised in the income statement.
Research and development
Research expenditure is recognised in the income statement
in the period in which it is incurred. Development expenditure,
including the cost of internally developed software, is recognised
in the income statement in the period in which it is incurred unless
it is probable that economic benefits will flow to the group from
the asset being developed, the cost of the asset can be reliably
measured and technical feasibility can be demonstrated, in which
case it is capitalised as an intangible asset on the balance sheet.
Capitalisation ceases when the asset being developed is ready for
use. Research and development costs include direct and indirect
labour, materials and directly attributable overheads.
Termination benefits
Termination benefits (leaver costs) are payable when employment is
terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits.
We recognise termination benefits when they are demonstrably
committed to the affected employees leaving the group.
Significant accounting policies that apply to segment information Operating and reportable segments Our operating segments are reported based on financial information provided to the Executive Committee, which is the key management committee and represents the \u2018chief operating decision maker\u2019. Our organisational structure reflects the different customer groups to which we provide communications products and services via our customer-facing units (CFUs). The CFUs are our reportable segments and generate substantially all of our revenue. With effect from 1 January 2023 we formed the new Business unit, but its components, Global and Enterprise, continued to be managed separately and reported separately to the Executive Committee. At 31 March 2023 the group had four CFUs: Consumer, Enterprise, Global and Openreach. From 1 April 2023 Business will be a single unit and financial information for this unit will be provided to the Executive Committee on a consolidated basis only. From FY24 our CFUs will be Business, Consumer and Openreach. The CFUs are supported by technology units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management. TUs and CUs are not reportable segments as they did not meet the quantitative thresholds as set out in IFRS 8 \u2018Operating Segments\u2019 for any of the years presented. We aggregate the remaining operations and include within the \u2018Other\u2019 category to reconcile to the consolidated results of the group. The \u2018Other\u2019 category includes unallocated TU costs and our CUs. Allocation of certain items to segments Provisions for the settlement of significant legal, commercial and regulatory disputes, which are negotiated at a group level, are initially recorded in the \u2018Other\u2019 segment. On resolution of the dispute, the full impact is recognised in the results of the relevant CFU and offset in the group results through the utilisation of the provision previously charged to the \u2018Other\u2019 segment. Settlements which are particularly significant or cover more than one financial year may fall within the definition of specific items as detailed in note 9. The costs incurred by TUs and CUs are recharged to the CFUs to reflect the services provided to them. Depreciation and amortisation incurred by TUs in relation to the networks and systems they manage and operate on behalf of the CFUs is allocated to the CFUs based on their respective utilisation. Capital expenditure incurred by TUs for specific projects undertaken on behalf of the CFUs is allocated based on the value of the directly attributable expenditure incurred. Where projects are not directly attributable to a particular CFU, capital expenditure is allocated between them based on the proportion of estimated future economic benefits. Specific items are detailed in note 9 and are not allocated to the reportable segments as this reflects how they are reported to the Executive Committee. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the group. Measuring segment performance Performance of each reportable segment is measured based on adjusted EBITDA. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. Adjusted EBITDA is considered to be a useful measure of the operating performance of the CFUs because it approximates the underlying operating cash flow by eliminating depreciation and amortisation and also provides a meaningful analysis of trading performance by excluding specific items, which are disclosed separately by virtue of their size, nature or incidence. We also increasingly track adjusted operating profit which reflects the growing depreciation expense arising from our elevated network investment. Revenue recognition Our revenue recognition policy is set out in Note 5. Internal revenue and costs Most of our internal trading relates to Openreach and arises on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the other CFUs, including the use of BT Ireland\u2019s network. This occurs both directly, and also indirectly, through TUs which are included within the \u2018Other\u2019 segment. Enterprise internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning services. Internal revenue arising in Consumer relates primarily to employee broadband and wi-fi services. Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the sale of other products and services is agreed between the relevant CFUs and therefore the profitability of CFUs may be impacted by transfer pricing levels. Geographic segmentation The UK is our country of domicile and is where we generate the majority of our revenue from external UK customers. The geographic analysis of revenue is based on the country in which the customer is invoiced. The geographic analysis of non-current assets, which excludes derivative financial instruments, investments, preference shares in joint ventures, retirement benefit schemes in surplus and deferred tax assets, is based on the location of the assets. Significant accounting policies that apply to revenue Revenue from contracts with customers in scope of IFRS 15 Most revenue recognised by the group (excluding Openreach, where most revenue is recognised under the scope of IFRS 16) is in scope of IFRS 15 and is subject to the following revenue recognition policy. On inception of the contract we identify a \u201cperformance obligation\u201d for each of the distinct goods or services we have promised to provide to the customer. The consideration specified in the contract with the customer is allocated to each performance obligation identified based on their relative standalone selling prices, and is recognised as revenue as they are satisfied. The table below summarises the performance obligations we have identified for our major service lines and provides information on the timing of when they are satisfied and the related revenue recognition policy. Also detailed in this note is revenue expected to be recognised in future periods for contracts in place at 31 March 2023 that contain unsatisfied performance obligations. Service line Performance obligations Revenue recognition policy Information and communications technology (ICT) and managed networks Provision of networked IT services, managed network services, and arrangements to design and build software solutions. Performance obligations are identified for each distinct service or deliverable for which the customer has contracted, and are considered to be satisfied over the time period that we deliver these services or deliverables. Commitments to provide hardware to customers that are distinct from the other promises are considered to be satisfied at the point in time that control passes to the customer. Revenue for services is recognised over time using a measure of progress that appropriately reflects the pattern by which the performance obligation is satisfied. For time and materials contracts, revenue is recognised as the service is received by the customer. Where performance obligations exist for the provision of hardware, revenue is recognised at the point in time that the customer obtains control of the promised asset. For long-term fixed price contracts revenue recognition will typically be based on the satisfaction of performance obligations in respect of the achievement of contract milestones and customer acceptance, which is the best measure of progress towards the completion of the performance obligation. Fixed access subscriptions Provision of broadband, TV and fixed telephony services including national and international calls, connections, line rental and calling features. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Installation services are recognised as distinct performance obligations if their relationship with the other services in the contract is purely functional. These are satisfied when the customer benefits from the service. Connection services are not distinct performance obligations and are therefore combined with the associated service performance obligation. Fixed subscription charges are recognised as revenue on a straight-line basis over the period that the services are provided. Upfront charges for non-distinct connection and installation services are deferred as contract liabilities and are recognised as revenue over the same period. Variable charges such as call charges are recognised when the related services are delivered. Where installation activities are distinct performance obligations, revenue is recognised at the point in time that the installation is completed. Mobile subscriptions Provision of mobile postpaid and prepaid services, including voice minutes, SMS and data services. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Subscription fees, consisting primarily of monthly charges for access to internet or voice and data services, are recognised as the service is provided. One-off services such as calls outside of plan and excess data usage are recognised when the service is used. Equipment and other services Provision of equipment and other services, including mobile phone handsets and hardware such as set- top boxes and broadband routers provided as part of customer contracts. Performance obligations are satisfied at the point in time that control passes to the customer. For other services, performance obligations are identified based on the distinct goods and services we have committed to provide. Revenue from equipment sales is recognised at the point in time that control passes to the customer. Where payment is not received in full at the time of the sale, such as with equipment provided as part of mobile and fixed access subscriptions, contract assets are recognised for the amount due from the customer that will be recovered over the contract period. Revenue to be recognised is calculated by reference to the relative standalone selling price of the equipment. For other services, revenue is recognised when the related performance obligations are satisfied, which could be over time, in line with contract milestones, or at a point in time depending on the nature of the service.
We recognise revenue based on the relative standalone selling price of each performance obligation. Determining the standalone
selling price often requires judgement and may be derived from regulated prices, list prices, a cost-plus derived price or the price of
similar products when sold on a standalone basis by BT or a competitor. In some cases it may be appropriate to use the contract price
when this represents a bespoke price that would be the same for a similar customer in a similar circumstance.
The fixed access and mobile subscription arrangements sold by our Consumer business are typically payable in advance, with any
variable or one-off charges billed in arrears. Contracts are largely inflation-linked with price increases recognised when effective.
Payment is received immediately for direct sales of equipment to customers. Where equipment is provided to customers under mobile
and fixed access subscription arrangements, payment for the equipment is received over the course of the contract term. For sales by
our enterprise businesses, invoices are issued in line with contractual terms. Payments received in advance are recognised as contract
liabilities; amounts billed in arrears are recognised as contract assets.
We are applying the practical expedient to recognise revenue \u201cas-invoiced\u201d for certain fixed access and mobile subscription services
revenues. Where we have a right to invoice at an amount that directly corresponds with performance to date, we recognise revenue at
that amount. We have also adopted the practical expedient not to calculate the aggregate amount of the transaction price allocated
to the performance obligations that are unsatisfied for these contracts.
We do not have any material obligations in respect of returns, refunds or warranties. Where we act as an agent in a transaction, such
as insurance services offered, we recognise commission net of directly attributable costs. Where the actual and estimated costs to
completion of the contract exceed the estimated revenue, a loss is recognised immediately.
We exercise judgement in assessing whether the initial set-up, transition and transformation phases of long-term contracts are
distinct from the other services to be delivered under the contract and therefore represent distinct performance obligations. This
determines whether revenue is recognised in the early stages of the contract, or deferred until delivery of the other services promised
in the contract begins.
We recognise immediately the entire estimated loss for a contract when we have evidence that the contract is unprofitable. If these
estimates indicate that any contract will be less profitable than previously forecast, contract assets may have to be written down to
the extent they are no longer considered to be fully recoverable. We perform ongoing profitability reviews of our contracts in order
to determine whether the latest estimates are appropriate. Key factors reviewed include:
\u2013 Transaction volumes or other inputs affecting future revenues which can vary depending on customer requirements, plans, market
position and other factors such as general economic conditions.
\u2013 Our ability to achieve key contract milestones connected with the transition, development, transformation and deployment phases
for customer contracts.
\u2013 The status of commercial relations with customers and the implications for future revenue and cost projections.
\u2013 Our estimates of future staff and third party costs and the degree to which cost savings and efficiencies are deliverable.
Revenue from lease arrangements in scope of IFRS 16
Some consumer broadband and TV products and arrangements to provide external communications providers with exclusive use
of Openreach\u2019s fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16.
At inception of a contract, we determine whether the contract is, or contains, a lease following the accounting policy set out in note
15. Arrangements meeting the definition of a lease in which we act as lessor are classified as operating or finance leases at lease
inception based on an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership
of the underlying asset. If this is the case then the lease is a finance lease; if not, it is an operating lease. For sub-leases, we make this
assessment by reference to the characteristics of the right-of-use asset associated with the head lease rather than the underlying
leased asset.
Income from arrangements classified as operating leases is presented as revenue where it relates to our core operating activities,
for example leases of fixed-line telecommunications infrastructure to external communications providers and leases of devices to
consumer customers as part of fixed access subscription products. Operating lease income from other arrangements is presented
within other operating income (note 6).
We recognise operating lease payments as income on a straight-line basis over the lease term. Any upfront payments received, such as
connection fees, are deferred over the lease term. Determining the lease term is subject to the significant judgements set out in note 15.
Where the contract contains both lease and non-lease components, the transaction price is allocated between the components on
the basis of relative standalone selling price.
Where an arrangement is assessed as a finance lease we derecognise the underlying asset and recognise a receivable equivalent
to the net investment in the lease. Finance lease receivables are presented in note 17. The receivable is measured based on future
payments to be received discounted using the interest rate implicit in the lease, adjusted for any direct costs. Any difference between
the derecognised asset and the finance lease receivable is recognised in the income statement. Where the nature of services delivered
relates to our core operating activities it is presented as revenue. Where it relates to non-core activities it is presented within other
operating income (note 6).
Significant accounting policies that apply to contract assets and liabilities
We recognise contract assets for goods and services for which control has transferred to the customer before we have the right to
bill. These assets mainly relate to mobile handsets provided upfront but paid for over the course of a contract. Contract assets are
reclassified as receivables when the right to payment becomes unconditional and we have billed the customer.
Contract liabilities are recognised when we have received advance payment for goods and services that we have not transferred to the
customer. These primarily relate to fees received for connection and installation services that are not distinct performance obligations.
Where the initial set-up, transition or transformation phase of a long-term contract is considered to be a distinct performance
obligation we recognise a contract asset for any work performed but not billed. Conversely a contract liability is recognised where
these activities are not distinct performance obligations and we receive upfront consideration. In this case eligible costs associated
with delivering these services are capitalised as fulfilment costs, see note 17.
We provide for expected lifetime losses on contract assets following the policy set out in note 17.
Significant accounting policies that apply to specific items Our income statement and segmental analysis separately identify trading results on an adjusted basis, being before specific items. The directors believe that presentation of the group\u2019s results in this way is relevant to an understanding of the group\u2019s financial performance as specific items are those that in management\u2019s judgement need to be disclosed by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing an additional analysis of our reporting trading results. Specific items may not be comparable to similarly titled measures used by other companies. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors. Examples of charges or credits meeting the above definition and which have been presented as specific items in the current and/or prior years include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that items meet the criteria, which are applied consistently from year to year, they are treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. In FY20 we included the impacts of Covid-19 on various balance sheet items as at 31 March 2020 as specific. Any releases to this provision have been released through specific items in subsequent periods. Current and future movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment, will be classified as specific as they are deemed to be related to the divestment of BT Sport operations and linked to the overall fair value of the transaction. Refer to note 25 for further detail. ignificant accounting policies that apply to taxation Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group\u2019s subsidiaries, associates and joint ventures operate and generate taxable income. We evaluate positions taken in tax returns where tax regulation is subject to interpretation, and establish provisions if appropriate based on the amounts likely to be paid to tax authorities. Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of our assets and liabilities and their tax base. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred and current income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it is probable that there will be suitable taxable profits against which the deductible temporary difference can be utilised. Deferred tax balances for which there is a right of offset within the same jurisdiction are presented net on the face of the group balance sheet as permitted by IAS 12, with the exception of deferred tax related to our pension schemes which is disclosed within deferred tax assets. Key accounting estimates and significant judgements made in accounting for taxation We seek to pay tax in accordance with the laws of the countries where we do business. However, in some areas these laws are unclear, and it can take many years to agree an outcome with a tax authority or through litigation. We estimate our tax on country-by-country and issue-by-issue bases. Our key uncertainties are whether our intra-group trading model will be accepted by a particular tax authority; whether intra-group payments are subject to withholding taxes and the deductibility of certain compensation payments made in prior years. We provide for the predicted outcome where an outflow is probable, but the agreed amount can differ materially from our estimates. Approximately 75% by value of the provisions are under active tax authority examination and are therefore likely to be re-estimated or resolved in the coming 12 months. \u00a3104m (FY22: \u00a3194m) is included in current tax liabilities or offset against current tax assets where netting is appropriate. Under a downside case an additional amount of \u00a3174m could be required to be paid. This amount is not provided as we don\u2019t consider this outcome to be probable. Deciding whether to recognise deferred tax assets is judgemental. We only recognise them when we consider it is probable that they can be recovered. In making this judgement we consider evidence such as historical financial performance, future financial plans and trends, the duration of existing customer contracts and whether our intra-group pricing model has been agreed by the relevant tax authority. The value of the group\u2019s income tax assets and liabilities is disclosed on the group balance sheet. The value of the group\u2019s deferred tax assets and liabilities is disclosed below.
Significant accounting policies that apply to intangible assets
We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the
asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill,
over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed.
If the pattern cannot be determined reliably, the straight-line method is used.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets
(including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note.
Acquired intangible assets \u2013 customer relationships and brands
Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at
the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these
relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them.
Telecommunications licences
Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded
at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend
beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences
acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised
cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date.
Computer software
Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed
software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly
associated with the production of internally developed software, including direct and indirect labour costs of development, where
it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical
feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet
these criteria and research costs are expensed as incurred.
Our development costs which give rise to internally developed software include upgrading the network architecture or functionality
and developing service platforms aimed at offering new services to our customers.
Other
Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on
a straight-line basis over their useful economic life or the term of the contract.
Estimated useful economic lives
The estimated useful economic lives assigned to the principal categories of intangible assets are as follows:
\u2013 Computer software 2 to 10 years
\u2013 Telecommunications licences 2 to 20 years
\u2013 Customer relationships and brands 1 to 15 years
Impairment of intangible assets
Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting
date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount
is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash
generating unit and the fair value less costs to dispose.
Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement,
as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a
pro-rata basis against intangible and other assets.
Significant accounting policies that apply to impairment of goodwill
We perform an annual goodwill impairment review.
Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a
result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the
smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of
assets. Our CGUs are deemed to be Consumer, Enterprise and Global.
We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is
allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes.
The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering
a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and
operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year
have been extrapolated using perpetuity growth rates.
Significant judgements and key accounting estimates made in reviewing goodwill for impairment
Determining our CGUs
The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of
assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these
generate independent revenue streams. Our determination of CGUs is unchanged from FY22.
From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review
the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs
into a combined \u2018Consumer\u2019 CGU.
Estimating value in use
Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future
revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in
the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing
management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations.
Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of
the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal
discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for
the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have
not been adjusted.
Significant accounting policies that apply to property, plant and equipment
Our property, plant and equipment is included at historical cost, net of accumulated depreciation, government grants and any
impairment charges. Property, plant and equipment acquired through business combinations is initially recorded at fair value and
subsequently accounted for on the same basis as our existing assets. We derecognise items of property, plant and equipment on
disposal or when no future economic benefits are expected to arise from the continued use of the asset. The difference between the
sale proceeds and the net book value at the date of disposal is recognised in operating costs in the income statement.
Included within the cost of network infrastructure and equipment are direct and indirect labour costs, materials and directly
attributable overheads.
We depreciate property, plant and equipment on a straight-line basis from the time the asset is available for use, to write off the asset\u2019s
cost over the estimated useful life taking into account any expected residual value. Freehold land is not depreciated.
Estimated useful economic lives
The estimated useful lives assigned to principal categories of assets are as follows:
Land and buildings
\u2013 Freehold buildings 14 to 50 years
\u2013 Short-term leasehold improvements Shorter of 10 years or lease term
\u2013 Leasehold land and buildings Shorter of unexpired portion of lease or 40 years
Network infrastructure
Transmission equipment
\u2013 Duct 40 years
\u2013 Cable 3 to 25 years
\u2013 Fibre 5 to 20 years
Exchange equipment 2 to 13 years
Other network equipment 2 to 20 years
Other assets
\u2013 Motor vehicles 2 to 10 years
\u2013 Computers and office equipment 3 to 7 years
Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively.
Network share assets
Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title
remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE was
recognised at fair value within tangible assets, and depreciated in line with policy. Subsequent additions are recorded at cost.
Impairment of property, plant and equipment
We test property, plant and equipment for impairment if events or changes in circumstances (assessed at each reporting date)
indicate that the carrying amount may not be recoverable. When an impairment test is performed, we assess the recoverable amount
by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant asset and the fair
value less costs to dispose. If it is not possible to determine the recoverable amount for the individual asset then we assess impairment
by reference to the relevant cash generating unit as described in note 13.
Building Digital UK (BDUK) government grants
We receive government grants in relation to BDUK and other rural superfast broadband contracts. Where we have achieved certain
service levels, or delivered the network more efficiently than anticipated, we have an obligation to either re-invest or repay grant
funding. Where this is the case, we recognise deferred income in respect of the funding that will be re-invested or repaid, and make
a corresponding adjustment to the carrying amount of the related property, plant and equipment.
Assessing the timing of whether and when we change the estimated take-up assumption is judgemental as it involves considering
information which is not always observable. Our consideration on whether and when to change the base case assumption is dependent
on our expectation of the long-term take-up trend.
Our assessment of how much grant income to defer includes consideration of the difference between the take-up percentage agreed
with the local authority and the likelihood of actual take-up. The value of the government grants deferred is disclosed in note 18.
Significant accounting policies that apply to leases
Identifying whether a lease exists
At inception of a contract, we determine whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to
control the use of an identified asset, for a period of time, in exchange for consideration. In making this assessment, we consider whether:
\u2013 The contract involves the use of an identified asset, either explicitly or implicitly. The asset must be physically distinct or represent
substantially all the capacity of a physically distinct asset. Assets that a supplier has a substantive right to substitute are not
considered distinct.
\u2013 The lessee (either the group, or the group\u2019s customers) has the right to obtain substantially all the economic benefits from the use of
the asset throughout the period of use; and
\u2013 The lessee has the right to direct the use of the asset, in other words, has the decision-making rights that are most relevant to
changing how and for what purpose the asset is used.
Where practicable, and by class of underlying asset, we have elected to account for leases containing a lease component and one or
more non-lease components as a single lease component. Where this election has been taken, it has been applied to the entire asset.
Lessee accounting
We recognise a lease liability and right-of-use asset at the commencement of the lease.
Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using the
group\u2019s incremental borrowing rate.
The lease term is the non-cancellable period of the lease adjusted for the impact of any extension options that we are reasonably
certain that the lessee will exercise, or termination options that we are reasonably certain that the lessee will not exercise.
The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to obtain an
asset of similar value.
Lease payments include:
\u2013 fixed payments
\u2013 variable lease payments that depend on an index or rate
\u2013 amounts expected to be paid under residual value guarantees
\u2013 the exercise price of any purchase options that we are reasonably certain to exercise
\u2013 payments due over optional renewal periods where we are reasonably certain to renew
\u2013 penalties for early termination of the lease where we are reasonably certain to terminate early
Lease liabilities are subsequently measured at amortised cost using the effective interest method. They are remeasured if there is a
change in future lease payments, including changes in the index or rate used to determine those payments, or the amount we expect to
be payable under a residual value guarantee.
We also remeasure lease liabilities where the lease term changes. This occurs when the non-cancellable period of the lease
changes, or on occurrence of a significant event or change in circumstances within the control of the lessee and which changes our
initial assessment in regard to whether the lessee is reasonably certain to exercise extension options or not to exercise termination
options. Where the lease term changes we remeasure the lease liability using the group\u2019s incremental borrowing rate at the date
of reassessment. Where a significant event or change in circumstances does not occur, the lease term remains unchanged and the
carrying amounts of the lease liability and associated right-of-use asset will decline over time.
Right-of-use assets are initially measured at the initial amount of the corresponding lease liabilities, adjusted for any prepaid lease
payments, plus any initial direct costs incurred and an estimate of any decommissioning costs that have been recognised as provisions,
less any lease incentives received. They are subsequently depreciated using the straight-line method to the earlier of the end of the
useful life of the asset or the end of the lease term. Right-of-use assets are tested for impairment following the policy set out in note 14
and are adjusted for any remeasurement of lease liabilities.
We have elected not to recognise lease liabilities and right-of-use assets for short-term leases that have a lease term of 12 months or
less, and leases of low-value assets with a purchase price under \u00a35,000. We recognise payments for these items as an expense on a
straight-line basis over the lease term.
Any variable lease payments that do not depend on an index or rate, such as usage-based payments, are recognised as an expense in
the period to which the variability relates.
Lessor accounting
At inception or on modification of a contract that contains a lease component, we allocate the consideration in the contract to each
lease component on the basis of their relative standalone prices.
When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, we make an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this
assessment, we consider certain indicators such as whether the lease is for the major part of the economic life of the asset.
When we are an intermediate lessor, we account for our interests in the headlease and the sublease separately. We assess the lease
classification of a sublease with reference to the right-of-use asset arising from the headlease, not with reference to the underlying
asset. If a headlease is a short-term lease to which we apply the exemption described above, then we classify the sublease as an
operating lease.
If an arrangement contains lease and non-lease components, then we apply IFRS 15 to allocate the consideration in the contract.
We apply the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. We further regularly review
estimated unguaranteed residual values used in calculating the gross investment in the lease.
We recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of \u2018other
revenue\u2019.
Significant judgements made in accounting for leases
The lease term is a key determinant of the size of the lease liability and right-of-use asset recognised where the group acts as lessee;
and the deferral period for any upfront connection charges where the group acts as lessor. Determining the lease term requires
judgement to evaluate whether we are reasonably certain the lessee will exercise extension options or will not exercise termination
options. Key facts and circumstances that create an incentive to exercise those options are considered; these include:
\u2013 Our anticipated operational, retail and office property requirements in the mid and long term.
\u2013 The availability of suitable alternative sites.
\u2013 Costs or penalties associated with exiting lease arrangements relative to the benefits to be gained, including costs of removing
leasehold improvements or relocating, and indirect costs such as disruption to business.
\u2013 Significant investments in leased sites, in particular those with useful lives beyond the lease term.
\u2013 Costs associated with extending lease arrangements including rent increases during secondary lease periods.
Our definition of \u2018reasonable certainty\u2019, and therefore the lease term, will often align with the judgements made in our medium-term
plan, in particular for leases of non-specialised property and equipment on rolling (or \u2018evergreen\u2019) arrangements that continue until
terminated and which can be exited without significant penalty.
Following initial determination of the lease term, we exercise judgement in evaluating whether events or changes in circumstances are
sufficiently significant to change the initial assessment of whether we are reasonably certain the lessee will exercise extension options
or will not exercise termination options; and in the subsequent reassessment of the lease term.
Key judgements exercised in setting the lease term
The quantum of the lease liability and right-of-use asset currently recognised on our balance sheet is most significantly affected by the
judgement exercised in setting the lease term for the arrangement under which the bulk of our operational UK property estate is held.
Setting the lease term for our leased cell sites has also involved the use of judgement, albeit to a lesser degree.
UK operational property portfolio
Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we may
either vacate some or all properties or purchase the entire estate. If neither option is taken the lease continues to the next unilaterally
available break point in 2041. The lease liability recognised for the arrangement reflects a lease end date of 2031.
On initial recognition we concluded that, although the majority of these properties are expected to be needed on a long-term basis,
we couldn\u2019t be reasonably certain that we wouldn\u2019t exercise the termination option or that we would exercise the purchase option. In
coming to this conclusion, we had due regard to material sub-lease arrangements relating to the estate.
As time progresses our assessment may change; if this happens, we will remeasure the lease liability and right-of-use asset to reflect
either the rentals due for any properties we will continue to occupy, or the cost of purchasing the estate, using an updated discount
rate. There would be no overall impact on net assets.
If the assessment were to change at the balance sheet date 31 March 2023:
\u2013 Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a33bn
and \u00a35bn
\u2013 Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the lease
liability and right-of-use asset of between \u00a31bn and \u00a32bn
Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the
development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects the
significant uncertainty around key variables used to determine cash outflows, especially future inflation and which properties the
group will be able to exit prior to or in 2031.
Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated from
the disposal, repurposing or subleasing of properties retained post-2031.
We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were not
reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these options.
Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion. We exercise
similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not exercise termination
options associated with other leased properties.
In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions to exit
a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a termination
option until implementation of the associated business plan has progressed to a stage that we are committed to exiting the property.
At that point we reassess the lease term by reference to the time we expect to remain in occupation of the property and any notice
period associated with exercise of the option.
Cell sites
Most of the liability recognised in respect of leased cell sites relates to multi-site arrangements with commercial providers. The fixed-
term nature of these arrangements means it has not been necessary to exercise significant judgement when determining the lease
term. Where the arrangements offer extension options we have been required to conclude whether the options are reasonably certain
to be exercised. Although the balance sheet could be materially affected by the conclusion reached in regard to these options, we
have not been required to exercise a significant degree of judgement in arriving at the lease term having regard to the period of time
covered by the options, the difficulty in predicting the group\u2019s long-term network requirements, and the relatively high threshold that
\u2018reasonably certain\u2019 represents.
A smaller proportion of the cell site liability relates to arrangements with individual landlords which are either rolling or can be exited
with notice. When setting the initial lease term for these arrangements we exercised significant judgement in establishing the period
that we are reasonably certain to require use of the site. We broadly aligned lease terms with our medium-term planning horizon after
assessing the relative strengths of the following factors:
\u2013 Long-term economic incentives to remain on sites including existing capital improvements;
\u2013 A need to maintain flexibility in our ability to develop and manage our network infrastructure to react quickly to technological
developments and evolving capacity requirements; and
\u2013 Incentives to renegotiate arrangements in the medium term to gain more security over sites to support future capital investment.
Although significant judgement has been exercised in determining the lease term, reaching an alternative conclusion would not have
a material impact on the balance sheet having regard to the most feasible alternative lease terms.
Subsequently, we consider key events that trigger reassessment of lease terms to be developments which resolve uncertainty around
our economic incentive to remain on individual sites in the long term. These are primarily lease renegotiations and significant capital
investments, for example that associated with our 5G rollout and other capital refresh programmes.
Significant accounting policies that apply to programme rights
Programme rights are recognised on the balance sheet from the point at which the legally enforceable licence period begins. They are
accounted for as inventory and held at the lower of cost and net realisable value. They are initially recognised at cost and are consumed
from the point at which they are available for use, on a straight-line basis over the programming period, or the remaining licence term,
as appropriate, which is generally 12 months.
Additions reflect TV programme rights for which the legally enforceable licence period has started during the year.
Rights for which the licence period has not started are disclosed as contractual commitments in note 32. Payments made to receive
commissioned or acquired programming in advance of the legal right to broadcast the programmes are classified as prepayments (see
note 17). No contractual commitments or prepayments exist in respect of programme rights at 31 March 2023 following the BT Sport
divestment during the year.
Significant accounting policies that apply to trade and other receivables
Trade receivables are recognised where the right to receive payment from customers is conditional only on the passage of time. We
initially recognise trade and other receivables at fair value, which is usually the original invoiced amount. They are subsequently carried
at amortised cost using the effective interest method. The carrying amount of these balances approximates to fair value due to the
short maturity of amounts receivable.
We provide services to consumer and business customers, mainly on credit terms. We know that certain debts due to us will not
be paid through the default of a small number of our customers. Because of this, we recognise an allowance for doubtful debts on
initial recognition of receivables, which is deducted from the gross carrying amount of the receivable. The allowance is calculated
by reference to credit losses expected to be incurred over the lifetime of the receivable. In estimating a loss allowance we consider
historical experience and informed credit assessment alongside other factors such as the current state of the economy and particular
industry issues. We consider reasonable and supportable information that is relevant and available without undue cost or effort.
Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss experiences
for the relevant aged category as well as forward-looking information and general economic conditions. Allowances are calculated by
individual CFUs in order to reflect the specific nature of the customers relevant to that CFU.
The group utilises factoring arrangements for selected trade receivables. Trade receivables that are subject to debt factoring
arrangements are derecognised if they meet the conditions for derecognition detailed in IFRS 9 \u2018Financial instruments\u2019.
Contingent assets such as any insurance recoveries which we expect to recoup, have not been recognised in the financial statements
as these are only recognised within trade and other receivables when their receipt is virtually certain.
Significant accounting policies that apply to deferred contract costs
We capitalise certain costs associated with the acquisition and fulfilment of contracts with customers and amortise them over the
period that we transfer the associated services.
Connection costs are deferred as contract fulfilment costs because they allow satisfaction of the associated connection performance
obligation and are considered recoverable. Sales commissions and other third party contract acquisition costs are capitalised as
costs to acquire a contract unless the associated contract term is less than 12 months, in which case they are expensed as incurred.
Capitalised costs are amortised over the minimum contract term. A portfolio approach is used to determine contract term.
Where the initial set-up, transition and transformation phases of long-term contractual arrangements represent distinct performance
obligations, costs in delivering these services are expensed as incurred. Where these services are not distinct performance obligations,
we capitalise eligible costs as a cost of fulfilling the related service. Capitalised costs are amortised on a straight-line basis over the
remaining contract term, unless the pattern of service delivery indicates a more appropriate profile. To be eligible for capitalisation,
costs must be directly attributable to specific contracts, relate to future activity, and generate future economic benefits. Capitalised
costs are regularly assessed for recoverability.
Significant accounting policies that apply to trade and other payables
We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently carry them
at amortised cost using the effective interest method.
We use a supply chain financing programme to extend payment terms with a limited number of suppliers to a more typical payment
term. We also use a separate supply chain financing programme to allow suppliers to receive funding earlier than the invoice due date.
We assess these arrangements against indicators to assess if debts which vendors have sold to the funder under the supplier financing
schemes continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2023 the payables met
the criteria of trade payables. Cash flows are presented in cash flows from operating activities.
Significant accounting policies that apply to provisions & contingent liabilities We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an outflow that is not probable or which cannot be reliably estimated. Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate. Key accounting estimates and significant judgements made in accounting for provisions & contingent liabilities We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are not recognised as liabilities on our balance sheet. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes where this can be reasonably determined. In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution. Key accounting estimates applied in accounting for provisions and contingent liabilities Other provisions may involve the use of key (but not critical) estimates as explained below. When measuring provisions we reflect the impact of inflation as appropriate particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows. Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made estimates of the costs associated with the restoration of properties by reference to any relevant guidance such as rate cards. Cash outflows occur as and when properties are vacated and the obligations are settled. Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the site. The provision represents the group\u2019s best estimate of the costs to dismantle equipment and restore the sites. Obligations are settled as and when sites are vacated and the timing is largely influenced by the group\u2019s network strategy.
Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical regulatory
matters. The charge/credit for the year represents the outcome of management\u2019s re-assessment of the estimates and regulatory risks
across a range of issues, including price and service issues. The prices at which certain services are charged are regulated and may be
subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk we make key judgements, including
in regard to interpreting Ofcom regulations and past and current claims. The precise outcome of each matter depends on whether it
becomes an active issue, and the extent to which negotiation or regulatory and compliance decisions will result in financial settlement.
The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement.
Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against the
group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice received.
Provisions recognised are inherently judgemental and could change over time as matters progress.
Establishing contingent liabilities associated with litigation brought against the group may involve the use of key estimates and
assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further information in
relation to specific matters in the \u2018contingent liabilities\u2019 section below.
Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties,
with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an
independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle
accident claims, and our in-house insurance teams review our exposure to other risks.
Other provisions do not include any individually material provisions.
For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual outcome
of any settlement.
Types of retirement benefit plans Defined benefit (\u201cDB\u201d) plans DB plan benefits are determined by the plan rules, typically dependent on factors such as age, years of service and pensionable pay, but not on the value of actual contributions made by the company and members. The group is exposed to investment and other experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from regular contributions, expected investment income and assets held. The net defined benefit liability, or deficit, is the present value of all expected future benefit cash flows to be paid by each plan, calculated using the projected unit credit method by professionally qualified actuaries (also known as the Defined Benefit Obligation (DBO) or liabilities) less the fair value of the plan assets. Defined contribution (\u201cDC\u201d) plans DC plan benefits are linked to the value of each member\u2019s fund, which is based on contributions paid and the performance of each individual\u2019s chosen investments. The group has no exposure to investment and other experience risks.
Critical accounting estimates and significant judgements made when valuing the BTPS assets
Under IAS 19, plan assets are measured at fair value at the balance sheet date and include quoted and unquoted investments.
Valuation of main quoted investments
\u2013 Equities listed on recognised stock exchanges are valued at closing bid prices.
\u2013 Bonds that are regularly traded are valued using broker quotes.
\u2013 Exchange traded derivative contracts are valued based on closing bid prices
Valuation of main unquoted investments
A portion of unquoted investments are valued based on inputs that are not directly observable, which require more judgement.
The assumptions used in valuing unquoted investments are affected by market conditions.
\u2013 Equities are valued using the International Private Equity and Venture Capital (IPEVC) guidelines where the most significant
assumptions are the discount rate and earnings assumptions.
\u2013 Property investments are valued on the basis of open market value by an independent valuer using RICS guidelines. The significant
assumptions used in the valuation are rental yields and occupancy rates.
\u2013 Bonds, including those issued by BT, that are not regularly traded are valued by an independent valuer using pricing models making
assumptions for credit risk, market risk and market yield curves.
\u2013 Holdings in investment funds are typically valued at the Net Asset Value provided by the fund administrator or investment manager.
The significant assumption used in the valuation is the Net Asset Value.
\u2013 Infrastructure investments are valued by an independent valuer using a model-based valuation such as a discounted cash flow
approach, or at the price of recent market transactions if they represent fair value. Where a discounted cash flow model is used,
the significant assumptions used in the valuation are the discount rate and the expected cash flows.
\u2013 Over the counter derivatives are valued by an independent valuer using cash flows discounted at market rates. The significant
assumptions used in the valuation are the yield curves and cost of carry.
\u2013 The longevity insurance contract is measured by discounting the projected cash flows payable under the contract (projected by
an actuary, consistent with the terms of the contract). The significant assumptions used to value the asset are the discount rate
(including adjustments to the risk free rate) and the mortality assumptions.
\u00a36.4bn of unquoted investments that are formally valued periodically by the investment manager have a latest valuation that precedes
the balance sheet date. These assets consist of: \u00a33.7bn non-core credit; \u00a31.2bn mature infrastructure; \u00a31.1bn private equity; \u00a30.2bn
secure income; and \u00a30.2bn overseas property. These valuations have been adjusted for cash movements between the previous
valuation date and 31 March 2023. The valuation approach and inputs for these investments would only be approximately updated
where there were indications of significant movements, for example implied by market indicators. No such adjustment was required
at 31 March 2023.
Asset-backed funding arrangement
The asset-backed funding arrangement, issued to the BTPS in May 2021, has a fair value of \u00a31.3bn at 31 March 2023 (2022: \u00a31.4bn)
calculated as the present value of the future stream of payments, allowing for the probability of the BTPS becoming fully funded
and therefore the payments to the BTPS ending early. It is not recognised as a pension asset when measuring the group\u2019s IAS 19 net
defined benefit liability as it is a non-transferable financial instrument issued by the group.
Critical accounting estimates and significant judgements made when valuing our pension liabilities The measurement of the service cost and the liabilities involves judgement about uncertain events including the life expectancy of members, price inflation and the discount rate used to calculate the net present value of the future pension payments. We use estimates for all of these uncertain events. Our assumptions reflect historical experience, market expectations (where relevant), actuarial advice and our judgement regarding future expectations at the balance sheet date. Significant accounting policies that apply to own shares Own shares are recorded at cost and deducted from equity. When shares held for the beneficial ownership of employees vest unconditionally or are cancelled they are transferred from the own shares reserve to retained earnings at their weighted average cost. Significant accounting policies that apply to share-based payments We operate a number of equity-settled share-based payment arrangements, under which we receive services from employees in consideration for equity instruments (share options and shares) of the group. Equity-settled share-based payments are measured at fair value at the date of grant. Market-based performance criteria and non-vesting conditions (for example, the requirement for employees to make contributions to the share purchase programme) are reflected in this measurement of fair value. The fair value determined at the grant date is recognised as an expense on a straight-line basis over the vesting period, based on the group\u2019s estimate of the options or shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations, whichever is more appropriate to the share-based payment arrangement. Service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions which are taken into account to determine the fair value of equity instruments granted. In the case that an award or option does not vest as a result of a failure to meet a non-vesting condition that is within the control of either counterparty, this is accounted for as a cancellation. Cancellations are treated as accelerated vesting and all remaining future charges are immediately recognised in the income statement. As the requirement to save under an employee saveshare arrangement is a non-vesting condition, employee cancellations, other than through a termination of service, are treated as an accelerated vesting. No adjustment is made to total equity for awards that lapse or are forfeited after the vesting date. Significant accounting policies that apply to divestments and assets & liabilities classified as held for sale We classify non-current assets or a group of assets and associated liabilities, together forming a disposal group, as \u2018held for sale\u2019 when their carrying amount will be recovered principally through disposal rather than continuing use and the sale is highly probable. Sale is considered to be highly probable when management are committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed divestment within one year from the date of classification. We measure non-current assets or disposal groups classified as held for sale at the lower of their carrying amount and fair value less costs of disposal. Intangible assets, property, plant and equipment and right-of-use assets classified as held for sale are not depreciated or amortised. Upon completion of a divestment, we recognise a profit or loss on disposal calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest less costs incurred in disposing of the asset or disposal group and (ii) the carrying amount of the asset or disposal group (including goodwill). The profit or loss on disposal is recognised as a specific item, see note 9. In the event that non-current assets or disposal groups held for sale form a separate and identifiable major line of business, the results for both the current and comparative periods are reclassified as \u2018discontinued operations\u2019. Critical & key accounting estimates and significant judgements made in accounting for the BT Sport disposal Assessment of whether BT has joint control over the Sports JV See note 25 for assessment on control. Valuation of investment in A preference shares (akin to contingent consideration) BT will receive an earn-out from the Sports JV (subject to liquidity and usual UK company law requirements), which will end at the earliest of: \u2013 four years post completion of the transaction; \u2013 the exercise by WBD of the Call Option; and \u2013 if the earn-out reaches an agreed cap. The earn-out cash flows to BT are dependent on the cash profit generation of the Sports JV over the earn-out period and is therefore akin to contingent consideration, initially recorded at a fair value of \u00a3428m reflecting the present value of expected cash flows. The valuation of the earn-out consideration is supported by a jointly-agreed business plan and internal valuation model. The key assumptions within the jointly-agreed business plan and internal valuation model are: \u2013 approximately 50% of revenues and 80% of costs during the four years of the jointly-agreed business plan are contractually committed; \u2013 material contracts are renewed at an economic value no less than current terms; \u2013 the total premium sports subscriber base does not materially grow or decline over the earn-out period; and \u2013 revenue growth and production costs are driven by contractual terms. We have also assumed that the earn-out period ends at four years post completion of the transaction; however given the mechanics of the deal arrangements if there is an earlier exercise by WBD of their Call Option this would also not materially impact the amounts disclosed in the financial statements. Subsequent to the initial recognition, the group\u2019s carried forward investment in A preference shares will be remeasured to fair value at each reporting date in accordance with IFRS 9, see note 25.
Valuation of the minimum revenue guarantee in BT\u2019s distribution agreement with the Sports JV
BT plc\u2019s obligation under the minimum revenue guarantee of c. \u00a32bn over the first four years of the Sports JV represents both a
trading arrangement on market terms and a financing arrangement for the off-market element of the revenue guarantee, which has
been recorded as a financial liability within trade and other payables on the balance sheet. The liability will be held at amortised cost
and will unwind through payments made to the Sports JV over the next four years on the minimum revenue guarantee.
The valuation of this financial liability, and what a fair cost-per-subscriber would be, is sensitive to a number of assumptions on volumes
and price, and there is a range of outcomes which we could have arrived at. Alternative scenarios considered, based on the different
prices and terms used with other market participants, could have resulted in a liability ranging from \u00a3543m to \u00a3837m, and we initially
recognised a financial liability of \u00a3712m.
The key assumptions in calculating the financial liability are in estimating what is a market wholesale price at market volume
commitment that is supported by the forecast volumes for the related revenue streams. The volumes used are consistent with those
included in the jointly-agreed business plan as described above. We note that the bottom of the range disclosed above is based on
the price that we will pay after four years when the minimum revenue guarantee has ended, however we do not believe that is an
appropriate rate from the outset due to existing volume commitments.
Valuation of BT\u2019s equity interest in the Sports JV
WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports
JV. If the Call Option is not exercised, BT will have the ability to exit its shareholding in the JV either through a sale or IPO.
The group has valued its interest in the Sports JV based on the estimated fair value at exit and using the following key assumptions:
\u2013 BT expect to realise its interest in the Sports JV through exit rather than ongoing value in use;
\u2013 BT expect WBD to exercise its option to acquire BT\u2019s 50% interest in the Sports JV at the end of the first four years of the Sports JV; and
\u2013 An earnings multiple has been applied to the expected year 5 EBITDA per the jointly-agreed business plan \u2013 the multiple is at
the lower end of a possible range identified from comparable peers and transactions in the premium sports subscription and
broadcasting market.
As the group\u2019s interest is recorded on a point in time valuation, based on forecast earnings and current market returns on similar
investments, it carries both upside and downside risk from changes in micro- and macroeconomic factors affecting the sports content
subscription market and risk appetite of investors in that market.
We have applied the following sensitivities on these risk factors:
\u2013 EBITDA impact from revenue loss due to ongoing cost of living pressures or changes in the Sports JV\u2019s rights portfolio;
\u2013 An increase or decrease in the valuation multiple achieved; and
\u2013 An increase or decrease in the discount rate applied.
None of these sensitivities individually resulted in a material change to the investment value. All downside or upside factors in
combination could lead to a \u00a370m decrease or \u00a3200m increase in the fair value respectively. However, in our view, combining all
downside factors is not a reasonable scenario given the financial and commercial levers available to both the JV and BT to mitigate the
impact; and we have taken a prudent approach in not recognising a higher investment value upfront based on possible but uncertain
changes in market conditions in the future.
The investment will be subsequently accounted for using the equity method and will be subject to impairment testing at each
reporting period, with any impairment losses recognised through specific items, see note 25.
Discounting of cash flows
All cash flows expected to be received or paid over time have been discounted at a rate applicable to the risks associated with the cash flows:
\u2013 Deferred payments due to BT from WBD have been discounted at an appropriate post-tax cost of debt (3.3%);
\u2013 BT\u2019s earn-out from the Sports JV has been discounted at the weighted average cost of capital for the Sports JV at completion date
(6.7%); and
\u2013 BT\u2019s commitments under the minimum guarantee have been discounted at the group\u2019s post-tax cost of debt (2.8%).
We do not consider the net present value of the transaction would be materially affected by a reasonable change in the discount rate.
Significant accounting policies that apply to investments Investments classified as amortised cost These investments are measured at amortised cost. The carrying amount of these balances approximates to fair value. Any gain or loss on derecognition is recognised in the income statement. Investments classified as fair value through profit and loss These investments are initially recognised at fair value plus direct transaction costs. They are re-measured at subsequent reporting dates to fair value and changes are recognised directly in the income statement. Equity instruments classified as fair value through other comprehensive income We have made an irrevocable election to present changes in the fair value of equity investments that are not held for trading in other comprehensive income. All gains or losses are recognised in other comprehensive income and are not reclassified to the income statement when the investments are disposed of, aside from dividends which are recognised in the income statement when our right to receive payment is established. Equity investments are recorded in non-current assets unless they are expected to be sold within one year.
Significant judgements made in accounting for the sports joint venture
Assessment of whether BT has joint control over the Sports JV
The Sports JV is classified as a joint venture and hence has been deconsolidated from the group based on an assessment under IFRS
10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD.
Factors relevant to our assessment:
\u2013 Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new
or existing sports rights and distribution arrangements.
\u2013 Unequal cash distribution during the first four years due to the earn-out mechanism and relative size of businesses contributed
into the Sports JV.
\u2013 Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and
commitments to sports rights holders.
\u2013 WBD\u2019s call option to acquire BT\u2019s 50% interest in the Sports JV is not exercisable before key decisions over material activities
of the Sports JV are made such that joint control still applies at the outset.
The assessment whether joint control remains in place is reviewed at each reporting period .
Accounting policies adopted by the Sports JV
The Sports JV has a financial year-end of 31 July and therefore has not yet prepared its first set of audited financial statements. In
order to recognise our share of the Sports JV\u2019s results for our equity-accounted investment, we have prepared the Sports JV\u2019s financial
information disclosed below based on management accounts for the period ending 31 March 2023 after making certain adjustments
to comply with IFRS.
Significant judgements made in preparing the Sports JV\u2019s financial information:
\u2013 IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the
BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future
value of programme rights, and goodwill.
\u2013 Revenues from the minimum guarantee in the Sports JV\u2019s distribution agreement with BT should be adjusted to reflect a trading
agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 \u2013 this
mirrors the accounting treatment applied by BT (see note 23).
\u2013 A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss
under IFRS 9.
\u2013 Hedge accounting should be applied on the Sports JV\u2019s forward contracts with BT (see note 31) with fair value movements on the
derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the
forward contracts.
\u2013 Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed
by the Sports JV on a straight-line basis over the programming period which is generally 12 months \u2013 this is consistent with the
group\u2019s accounting policy (see note 16).
Accounting policies in other areas are consistent with those applied by the group.
Significant accounting policies that apply to cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily
convertible to cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less. All are
held at amortised cost on the balance sheet, equating to fair value.
For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above net of outstanding bank
overdrafts. Bank overdrafts are included within the current element of loans and other borrowings (note 27).
Significant accounting policies that apply to loans and other borrowings We initially recognise loans and other borrowings at the fair value of amounts received net of transaction costs. They are subsequently measured at amortised cost using the effective interest method and, if included in a fair value hedge relationship, are re-valued to reflect the fair value movements on the associated hedged risk. The resulting amortisation of fair value movements, on de-designation of the hedge, is recognised in the income statement.
Significant accounting policies that apply to derivatives and hedge accounting
All of our derivative financial instruments are held at fair value on the balance sheet.
Derivatives designated in a cash flow hedge
The group designates certain derivatives in a cash flow hedge relationship. Where derivatives qualify for hedge accounting, recognition
of any resultant gain or loss depends on the nature of the hedge. To qualify for hedge accounting, hedge documentation must be
prepared at inception, the hedge must be in line with BT\u2019s risk management strategy and there must be an economic relationship based
on the currency, amount and timing of the respective cash flows of the hedging instrument and hedged item. This is assessed at inception
and in subsequent periods in which the hedge remains in operation. Hedge accounting is discontinued when it is no longer in line with BT\u2019s
risk management strategy or if it no longer qualifies for hedge accounting.
The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument is
assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of altered
timing, cash flows or value.
When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a
highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity.
For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from equity and recognised
in the same line of the income statement and in the same period or periods that the hedged transaction affects the income statement.
Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income statement.
Other derivatives
Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some derivatives
may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset is more appropriate. We
effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including
those relating to inflationary features. These derivatives are classified as fair value through profit and loss and are recognised at fair value.
Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement are recognised
in the income statement in the line that most appropriately reflects the nature of the item or transaction to which they relate.
Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from the
transaction price, a day one gain or loss will arise which is not recognised in the income statement. Such gains and losses are deferred
and amortised to the income statement based on the remaining contractual term and as observable market data becomes available.
The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and market
rates of interest and foreign exchange at the balance sheet date.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-505": { "value": "1. Basis of preparation Preparation of the financial statements The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006. The consolidated financial statements are prepared on a going concern basis. This assessment is consistent with the assessment of our viability, as set out on pages 81 to 82, in estimating the financial impact of a severe but plausible outcome for each risk, both individually, in combination and through stochastic risk modelling. This stress testing confirmed that existing projected cash flows and cash management activities provide us with adequate headroom over the going concern assessment period. Having assessed the principal and emerging risks, the directors considered it appropriate to adopt the going concern basis of accounting when preparing the group and parent company financial statements. This assessment covers the period to May 2024, which is consistent with the FRC guidance. When reaching this conclusion, the directors took into account the group\u2019s and parent company\u2019s overall financial position (including trading results and ability to repay term debt as it matures without recourse to refinancing) and the exposure to principal risks. In preparing the financial statements, the directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 71 to 80 this year. There has been no material impact identified on the financial reporting judgements and estimates. These financial statements consolidate BT Group plc, the parent company, and its subsidiaries (together the \u2018group\u2019, \u2018us\u2019, \u2018we\u2019 or \u2018our\u2019). The consolidated financial statements are prepared on the historical cost basis, except for certain financial and equity instruments that have been measured at fair value. The consolidated financial statements are presented in sterling, the functional currency of BT Group plc. These financial statements cover the financial year from 1 April 2022 to 31 March 2023 (\u2018FY23\u2019), with comparative figures for the financial year from 1 April 2021 to 31 March 2022 (\u2018FY22\u2019). New and amended accounting standards effective during the year The following amended standards were effective during the year: Amendments to IAS 37 for onerous contracts The group adopted Onerous Contracts \u2013 Costs of Fulfilling a Contract (Amendments to IAS 37) from 1 April 2022. This resulted in a change in accounting policy for performing an onerous contracts assessment. Previously, only incremental costs to fulfil a contract were included when determining whether that contract was onerous. The revised policy is to include both incremental costs and an allocation of other costs directly attributable to the fulfilment of a contract. The amendments apply prospectively to contracts existing at the date when the amendments are first applied. We analysed contracts existing at 1 April 2022 and identified the cumulative effect of applying the revised policy to be a \u00a312m increase in the onerous contract provision. This has been recorded as an opening balance adjustment to retained earnings. Comparative figures have not been restated. IFRS Interpretations Committee agenda decisions The IFRS Interpretations Committee (IFRIC) periodically issues agenda decisions which explain and clarify how to apply the principles and requirements of IFRS standards. Agenda decisions are authoritative and may require the group to revise accounting policies or practice to align with the interpretations set out in the decision. We regularly review IFRIC updates and assess the impact of agenda decisions. The following were identified as being potentially significant to the group: Demand Deposits with Restrictions on Use arising from a Contract with a Third Party In its agenda decision, the IFRIC concluded that restrictions on the use of demand deposits arising from a contract with a third party do not result in the deposits being declassified as cash and cash equivalents, unless those restrictions change the nature of the deposit in a way such that it would no longer meet the definition of cash in IAS 7. Application of this agenda decision to deposits held by the group identified one bank account with restrictions on use that nonetheless meets the IAS 7 definition of cash. This bank account was subsequently recognised on the group balance sheet and is now reflected in the cash and cash equivalents balance presented throughout the financial statements. An equal and opposite amount was recognised in trade payables. The balance on this account was \u00a396m at 31 March 2023 and \u00a3148m at 31 March 2022. Prior period comparatives have not been restated as the impact is not considered material, having regard to the fact that a corresponding liability is recognised within trade payables and therefore has no bearing on the group\u2019s net assets. The impact on the cash flow statement is not considered to be material and recognition of the balance is presented as an increase in trade and other payables. Cash flows relating to the account which have already been accounted for within normalised cash flow (including its initial recognition) will be excluded from this metric. Other The following changes have not had a significant impact on our consolidated financial statements: \u2013 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) \u2013 Annual Improvements to IFRS Standards 2018-2020 \u2013 Reference to the Conceptual Framework \u2013 Amendments to IFRS 3 New and amended accounting standards that have been issued but are not yet effective The following new or amended standards and interpretations are applicable in future periods: IFRS 17 Insurance Contracts BT adopted IFRS 17 with retrospective application on 1 April 2023. It is therefore effective from FY24 onwards. The standard establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. The measurement method for insurance contracts required by IFRS 17 is a probability weighted discounted cash flow model, including a best estimate and an adjustment for non-financial risk calculated for groups of similar contracts. IFRS 17 primarily impacts insurance entities, however as it applies to individual contracts it is possible that non-insurers could issue contracts that are in scope of the standard such as product breakdown contracts or warranties. We have assessed the impact of the standard on the group and the BT Group plc legal entity, and concluded that its impact is not material. Contracts in scope of the standard entered into by the group are restricted to intragroup insurance arrangements, and the group does not issue external insurance contracts. Contracts in scope of the standard entered into by the BT Group plc legal entity are restricted to parent company guarantees, which we have assessed to have no material impact. The following are not expected to have a significant impact on the consolidated financial statements: \u2013 Classification of Liabilities as Current or Non-current (Amendments to IAS 1) \u2013 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) \u2013 Definition of Accounting Estimate (Amendments to IAS 8) \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) \u2013 Non-Current Liabilities with Covenants (Amendments to IAS 1) \u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) Presentation of specific items Our income statement and segmental analysis separately identify trading results before specific items (\u2018adjusted\u2019). The directors believe that presentation of our results in this way is relevant to an understanding of our financial performance, as specific items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing a meaningful analysis of our trading results. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Specific items may not be comparable to similarly titled measures used by other companies. Examples of charges or credits which meet the above definition include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that other items meet the criteria, which are applied consistently from year to year, they are also treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. Specific items for the current and prior year are disclosed in note 9. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-501": { "value": "1. Basis of preparation Preparation of the financial statements The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006. The consolidated financial statements are prepared on a going concern basis. This assessment is consistent with the assessment of our viability, as set out on pages 81 to 82, in estimating the financial impact of a severe but plausible outcome for each risk, both individually, in combination and through stochastic risk modelling. This stress testing confirmed that existing projected cash flows and cash management activities provide us with adequate headroom over the going concern assessment period. Having assessed the principal and emerging risks, the directors considered it appropriate to adopt the going concern basis of accounting when preparing the group and parent company financial statements. This assessment covers the period to May 2024, which is consistent with the FRC guidance. When reaching this conclusion, the directors took into account the group\u2019s and parent company\u2019s overall financial position (including trading results and ability to repay term debt as it matures without recourse to refinancing) and the exposure to principal risks. In preparing the financial statements, the directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 71 to 80 this year. There has been no material impact identified on the financial reporting judgements and estimates. These financial statements consolidate BT Group plc, the parent company, and its subsidiaries (together the \u2018group\u2019, \u2018us\u2019, \u2018we\u2019 or \u2018our\u2019). The consolidated financial statements are prepared on the historical cost basis, except for certain financial and equity instruments that have been measured at fair value. The consolidated financial statements are presented in sterling, the functional currency of BT Group plc. These financial statements cover the financial year from 1 April 2022 to 31 March 2023 (\u2018FY23\u2019), with comparative figures for the financial year from 1 April 2021 to 31 March 2022 (\u2018FY22\u2019). New and amended accounting standards effective during the year The following amended standards were effective during the year: Amendments to IAS 37 for onerous contracts The group adopted Onerous Contracts \u2013 Costs of Fulfilling a Contract (Amendments to IAS 37) from 1 April 2022. This resulted in a change in accounting policy for performing an onerous contracts assessment. Previously, only incremental costs to fulfil a contract were included when determining whether that contract was onerous. The revised policy is to include both incremental costs and an allocation of other costs directly attributable to the fulfilment of a contract. The amendments apply prospectively to contracts existing at the date when the amendments are first applied. We analysed contracts existing at 1 April 2022 and identified the cumulative effect of applying the revised policy to be a \u00a312m increase in the onerous contract provision. This has been recorded as an opening balance adjustment to retained earnings. Comparative figures have not been restated. IFRS Interpretations Committee agenda decisions The IFRS Interpretations Committee (IFRIC) periodically issues agenda decisions which explain and clarify how to apply the principles and requirements of IFRS standards. Agenda decisions are authoritative and may require the group to revise accounting policies or practice to align with the interpretations set out in the decision. We regularly review IFRIC updates and assess the impact of agenda decisions. The following were identified as being potentially significant to the group: Demand Deposits with Restrictions on Use arising from a Contract with a Third Party In its agenda decision, the IFRIC concluded that restrictions on the use of demand deposits arising from a contract with a third party do not result in the deposits being declassified as cash and cash equivalents, unless those restrictions change the nature of the deposit in a way such that it would no longer meet the definition of cash in IAS 7. Application of this agenda decision to deposits held by the group identified one bank account with restrictions on use that nonetheless meets the IAS 7 definition of cash. This bank account was subsequently recognised on the group balance sheet and is now reflected in the cash and cash equivalents balance presented throughout the financial statements. An equal and opposite amount was recognised in trade payables. The balance on this account was \u00a396m at 31 March 2023 and \u00a3148m at 31 March 2022. Prior period comparatives have not been restated as the impact is not considered material, having regard to the fact that a corresponding liability is recognised within trade payables and therefore has no bearing on the group\u2019s net assets. The impact on the cash flow statement is not considered to be material and recognition of the balance is presented as an increase in trade and other payables. Cash flows relating to the account which have already been accounted for within normalised cash flow (including its initial recognition) will be excluded from this metric. Other The following changes have not had a significant impact on our consolidated financial statements: \u2013 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) \u2013 Annual Improvements to IFRS Standards 2018-2020 \u2013 Reference to the Conceptual Framework \u2013 Amendments to IFRS 3 New and amended accounting standards that have been issued but are not yet effective The following new or amended standards and interpretations are applicable in future periods: IFRS 17 Insurance Contracts BT adopted IFRS 17 with retrospective application on 1 April 2023. It is therefore effective from FY24 onwards. The standard establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. The measurement method for insurance contracts required by IFRS 17 is a probability weighted discounted cash flow model, including a best estimate and an adjustment for non-financial risk calculated for groups of similar contracts. IFRS 17 primarily impacts insurance entities, however as it applies to individual contracts it is possible that non-insurers could issue contracts that are in scope of the standard such as product breakdown contracts or warranties. Notes to the consolidated financial statements 1. Basis of preparation continued We have assessed the impact of the standard on the group and the BT Group plc legal entity, and concluded that its impact is not material. Contracts in scope of the standard entered into by the group are restricted to intragroup insurance arrangements, and the group does not issue external insurance contracts. Contracts in scope of the standard entered into by the BT Group plc legal entity are restricted to parent company guarantees, which we have assessed to have no material impact. The following are not expected to have a significant impact on the consolidated financial statements: \u2013 Classification of Liabilities as Current or Non-current (Amendments to IAS 1) \u2013 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) \u2013 Definition of Accounting Estimate (Amendments to IAS 8) \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) \u2013 Non-Current Liabilities with Covenants (Amendments to IAS 1) \u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) Presentation of specific items Our income statement and segmental analysis separately identify trading results before specific items (\u2018adjusted\u2019). The directors believe that presentation of our results in this way is relevant to an understanding of our financial performance, as specific items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing a meaningful analysis of our trading results. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Specific items may not be comparable to similarly titled measures used by other companies. Examples of charges or credits which meet the above definition include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that other items meet the criteria, which are applied consistently from year to year, they are also treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. Specific items for the current and prior year are disclosed in note 9. 2. Critical & key accounting estimates and significant judgements The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying our accounting policies. We continually evaluate our estimates, assumptions and judgements based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. Our critical accounting estimates are those estimates that carry a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year. We also make other key estimates when preparing the financial statements, which, while not meeting the definition of a critical estimate, involve a higher degree of complexity and can reasonably be expected to be of relevance to a user of the financial statements. Management has discussed its critical and other key accounting estimates and associated disclosures with the Audit and Risk Committee. Significant judgements are those made by management in applying our significant accounting policies that have a material impact on the amounts presented in the financial statements. We may exercise significant judgement in our critical and key accounting estimates. Our critical and key accounting estimates and significant judgements are described in the following notes to the financial statements. They can be identified by the following symbol . Note Critical estimate Key estimate Significant judgement 10. Current and deferred income tax \u00fc \u00fc 13. Goodwill impairment \u00fc \u00fc 15. Reasonable certainty and determination of lease terms \u00fc 19. Contingent liabilities associated with litigation \u00fc \u00fc 19. Other provisions and contingent liabilities \u00fc \u00fc 20. Valuation of pension assets and liabilities \u00fc \u00fc 25. BT Sport joint venture \u00fc \u00fc 3. Significant accounting policies that apply to the overall financial statements The significant accounting policies applied in the preparation of our consolidated financial statements are set out below. Other significant accounting policies applicable to a particular area are disclosed in the most relevant note. They can be identified by the following symbol . We have applied all policies consistently to all the years presented, unless otherwise stated. Basis of consolidation The group financial statements consolidate the financial statements of BT Group plc and its subsidiaries, and include its share of the results of associates and joint ventures using the equity method of accounting. The group recognises its direct rights to (and its share of) jointly held assets, liabilities, revenues and expenses of joint operations under the appropriate headings in the consolidated financial statements. All business combinations are accounted for using the acquisition method regardless of whether equity instruments or other assets are acquired. A subsidiary is an entity that is controlled by another entity, known as the parent or investor. An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Non-controlling interests in the net assets of consolidated subsidiaries, which consist of the amounts of those interests at the date of the original business combination and non-controlling share of changes in equity since the date of the combination, are not material to the group\u2019s financial statements. The results of subsidiaries acquired or disposed of during the year are consolidated from and up to the date of change of control. Where necessary, accounting policies of subsidiaries have been aligned with the policies adopted by the group. All intra-group transactions including any gains or losses, balances, income or expenses are eliminated on consolidation. When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. The profit or loss on disposal is recognised as a specific item. Associates are those entities in which the group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the group has joint control, whereby the group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the activities that significantly affect the returns of the arrangement require the unanimous consent of the parties sharing control. Interests in associates and joint ventures are initially recognised at cost (including transaction costs) except where they relate to a retained non-controlling interest in a former subsidiary, which is initially recognised at a deemed cost being the fair value of the retained interest. Subsequent to initial recognition, the consolidated financial statements include the group\u2019s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases. Inventories Network maintenance equipment and equipment to be sold to customers are stated at the lower of cost or net realisable value, taking into account expected revenue from the sale of packages comprising a mobile handset and a subscription. Cost corresponds to purchase or production cost determined by either the first in first out (FIFO) or average cost method. Government grants Government grants are recognised when there is reasonable assurance that the conditions associated with the grants have been complied with and the grants will be received. Grants for the purchase or production of property, plant and equipment are deducted from the cost of the related assets and reduce future depreciation expense accordingly. Grants for the reimbursement of operating expenditure are deducted from the related category of costs in the income statement. Estimates and judgements applied in accounting for government grants received in respect of Building Digital UK (BDUK) and other rural superfast broadband contracts are described in note 14. Once a government grant is recognised, any related deferred income is treated in accordance with IAS 20 \u2018Accounting for Government Grants and Disclosure of Government Assistance\u2019. Foreign currencies Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. The functional currency of the group is sterling. Foreign exchange gains and losses resulting from the settlement of transactions and the translation of monetary assets and liabilities denominated in foreign currencies at period end exchange rates are recognised in the income statement line which most appropriately reflects the nature of the item or transaction. On consolidation, assets and liabilities of foreign undertakings are translated into sterling at year end exchange rates. The results of foreign undertakings are translated into sterling at the rates prevailing on the transaction dates. Foreign exchange differences arising on the retranslation of foreign undertakings are recognised directly in a separate component of equity, the translation reserve. In the event of the disposal of an undertaking with assets and liabilities denominated in a foreign currency, the cumulative translation difference associated with the undertaking in the translation reserve is charged or credited to the gain or loss on disposal recognised in the income statement. Research and development Research expenditure is recognised in the income statement in the period in which it is incurred. Development expenditure, including the cost of internally developed software, is recognised in the income statement in the period in which it is incurred unless it is probable that economic benefits will flow to the group from the asset being developed, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Capitalisation ceases when the asset being developed is ready for use. Research and development costs include direct and indirect labour, materials and directly attributable overheads. Termination benefits Termination benefits (leaver costs) are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. We recognise termination benefits when they are demonstrably committed to the affected employees leaving the group. 4. Segment information Significant accounting policies that apply to segment information Operating and reportable segments Our operating segments are reported based on financial information provided to the Executive Committee, which is the key management committee and represents the \u2018chief operating decision maker\u2019. Our organisational structure reflects the different customer groups to which we provide communications products and services via our customer-facing units (CFUs). The CFUs are our reportable segments and generate substantially all of our revenue. With effect from 1 January 2023 we formed the new Business unit, but its components, Global and Enterprise, continued to be managed separately and reported separately to the Executive Committee. At 31 March 2023 the group had four CFUs: Consumer, Enterprise, Global and Openreach. From 1 April 2023 Business will be a single unit and financial information for this unit will be provided to the Executive Committee on a consolidated basis only. From FY24 our CFUs will be Business, Consumer and Openreach. The CFUs are supported by technology units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management. TUs and CUs are not reportable segments as they did not meet the quantitative thresholds as set out in IFRS 8 \u2018Operating Segments\u2019 for any of the years presented. We aggregate the remaining operations and include within the \u2018Other\u2019 category to reconcile to the consolidated results of the group. The \u2018Other\u2019 category includes unallocated TU costs and our CUs. Allocation of certain items to segments Provisions for the settlement of significant legal, commercial and regulatory disputes, which are negotiated at a group level, are initially recorded in the \u2018Other\u2019 segment. On resolution of the dispute, the full impact is recognised in the results of the relevant CFU and offset in the group results through the utilisation of the provision previously charged to the \u2018Other\u2019 segment. Settlements which are particularly significant or cover more than one financial year may fall within the definition of specific items as detailed in note 9. The costs incurred by TUs and CUs are recharged to the CFUs to reflect the services provided to them. Depreciation and amortisation incurred by TUs in relation to the networks and systems they manage and operate on behalf of the CFUs is allocated to the CFUs based on their respective utilisation. Capital expenditure incurred by TUs for specific projects undertaken on behalf of the CFUs is allocated based on the value of the directly attributable expenditure incurred. Where projects are not directly attributable to a particular CFU, capital expenditure is allocated between them based on the proportion of estimated future economic benefits. Specific items are detailed in note 9 and are not allocated to the reportable segments as this reflects how they are reported to the Executive Committee. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the group. Measuring segment performance Performance of each reportable segment is measured based on adjusted EBITDA. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. Adjusted EBITDA is considered to be a useful measure of the operating performance of the CFUs because it approximates the underlying operating cash flow by eliminating depreciation and amortisation and also provides a meaningful analysis of trading performance by excluding specific items, which are disclosed separately by virtue of their size, nature or incidence. We also increasingly track adjusted operating profit which reflects the growing depreciation expense arising from our elevated network investment. Revenue recognition Our revenue recognition policy is set out in Note 5. Internal revenue and costs Most of our internal trading relates to Openreach and arises on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the other CFUs, including the use of BT Ireland\u2019s network. This occurs both directly, and also indirectly, through TUs which are included within the \u2018Other\u2019 segment. Enterprise internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning services. Internal revenue arising in Consumer relates primarily to employee broadband and wi-fi services. Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the sale of other products and services is agreed between the relevant CFUs and therefore the profitability of CFUs may be impacted by transfer pricing levels. Geographic segmentation The UK is our country of domicile and is where we generate the majority of our revenue from external UK customers. The geographic analysis of revenue is based on the country in which the customer is invoiced. The geographic analysis of non-current assets, which excludes derivative financial instruments, investments, preference shares in joint ventures, retirement benefit schemes in surplus and deferred tax assets, is based on the location of the assets. 4. Segment information continued Segment revenue and profit Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Segment revenue 9,737 4,962 3,328 5,675 27 23,729 Internal revenue (57) (113) \u2013 (2,890) \u2013 (3,060) Adjusted a revenue from external customers 9,680 4,849 3,328 2,785 27 20,669 Adjusted EBITDA b 2,623 1,394 458 3,449 4 7,928 Depreciation and amortisation a (1,397) (842) (317) (2,059) (138) (4,753) Adjusted a operating profit (loss) 1,226 552 141 1,390 (134) 3,175 Specific operating profit (loss) \u2013 see note 9 (556) Operating profit 2,619 Net finance expense c (831) Share of post tax profit (loss) of associates and joint ventures (59) Profit before tax 1,729 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Segment revenue 9,858 5,157 3,362 5,441 27 23,845 Internal revenue (83) (105) \u2013 (2,812) \u2013 (3,000) Adjusted a revenue from external customers 9,775 5,052 3,362 2,629 27 20,845 Adjusted EBITDA b 2,262 1,636 456 3,179 44 7, 577 Depreciation and amortisation a (1,421) (724) (355) (1,876) (29) (4,405) Adjusted a operating profit (loss) 841 912 101 1,303 15 3,172 Specific operating profit (loss) \u2013 see note 9 (287) Operating profit 2,885 Net finance expense c (922) Share of post tax profit (loss) of associates and joint ventures \u2013 Profit before tax 1,963 a Before specific items. b Adjusted EBITDA, defined as profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. c Net finance expense includes specific item expense of \u00a35m (FY22: \u00a3101m). See note 9. Internal revenue and costs Internal cost recorded by Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Internal revenue recorded by Consumer \u2013 40 16 \u2013 1 57 Enterprise 26 \u2013 32 \u2013 55 113 Global \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Openreach 1,805 888 184 \u2013 13 2,890 Total 1,831 928 232 \u2013 69 3,060 Internal cost recorded by Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Internal revenue recorded by Consumer \u2013 47 18 \u2013 18 83 Enterprise 19 \u2013 26 \u2013 60 105 Global \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Openreach 1,649 937 212 \u2013 14 2,812 Total 1,668 984 256 \u2013 92 3,000 4. Segment information continued Capital expenditure Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Intangible assets a 530 257 81 87 63 1,018 Property, plant and equipment b 663 351 171 2,709 144 4,038 Capital expenditure 1,193 608 252 2,796 207 5,056 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Intangible assets a 444 249 82 99 70 944 Property, plant and equipment b 754 320 119 2,449 221 3,863 Capital expenditure excluding spectrum 1,198 569 201 2,548 291 4,807 Purchase of spectrum a 388 91 \u2013 \u2013 \u2013 479 Capital expenditure 1,586 660 201 2,548 291 5,286 a Additions to intangible assets as presented in note 13. b Additions to property, plant and equipment as presented in note 14, inclusive of movement on engineering stores. Geographic segmentation Revenue from external customers Year ended 31 March 2023 \u00a3m 2022 \u00a3m UK 18,154 18,470 Europe, Middle East and Africa, excluding the UK 1,372 1,315 Americas 684 620 Asia Pacific 459 440 Adjusted a revenue 20,669 20,845 a Before specific items. Non-current assets Year ended 31 March 2023 \u00a3m 2022 \u00a3m UK 39,387 38,378 Europe, Middle East and Africa, excluding the UK 740 741 Americas 283 269 Asia Pacific 156 152 Non-current assets a 40,566 39,540 a Comprising the following balances presented in the group balance sheet: intangible assets, property, plant and equipment, right-of-use assets, joint ventures and associates and trade and other receivables and contract assets. 5. Revenue Significant accounting policies that apply to revenue Revenue from contracts with customers in scope of IFRS 15 Most revenue recognised by the group (excluding Openreach, where most revenue is recognised under the scope of IFRS 16) is in scope of IFRS 15 and is subject to the following revenue recognition policy. On inception of the contract we identify a \u201cperformance obligation\u201d for each of the distinct goods or services we have promised to provide to the customer. The consideration specified in the contract with the customer is allocated to each performance obligation identified based on their relative standalone selling prices, and is recognised as revenue as they are satisfied. The table below summarises the performance obligations we have identified for our major service lines and provides information on the timing of when they are satisfied and the related revenue recognition policy. Also detailed in this note is revenue expected to be recognised in future periods for contracts in place at 31 March 2023 that contain unsatisfied performance obligations. Service line Performance obligations Revenue recognition policy Information and communications technology (ICT) and managed networks Provision of networked IT services, managed network services, and arrangements to design and build software solutions. Performance obligations are identified for each distinct service or deliverable for which the customer has contracted, and are considered to be satisfied over the time period that we deliver these services or deliverables. Commitments to provide hardware to customers that are distinct from the other promises are considered to be satisfied at the point in time that control passes to the customer. Revenue for services is recognised over time using a measure of progress that appropriately reflects the pattern by which the performance obligation is satisfied. For time and materials contracts, revenue is recognised as the service is received by the customer. Where performance obligations exist for the provision of hardware, revenue is recognised at the point in time that the customer obtains control of the promised asset. For long-term fixed price contracts revenue recognition will typically be based on the satisfaction of performance obligations in respect of the achievement of contract milestones and customer acceptance, which is the best measure of progress towards the completion of the performance obligation. Fixed access subscriptions Provision of broadband, TV and fixed telephony services including national and international calls, connections, line rental and calling features. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Installation services are recognised as distinct performance obligations if their relationship with the other services in the contract is purely functional. These are satisfied when the customer benefits from the service. Connection services are not distinct performance obligations and are therefore combined with the associated service performance obligation. Fixed subscription charges are recognised as revenue on a straight-line basis over the period that the services are provided. Upfront charges for non-distinct connection and installation services are deferred as contract liabilities and are recognised as revenue over the same period. Variable charges such as call charges are recognised when the related services are delivered. Where installation activities are distinct performance obligations, revenue is recognised at the point in time that the installation is completed. Mobile subscriptions Provision of mobile postpaid and prepaid services, including voice minutes, SMS and data services. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Subscription fees, consisting primarily of monthly charges for access to internet or voice and data services, are recognised as the service is provided. One-off services such as calls outside of plan and excess data usage are recognised when the service is used. Equipment and other services Provision of equipment and other services, including mobile phone handsets and hardware such as set- top boxes and broadband routers provided as part of customer contracts. Performance obligations are satisfied at the point in time that control passes to the customer. For other services, performance obligations are identified based on the distinct goods and services we have committed to provide. Revenue from equipment sales is recognised at the point in time that control passes to the customer. Where payment is not received in full at the time of the sale, such as with equipment provided as part of mobile and fixed access subscriptions, contract assets are recognised for the amount due from the customer that will be recovered over the contract period. Revenue to be recognised is calculated by reference to the relative standalone selling price of the equipment. For other services, revenue is recognised when the related performance obligations are satisfied, which could be over time, in line with contract milestones, or at a point in time depending on the nature of the service. 5. Revenue continued We recognise revenue based on the relative standalone selling price of each performance obligation. Determining the standalone selling price often requires judgement and may be derived from regulated prices, list prices, a cost-plus derived price or the price of similar products when sold on a standalone basis by BT or a competitor. In some cases it may be appropriate to use the contract price when this represents a bespoke price that would be the same for a similar customer in a similar circumstance. The fixed access and mobile subscription arrangements sold by our Consumer business are typically payable in advance, with any variable or one-off charges billed in arrears. Contracts are largely inflation-linked with price increases recognised when effective. Payment is received immediately for direct sales of equipment to customers. Where equipment is provided to customers under mobile and fixed access subscription arrangements, payment for the equipment is received over the course of the contract term. For sales by our enterprise businesses, invoices are issued in line with contractual terms. Payments received in advance are recognised as contract liabilities; amounts billed in arrears are recognised as contract assets. We are applying the practical expedient to recognise revenue \u201cas-invoiced\u201d for certain fixed access and mobile subscription services revenues. Where we have a right to invoice at an amount that directly corresponds with performance to date, we recognise revenue at that amount. We have also adopted the practical expedient not to calculate the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for these contracts. We do not have any material obligations in respect of returns, refunds or warranties. Where we act as an agent in a transaction, such as insurance services offered, we recognise commission net of directly attributable costs. Where the actual and estimated costs to completion of the contract exceed the estimated revenue, a loss is recognised immediately. We exercise judgement in assessing whether the initial set-up, transition and transformation phases of long-term contracts are distinct from the other services to be delivered under the contract and therefore represent distinct performance obligations. This determines whether revenue is recognised in the early stages of the contract, or deferred until delivery of the other services promised in the contract begins. We recognise immediately the entire estimated loss for a contract when we have evidence that the contract is unprofitable. If these estimates indicate that any contract will be less profitable than previously forecast, contract assets may have to be written down to the extent they are no longer considered to be fully recoverable. We perform ongoing profitability reviews of our contracts in order to determine whether the latest estimates are appropriate. Key factors reviewed include: \u2013 Transaction volumes or other inputs affecting future revenues which can vary depending on customer requirements, plans, market position and other factors such as general economic conditions. \u2013 Our ability to achieve key contract milestones connected with the transition, development, transformation and deployment phases for customer contracts. \u2013 The status of commercial relations with customers and the implications for future revenue and cost projections. \u2013 Our estimates of future staff and third party costs and the degree to which cost savings and efficiencies are deliverable. Revenue from lease arrangements in scope of IFRS 16 Some consumer broadband and TV products and arrangements to provide external communications providers with exclusive use of Openreach\u2019s fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16. At inception of a contract, we determine whether the contract is, or contains, a lease following the accounting policy set out in note 15. Arrangements meeting the definition of a lease in which we act as lessor are classified as operating or finance leases at lease inception based on an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case then the lease is a finance lease; if not, it is an operating lease. For sub-leases, we make this assessment by reference to the characteristics of the right-of-use asset associated with the head lease rather than the underlying leased asset. Income from arrangements classified as operating leases is presented as revenue where it relates to our core operating activities, for example leases of fixed-line telecommunications infrastructure to external communications providers and leases of devices to consumer customers as part of fixed access subscription products. Operating lease income from other arrangements is presented within other operating income (note 6). We recognise operating lease payments as income on a straight-line basis over the lease term. Any upfront payments received, such as connection fees, are deferred over the lease term. Determining the lease term is subject to the significant judgements set out in note 15. Where the contract contains both lease and non-lease components, the transaction price is allocated between the components on the basis of relative standalone selling price. Where an arrangement is assessed as a finance lease we derecognise the underlying asset and recognise a receivable equivalent to the net investment in the lease. Finance lease receivables are presented in note 17. The receivable is measured based on future payments to be received discounted using the interest rate implicit in the lease, adjusted for any direct costs. Any difference between the derecognised asset and the finance lease receivable is recognised in the income statement. Where the nature of services delivered relates to our core operating activities it is presented as revenue. Where it relates to non-core activities it is presented within other operating income (note 6). 5. Revenue continued Disaggregation of external revenue The following table disaggregates external revenue by our major service lines and by reportable segment. Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m ICT and managed networks \u2013 1,676 1,676 \u2013 \u2013 3,352 Fixed access subscriptions 4,059 1,625 268 2,716 \u2013 8,668 Mobile subscriptions 3,351 1,074 86 \u2013 \u2013 4 ,511 Equipment and other services 2,270 474 1,298 69 27 4,138 Revenue before specific items 9,680 4,849 3,328 2,785 27 20,669 Specific items a (note 9) 12 Revenue 20,681 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m ICT and managed networks \u2013 1,715 1,672 \u2013 \u2013 3,387 Fixed access subscriptions 3,991 1,696 268 2,564 \u2013 8,519 Mobile subscriptions 3,247 1,176 87 \u2013 \u2013 4,510 Equipment and other services 2,537 465 1,335 65 27 4,429 Revenue before specific items 9,775 5,052 3,362 2,629 27 20,845 Specific items a (note 9) 5 Revenue 20,850 a Relates to regulatory matters classified as specific. See note 9. Revenue expected to be recognised in future periods for performance obligations that are not complete (or are partially complete) as at 31 March 2023 is \u00a312,792m (FY22: \u00a313,502m). Of this, \u00a36,592m (FY22: \u00a37,108m) relates to ICT and managed services contracts and equipment and other services which will substantially be recognised as revenue within three years. Fixed access and mobile subscription services typically have shorter contract periods and so \u00a36,200m (FY22: \u00a36,394m) will substantially be recognised as revenue within two years. Revenue recognised this year relating to performance obligations that were satisfied, or partially satisfied, in previous years was not material. Revenue related to customers\u2019 unexercised rights (for example, unused amounts on prepaid SIM cards) was not material. Lease income Presented within revenue is \u00a32,909m (FY22: \u00a32,745m) income from arrangements classified as operating leases under IFRS 16 and which represent core business activities for the group. Income relates predominantly to Openreach\u2019s leases of fixed-line telecommunications infrastructure to external communications providers, classified as fixed access subscription revenue in the table above, and leases of devices to Consumer customers as part of fixed access subscription offerings, classified as equipment and other services. During the year we also recognised: \u2013 \u00a329m (FY22: \u00a333m) operating lease income from non-core business activities which is presented in other operating income (note 6). Note 15 presents an analysis of payments to be received across the remaining term of operating lease arrangements. \u2013 \u00a358m (FY22: \u00a344m) revenue in relation to upfront gains from arrangements meeting the definition of a finance lease. These arrangements meet the criteria for revenue recognition as they concern leases and sub-leases of telecommunications infrastructure that represent core business activities of the group. \u00a369m (FY22: \u00a368m) of this income relates to the sub-leasing of right-of-use assets. These are primarily operating sub-leases of unutilised properties, and finance sub-leases of telecommunications infrastructure. Contract assets and liabilities Significant accounting policies that apply to contract assets and liabilities We recognise contract assets for goods and services for which control has transferred to the customer before we have the right to bill. These assets mainly relate to mobile handsets provided upfront but paid for over the course of a contract. Contract assets are reclassified as receivables when the right to payment becomes unconditional and we have billed the customer. Contract liabilities are recognised when we have received advance payment for goods and services that we have not transferred to the customer. These primarily relate to fees received for connection and installation services that are not distinct performance obligations. Where the initial set-up, transition or transformation phase of a long-term contract is considered to be a distinct performance obligation we recognise a contract asset for any work performed but not billed. Conversely a contract liability is recognised where these activities are not distinct performance obligations and we receive upfront consideration. In this case eligible costs associated with delivering these services are capitalised as fulfilment costs, see note 17. We provide for expected lifetime losses on contract assets following the policy set out in note 17. 6. Operating costs Year ended 31 March Notes 2023 \u00a3m 2022 \u00a3m (re-presented) a Operating costs by nature Staff costs: Wages and salaries 3,858 3,746 Social security costs 424 400 Other pension costs 20 590 591 Share-based payment expense 22 80 108 Total staff costs 4,952 4,845 Own work capitalised a (1,364) (1,105) Net staff costs 3,588 3,740 Net indirect labour costs a,b 381 470 Net labour costs 3,969 4,210 Product costs 3,368 3,166 Sales commissions 589 628 Payments to telecommunications operators 1,354 1,346 Property and energy costs 1,242 1,028 Network operating and IT costs 913 904 TV programme rights charges c 354 879 Provision and installation 591 678 Marketing and sales 363 312 Net impairment losses on trade receivables and contract assets d 138 102 Other operating costs 103 256 Other operating income (243) (241) Depreciation and amortisation, including impairment charges 4,753 4,405 Total operating costs before specific items 17, 494 17,673 Specific items 9 568 292 Total operating costs 18,062 17, 965 Operating costs before specific items include the following: Leaver costs e 11 15 Research and development expenditure f 683 604 Foreign currency (gains)/losses (9) 3 Inventories recognised as an expense 2,311 2,297 a FY22 comparatives have been re-presented to reclassify \u00a3116m capitalised labour from net indirect labour costs to own work capitalised. This change results from a recent system change and improved analysis which affords better visibility of the nature of capitalised labour costs. b Net of capitalised indirect labour costs of \u00a3824m (FY22: \u00a3755m (re-presented, see footnote a)). c TV programme rights charges relate to programme rights assets which were transferred to the sports joint venture in August 2022, see note 23. d Consists of net impairment losses on trade receivables and contract assets in Consumer of \u00a394m (FY22: \u00a386m), in Enterprise of \u00a330m (FY22: \u00a35m), in Global of \u00a32m (FY22: \u00a37m), in Openreach of \u00a35m (FY22: \u00a33m) and in Other of \u00a31m (FY22: \u00a31m). e Leaver costs are included within wages and salaries, except for leaver costs of \u00a3129m (FY22: \u00a3170m) associated with restructuring costs, which have been recorded as specific items. f Research and development expenditure includes amortisation of \u00a3632m (FY22: \u00a3543m) in respect of capitalised development costs and operating expenses of \u00a351m (FY22: \u00a361m). In addition, the group capitalised software development costs of \u00a3503m (FY22: \u00a3601m). 5. Revenue continued Contract assets and liabilities are as follows: At 31 March 2023 \u00a3m 2022 \u00a3m Contract assets Current 1,565 1,554 Non-current 369 361 1,934 1,915 Contract liabilities Current 859 833 Non-current 193 170 1,052 1,003 \u00a3903m of the contract liability at 31 March 2022 was recognised as revenue during the year (FY22: \u00a3880m). Impairment losses of \u00a346m were recognised on contract assets during the year (FY22: \u00a348m). The expected credit loss provisions recognised against contract assets vary across the group due to the nature of our customers; the expected loss rate at 31 March 2023 was 3% (FY22: 3%). 6. Operating costs continued Depreciation and amortisation, which includes impairment charges, is analysed as follows: Year ended 31 March Notes 2023 \u00a3m 2022 \u00a3m Depreciation and amortisation before impairment charges Intangible assets 13 1,165 1,035 Property, plant and equipment 14 2,878 2,658 Right-of-use assets 15 689 676 Impairment charges Intangible assets 13 \u2013 13 Property, plant and equipment 14 11 11 Right-of-use assets 15 10 12 Total depreciation and amortisation before specific items 4,753 4,405 Impairment charges classified as specific items 9 Intangible assets \u2013 \u2013 Property, plant and equipment \u2013 \u2013 Right-of-use assets 65 \u2013 Total depreciation and amortisation 4,818 4,405 Who are our key management personnel and how are they compensated? Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is shown in the table below: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 23.0 17.7 Post employment benefits a 0.7 0.7 Share-based payments 6.7 6.7 30.4 25.1 a Post employment benefits include cash pension allowances paid to the Chief Executive and Chief Financial Officer. The group does not contribute to defined contribution or defined benefit pension schemes on behalf of key management personnel. Key management personnel are compensated solely in the form of cash and share-based payments. During the current and prior years, key management personnel made no gains from exercise of share options. 7. Employees 2023 2022 Number of employees in the group a Year end '000 Average '000 Year end '000 Average '000 UK 77.6 79.7 79.9 80.2 Non-UK 19.5 19.1 18.5 18.8 Total employees 97.1 98.8 98.4 99.0 Consumer 16.4 16.5 16.6 17. 2 Enterprise 11.4 11.6 11. 5 11. 4 Global 12.6 13.0 13.2 13.8 Openreach 36.6 37.6 37.3 36.4 Other 20.1 20.1 19.8 20.2 Total employees 97.1 98.8 98.4 99.0 a These reflect the full-time equivalent of full- and part-time employees. 9. Specific items Significant accounting policies that apply to specific items Our income statement and segmental analysis separately identify trading results on an adjusted basis, being before specific items. The directors believe that presentation of the group\u2019s results in this way is relevant to an understanding of the group\u2019s financial performance as specific items are those that in management\u2019s judgement need to be disclosed by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing an additional analysis of our reporting trading results. Specific items may not be comparable to similarly titled measures used by other companies. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors. Examples of charges or credits meeting the above definition and which have been presented as specific items in the current and/or prior years include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that items meet the criteria, which are applied consistently from year to year, they are treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. In FY20 we included the impacts of Covid-19 on various balance sheet items as at 31 March 2020 as specific. Any releases to this provision have been released through specific items in subsequent periods. Current and future movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment, will be classified as specific as they are deemed to be related to the divestment of BT Sport operations and linked to the overall fair value of the transaction. Refer to note 25 for further detail. 8. Audit, audit related and other non-audit services The following fees were paid or are payable to the company\u2019s auditors, KPMG LLP and other firms in the KPMG network. Year ended 31 March 2023 \u00a3000 2022 \u00a3000 Fees payable to the company\u2019s auditors and its associates for: Audit services a The audit of the parent company and the consolidated financial statements 13,558 11,40 0 The audit of the company\u2019s subsidiaries 6,274 6,009 19,832 17, 40 9 Audit related assurance services b 2,553 3,169 Other non-audit services All other assurance services 55 127 Total services 22,440 20,705 a Services in relation to the audit of the parent company and the consolidated financial statements. This also includes fees payable for the statutory audits of the financial statements of subsidiary companies. b Includes services that are required by law or regulation to be carried out by an appointed auditor and services that support us to fulfil obligations required by law or regulation. This includes fees for the review of interim results and the accrued fee for the audit of the group\u2019s regulatory financial statements. In FY23 this included fees of \u00a31,000,000 to support divestment transactions (FY22: \u00a3789,000). Fees payable to auditors other than KPMG for audits of certain overseas subsidiaries were \u00a3171,000 (FY22: \u00a3163,000). The BT Pension Scheme is an associated pension fund as defined in the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011. In FY23 KPMG LLP received total fees from the BT Pension Scheme of \u00a31.6m (FY22: \u00a31.6m) in respect of the following services: Year ended 31 March 2023 \u00a3000 2022 \u00a3000 Audit of financial statements of associates 1,622 1,602 Audit-related assurance services 14 16 Total services 1,636 1,618 9. Specific items continued Year ended 31 March 2023 \u00a3m 2022 \u00a3m Revenue Retrospective regulatory matters (12) (5) Specific revenue (12) (5) Operating costs Restructuring charges 300 347 BT Sport disposal 155 \u2013 Sports JV \u2013 subsequent movements 34 \u2013 Retrospective regulatory matters 12 \u2013 Other divestment-related items 2 (36) Covid-19 \u2013 (19) Specific operating costs before depreciation and amortisation 503 292 Impairment charges due to property rationalisation 65 \u2013 Specific operating costs 568 292 Specific operating loss 556 287 Net finance expense Finance expense relating to BT Sport disposal (13) 8 Interest expense on retirement benefit obligation 18 93 Specific net finance expense 5 101 Net specific items charge before tax 561 388 Taxation Tax credit on specific items above (308) (80) Tax charge on re-measurement of deferred tax \u2013 420 (308) 340 Net specific items charge after tax 253 728 Retrospective regulatory matters We recognised net nil impact in relation to historic regulatory matters, with \u00a312m credits recognised in revenue offset by \u00a312m charges recognised within operating costs (FY22: net credit of \u00a35m). These items represent movements in provisions relating to various matters. Restructuring charges We have incurred charges of \u00a3300m (FY22: \u00a3347m) relating to projects associated with our group-wide cost transformation and modernisation programme. Costs primarily relate to leaver costs, consultancy costs, and staff costs associated with colleagues working exclusively on programme activity. The net cash cost of restructuring activity during the year was \u00a3326m (FY22: \u00a3370m). The programme was first announced in May 2020 and runs until the end of FY25. In response to cost inflation, during the year we revised the gross annualised savings target to \u00a33.0bn (previously \u00a32.5bn), with a cost to achieve of \u00a31.6bn (previously \u00a31.3bn). Since embarking on the programme we have achieved gross annualised savings of \u00a32.1bn and incurred costs of \u00a31.1bn. BT Sport disposal During FY23 we completed the disposal of BT Sport operations. We recognised a profit on disposal of \u00a328m in specific items, made up of \u00a3155m charges recognised within operating costs net of \u00a3183m tax credits. We also recognised a \u00a313m credit within finance costs as specific (FY22: \u00a38m charge), relating to a foreign exchange hedging arrangement with the Sports JV, see note 31. Further details on the BT Sport disposal can be found in note 23. Sports JV subsequent movements Subsequent to the disposal, we have recorded a net fair value movement of \u00a334m on the A and C preference shares in the Sports JV (see note 25). Other divestment-related items We recognised a \u00a32m charge (FY22: \u00a336m credit) relating to ongoing divestment projects. Covid-19 In FY20 we recognised one-off charges of \u00a395m relating to the impact of Covid-19 on various balance sheet items. Any releases of this provision have also been booked as a specific item. At 31 March 2023 these provisions had been fully released or utilised. Impairment charges due to property rationalisation During FY23, we recognised a \u00a365m impairment charge as specific (FY22: \u00a3nil), in relation to an ongoing property rationalisation programme. 10. Taxation S ignificant accounting policies that apply to taxation Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group\u2019s subsidiaries, associates and joint ventures operate and generate taxable income. We evaluate positions taken in tax returns where tax regulation is subject to interpretation, and establish provisions if appropriate based on the amounts likely to be paid to tax authorities. Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of our assets and liabilities and their tax base. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred and current income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it is probable that there will be suitable taxable profits against which the deductible temporary difference can be utilised. Deferred tax balances for which there is a right of offset within the same jurisdiction are presented net on the face of the group balance sheet as permitted by IAS 12, with the exception of deferred tax related to our pension schemes which is disclosed within deferred tax assets. Key accounting estimates and significant judgements made in accounting for taxation We seek to pay tax in accordance with the laws of the countries where we do business. However, in some areas these laws are unclear, and it can take many years to agree an outcome with a tax authority or through litigation. We estimate our tax on country-by-country and issue-by-issue bases. Our key uncertainties are whether our intra-group trading model will be accepted by a particular tax authority; whether intra-group payments are subject to withholding taxes and the deductibility of certain compensation payments made in prior years. We provide for the predicted outcome where an outflow is probable, but the agreed amount can differ materially from our estimates. Approximately 75% by value of the provisions are under active tax authority examination and are therefore likely to be re-estimated or resolved in the coming 12 months. \u00a3104m (FY22: \u00a3194m) is included in current tax liabilities or offset against current tax assets where netting is appropriate. Under a downside case an additional amount of \u00a3174m could be required to be paid. This amount is not provided as we don\u2019t consider this outcome to be probable. Deciding whether to recognise deferred tax assets is judgemental. We only recognise them when we consider it is probable that they can be recovered. In making this judgement we consider evidence such as historical financial performance, future financial plans and trends, the duration of existing customer contracts and whether our intra-group pricing model has been agreed by the relevant tax authority. The value of the group\u2019s income tax assets and liabilities is disclosed on the group balance sheet. The value of the group\u2019s deferred tax assets and liabilities is disclosed below. 9. Specific items continued Interest expense on retirement benefit obligation During the year we incurred \u00a318m (FY22: \u00a393m) of interest costs in relation to our defined benefit pension obligations. Tax on specific items A tax credit of \u00a3308m (FY22: \u00a380m) was recognised in relation to specific items. Of this, \u00a3183m relates to the BT Sport disposal. Further details can be found in note 25. Remeasurement of deferred tax balances In FY22 we remeasured our deferred tax balances following the enactment of the new UK corporation tax rate of 25% from April 2023. The corresponding adjustment comprised a net tax charge of \u00a3420m in the income statement and a non-recurring tax credit of \u00a3298m in the statement of comprehensive income. This was classified as a specific item due to its size and the out-of-period nature of this charge. 10. Taxation continued Analysis of our taxation expense for the year Year ended 31 March 2023 \u00a3m 2022 \u00a3m United Kingdom Corporation tax at 19% (FY22: 19%) \u2013 \u2013 Adjustments in respect of earlier years a 63 223 Non-UK taxation Current (67) (78) Adjustments in respect of earlier years 9 7 Total current taxation (expense) 5 152 Deferred taxation Origination and reversal of temporary differences 102 (102) Adjustments in respect of earlier years a 56 (190) Impact of change in UK corporation tax rate to 25% (FY22: 19%) \u2013 (420) Remeasurement of temporary differences 13 (129) Total deferred taxation credit (expense) 171 (841) Total taxation (expense) 176 (689) a In FY22, certain prior period tax issues were resolved at a net tax cost of \u00a369m, comprising a \u00a3263m deferred tax charge and a \u00a3194m current tax credit. Factors affecting our taxation expense for the year The taxation expense on the profit for the year differs from the amount computed by applying the UK corporation tax rate to the profit before taxation as a result of the following factors: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Profit before taxation 1,729 1,963 Expected taxation expense at UK rate of 19% (FY22: 19%) (328) (373) Effects of: (Higher)/lower taxes on non-UK profits \u2013 (4) Net permanent differences between tax and accounting a 352 179 Adjustments in respect of earlier years b 126 40 Prior year non-UK losses used against current year profits 5 20 Non-UK losses not recognised c 9 (2) Re-measurement of deferred tax balances 12 (549) Total taxation credit (expense) 176 (689) Exclude specific items (note 9) (308) 340 Total taxation expense before specific items (132) (349) a Includes income that is not taxable or UK income taxable at a different rate, and expenses for which no tax relief is received. In both FY22 and FY23 this included the benefit of the UK super-deduction. In FY23 it also includes the non-taxable profit on the disposal and revaluation of BT Sport. b Reflects the differences between initial accounting estimates and tax returns submitted to tax authorities, including the release and establishment of provisions for uncertain tax positions. c Reflects losses made in countries where it has not been considered appropriate to recognise a deferred tax asset, as future taxable profits are not probable. 10. Taxation continued Tax components of other comprehensive income Year ended 31 March 2023 Tax credit (expense) \u00a3m 2022 Tax credit (expense) \u00a3m Taxation on items that will not be reclassified to the income statement Pension remeasurements 732 (399) Tax on items that have been or may be reclassified subsequently to the income statement Exchange differences on translation of foreign operations \u2013 \u2013 Fair value movements on cash flow hedges \u2013 net fair value gains or (losses) (90) (31) \u2013 recognised in income and expense \u2013 \u2013 Total tax recognised in other comprehensive income 642 (430) Current tax credit a 8 8 Deferred tax credit (expense) 634 (438) Total tax recognised in other comprehensive income 642 (430) a Includes \u00a3nil (FY22: \u00a3nil) relating to cash contributions made to reduce retirement benefit obligations. Tax (expense) credit recognised directly in equity Year ended 31 March 2023 \u00a3m 2022 \u00a3m Tax (expense) credit relating to share-based payments (9) 11 Deferred taxation Fixed asset temporary differences \u00a3m Retirement benefit obligations a \u00a3m Share- based payments \u00a3m Tax losses \u00a3m Other \u00a3m Jurisdictional offset \u00a3m Total \u00a3m At 1 April 2021 1,587 (926) (20) (66) (135) \u2013 440 Expense (credit) recognised in the income statement 1,326 (33) (5) (434) (13) \u2013 841 Expense (credit) recognised in other comprehensive income \u2013 764 \u2013 (354) 28 \u2013 438 Exchange differences \u2013 \u2013 (11) \u2013 \u2013 \u2013 (11) Acquisition of subsidiary \u2013 \u2013 \u2013 (3) \u2013 \u2013 (3) Transfer from current tax \u2013 \u2013 \u2013 \u2013 (34) \u2013 (34) At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Non-current Deferred tax asset \u2013 (195) (36) (857) (154) 953 (289) Deferred tax liability 2,913 \u2013 \u2013 \u2013 \u2013 (953) 1,960 At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Expense (credit) recognised in the income statement 886 (18) (13) (1,022) (4) \u2013 (171) Expense (credit) recognised in other comprehensive income \u2013 (413) \u2013 (311) 90 \u2013 (634) Expense (credit) recognised in equity \u2013 \u2013 9 \u2013 \u2013 \u2013 9 Exchange differences \u2013 \u2013 \u2013 (4) (3) (7) Transfer to held for sale \u2013 \u2013 \u2013 \u2013 2 \u2013 2 Transfer to current tax \u2013 \u2013 \u2013 \u2013 41 \u2013 41 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 Non-current Deferred tax asset \u2013 (626) (40) (2,194) (28) 2,179 (709) Deferred tax liability 3,799 \u2013 \u2013 \u2013 \u2013 (2,179) 1,620 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 a Includes a deferred tax asset of \u00a38m (FY22: \u00a35m) arising on contributions payable to defined contribution pension plans. The majority of the deferred tax assets and liabilities noted above are anticipated to be realised after more than 12 months. What factors affect our future tax charges? We expect a large proportion of our capital spend on fibre roll-out to be eligible for the Government\u2019s super-deduction regime, which allows for enhanced and accelerated tax relief for qualifying capital expenditure. These enhanced deductions are available for FY22 and FY23, driving a projected UK tax loss and no UK tax payments for these periods. Together with trading losses and pension deficit contribution deductions, these result in c. \u00a38bn of tax losses expected to be carried forward from FY23 to be utilised against UK taxable profit from FY24 onwards. These are represented by a net c. \u00a32.0bn deferred tax asset which is disclosed within the \u00a32,194m deferred tax asset relating to tax losses in the table above. 10. Taxation continued What are our unrecognised tax losses and other temporary differences? At 31 March 2023 we had operating losses and other temporary differences carried forward in respect of which no deferred tax assets were recognised amounting to \u00a33.7bn (FY22: \u00a33.8bn). Our other temporary differences have no expiry date restrictions. The expiry date of operating losses carried forward is dependent upon the tax law of the various territories in which the losses arose. A summary of expiry dates for losses in respect of which restrictions apply is set out below: At 31 March 2023 \u00a3m Expiry Restricted losses Europe \u2013 2024 \u2013 2027 Americas 365 2024 \u2013 2045 Other 3 2024 \u2013 2030 Total restricted losses 368 Unrestricted operating losses 3,073 No expiry Other temporary differences 266 No expiry Total 3,707 At 31 March 2023 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting to \u00a316.8bn (FY22: \u00a316.8bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these losses to be remote. At 31 March 2023 the undistributed earnings of non-UK subsidiaries were \u00a32.5bn (FY22: \u00a31.9bn). No deferred tax liabilities have been recognised in respect of these unremitted earnings because the group is in a position to control the timing of any dividends from subsidiaries and hence any tax consequences that may arise. Under current tax rules, tax of \u00a341m (FY22: \u00a335m) would arise if these earnings were to be repatriated to the UK. 11. Earnings per share How is earnings per share calculated? Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders by the weighted average number of shares in issue after deducting the own shares held by employee share ownership trusts and treasury shares. In calculating the diluted earnings per share, share options outstanding and other potential shares have been taken into account where the impact of these is dilutive. Year ended 31 March 2023 2022 Basic weighted average number of shares (millions) 9,803 9,866 Dilutive shares from share options (millions) 83 105 Dilutive shares from share awards (millions) 171 165 Diluted weighted average number of shares (millions) 10,057 10,136 Basic earnings per share 19.4p 12.9p Diluted earnings per share 18.9p 12.5p The earnings per share calculations are based on profit after tax attributable to equity shareholders of the parent company which excludes non-controlling interests. Profit after tax was \u00a31,905m (FY22: \u00a31,274m) and profit after tax attributable to non-controlling interests was \u00a34m (FY22: \u00a32m). Profit attributable to non-controlling interests is not presented separately in the financial statements as it is not material. 12. Dividends What is the group\u2019s dividend policy? We have a progressive dividend policy to maintain or grow the dividend each year whilst taking into consideration a number of factors including underlying medium-term earnings expectations and levels of business reinvestment. What dividends have been paid? A final dividend of 5.39p per share amounting to approximately \u00a3534m is proposed in respect of the year ended 31 March 2023 (FY22: final dividend of 5.39p per share amounting to \u00a3527m paid in respect of the year ended 31 March 2022). An interim dividend of 2.31p per share amounting to \u00a3226m was paid on 6 February 2023 (FY22: interim dividend of 2.31p per share amounting to \u00a3227m paid). This value may differ from the amount shown for equity dividends paid in the group cash flow statement, which represents the actual cash paid in relation to dividend cheques that have been presented over the course of the financial year. 2023 2022 Year ended 31 March pence per share \u00a3m pence per share \u00a3m Final dividend in respect of the prior year 5.39 527 \u2013 \u2013 Interim dividend in respect of the current year 2.31 226 2.31 227 7.70 753 2.31 227 13. Intangible assets Significant accounting policies that apply to intangible assets We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method is used. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets (including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note. Acquired intangible assets \u2013 customer relationships and brands Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them. Telecommunications licences Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date. Computer software Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, where it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet these criteria and research costs are expensed as incurred. Our development costs which give rise to internally developed software include upgrading the network architecture or functionality and developing service platforms aimed at offering new services to our customers. Other Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a straight-line basis over their useful economic life or the term of the contract. Estimated useful economic lives The estimated useful economic lives assigned to the principal categories of intangible assets are as follows: \u2013 Computer software 2 to 10 years \u2013 Telecommunications licences 2 to 20 years \u2013 Customer relationships and brands 1 to 15 years Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. 13. Intangible assets continued Goodwill \u00a3m Customer relationships and brands a \u00a3m Telecoms licences and other b \u00a3m Internally developed software c \u00a3m Purchased software c \u00a3m Total \u00a3m Cost At 1 April 2021 7, 838 3,383 3,013 4,753 1,135 20,122 Additions d \u2013 \u2013 479 793 151 1,423 Acquisitions 94 \u2013 \u2013 \u2013 2 96 Disposals and adjustments f (7) \u2013 (3) (239) (272) (521) Transfers \u2013 \u2013 1 45 (44) 2 Exchange differences 43 \u2013 \u2013 1 (1) 43 Transfers to assets held for sale e (51) \u2013 \u2013 (7) \u2013 (58) At 31 March 2022 7,917 3,383 3,490 5,346 971 21,107 Additions \u2013 \u2013 \u2013 815 203 1,018 Acquisitions \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f (21) \u2013 \u2013 (466) 151 (336) Transfers \u2013 \u2013 \u2013 30 (38) (8) Exchange differences 72 \u2013 1 2 7 82 Transfer to assets held for sale e (13) \u2013 \u2013 \u2013 \u2013 (13) At 31 March 2023 7,955 3,383 3,491 5,727 1,294 21,850 Accumulated amortisation At 1 April 2021 \u2013 2,238 734 3,299 494 6,765 Amortisation charge for the year g \u2013 231 179 529 96 1,035 Impairment g \u2013 \u2013 \u2013 \u2013 13 13 Disposals and adjustments f \u2013 \u2013 (5) (229) (278) (512) Transfers \u2013 \u2013 \u2013 (2) 2 \u2013 Exchange differences \u2013 \u2013 \u2013 1 (1) \u2013 Transfers to assets held for sale e \u2013 \u2013 \u2013 (3) \u2013 (3) At 31 March 2022 \u2013 2,469 908 3,595 326 7,298 Amortisation charge for the year g \u2013 231 185 596 153 1,165 Impairment g \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f \u2013 \u2013 1 (389) 79 (309) Transfers \u2013 \u2013 \u2013 (56) 56 \u2013 Exchange differences \u2013 \u2013 1 1 7 9 At 31 March 2023 \u2013 2,700 1,095 3,747 621 8,163 Carrying amount At 31 March 2022 7,917 914 2,582 1,751 645 13,809 At 31 March 2023 7,955 683 2,396 1,980 673 13,687 a The remaining unamortised balance of customer relationships and brands relates to customer relationships recognised on acquisition of EE. b Telecoms licences and other primarily represents spectrum licences. These include 2100 MHz licence with book value of \u00a3643m (FY22: \u00a3693m), 1800 MHz with book value of \u00a3590m (FY22: \u00a3636m), 700Mhz with book value of \u00a3281m (FY22: \u00a3297m), 3400 MHz with book value of \u00a3242m (FY22: \u00a3258m) and 2600 MHz with book value of \u00a3206m (FY22: \u00a3227m). Spectrum licences are being amortised over a period between 11 and 19 years. c Includes a carrying amount of \u00a31,125m (FY22: \u00a31,046m) in respect of assets under construction, which are not yet amortised. d Additions to telecoms licences and other assets in FY22 include \u00a3479m recognised in relation to spectrum which represents the amount paid to Ofcom to secure the spectrum bands together with the related interference mitigation provision. e For a breakdown of assets held for sale see note 23. f Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully amortised assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated amortisation following review of fixed asset registers. These adjustments do not impact the net carrying amount of any asset class. g In previous years impairment charges were included within the amortisation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. 13. Intangible assets continued Impairment of goodwill Significant accounting policies that apply to impairment of goodwill We perform an annual goodwill impairment review. Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Our CGUs are deemed to be Consumer, Enterprise and Global. We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes. The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year have been extrapolated using perpetuity growth rates. Significant judgements and key accounting estimates made in reviewing goodwill for impairment Determining our CGUs The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these generate independent revenue streams. Our determination of CGUs is unchanged from FY22. From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs into a combined \u2018Consumer\u2019 CGU. Estimating value in use Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have not been adjusted. 13. Intangible assets continued We tested our goodwill for impairment as at 31 March 2023. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment and sensitivities are disclosed below. Cost Consumer \u00a3m Legacy BT Consumer \u00a3m Legacy EE \u00a3m Enterprise \u00a3m Global \u00a3m Total \u00a3m At 1 April 2021 \u2013 1,183 2,768 3,475 412 7, 838 Acquisitions and disposals \u2013 \u2013 \u2013 94 (7) 87 Transfer 3,951 (1,183) (2,768) \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 39 43 Transfer to assets held for sale a (51) \u2013 \u2013 \u2013 \u2013 (51) At 31 March 2022 3,900 \u2013 \u2013 3,573 444 7,917 Acquisitions and disposals (26) \u2013 \u2013 4 1 (21) Transfer \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 68 72 Transfer to assets held for sale \u2013 \u2013 \u2013 (4) (9) (13) At 31 March 2023 3,874 \u2013 \u2013 3,577 504 7,955 a Assets transferred to held for sale during FY22 relate to the sale of our BT Sport operations. See note 23. What discount rate have we used? The pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. The assumptions used in the calculation of the group\u2019s weighted average cost of capital are benchmarked to externally available data. The pre-tax discount rate used in performing the value in use calculation in FY23 was 9.4% (FY22: 7.6%). We have used the same discount rate for all CGUs except Global where we have used 9.7% (FY22: 7.9%) reflecting higher risk in some of the countries in which Global operates. In FY23 we changed the calculation methodology of the group\u2019s weighted average cost of capital. The most significant change relates to the nominal interest rate for debt which we previously benchmarked to a 5-year historic average. We now use a spot rate to better reflect the recent significant increases in interest rates by the Bank of England, and the increase in our discount rate is largely attributable to this. The pre-tax discount rate calculated under the previous methodology would have been 7.8%. What growth rates have we used? The perpetuity growth rates are determined based on the forecast market growth rates of the regions in which the CGU operates, and reflect an assessment of the long-term growth prospects of that market. The growth rates have been benchmarked against external data for the relevant markets. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors. We used a perpetuity growth rate of 2.4% (FY22: 2.3%) for Global and 2.0% (FY22: 2.0%) for Enterprise and Consumer. What sensitivities have we applied? There is significant headroom in our Enterprise and Consumer CGUs. For Global, the value in use exceeds the carrying value of the CGU by approximately \u00a30.7bn (FY22: \u00a33.9bn) due mainly to market conditions and the increased weighted average cost of capital. Any of the following changes in assumptions in isolation would cause the recoverable amount for the CGU to equal its carrying amount: \u2013 A reduction in the perpetuity growth rate from our 2.4% assumption to a revised assumption of a perpetuity decline rate of 3.9%; \u2013 An increase in the discount rate from our 9.7% assumption to a revised assumption of 14.4%; or \u2013 Shortfalls in trading performance against forecast resulting in operating cash flows decreasing by 41% each year and in perpetuity. 14. Property, plant and equipment Significant accounting policies that apply to property, plant and equipment Our property, plant and equipment is included at historical cost, net of accumulated depreciation, government grants and any impairment charges. Property, plant and equipment acquired through business combinations is initially recorded at fair value and subsequently accounted for on the same basis as our existing assets. We derecognise items of property, plant and equipment on disposal or when no future economic benefits are expected to arise from the continued use of the asset. The difference between the sale proceeds and the net book value at the date of disposal is recognised in operating costs in the income statement. Included within the cost of network infrastructure and equipment are direct and indirect labour costs, materials and directly attributable overheads. We depreciate property, plant and equipment on a straight-line basis from the time the asset is available for use, to write off the asset\u2019s cost over the estimated useful life taking into account any expected residual value. Freehold land is not depreciated. Estimated useful economic lives The estimated useful lives assigned to principal categories of assets are as follows: Land and buildings \u2013 Freehold buildings 14 to 50 years \u2013 Short-term leasehold improvements Shorter of 10 years or lease term \u2013 Leasehold land and buildings Shorter of unexpired portion of lease or 40 years Network infrastructure Transmission equipment \u2013 Duct 40 years \u2013 Cable 3 to 25 years \u2013 Fibre 5 to 20 years Exchange equipment 2 to 13 years Other network equipment 2 to 20 years Other assets \u2013 Motor vehicles 2 to 10 years \u2013 Computers and office equipment 3 to 7 years Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively. Network share assets Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE was recognised at fair value within tangible assets, and depreciated in line with policy. Subsequent additions are recorded at cost. Impairment of property, plant and equipment We test property, plant and equipment for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, we assess the recoverable amount by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant asset and the fair value less costs to dispose. If it is not possible to determine the recoverable amount for the individual asset then we assess impairment by reference to the relevant cash generating unit as described in note 13. Building Digital UK (BDUK) government grants We receive government grants in relation to BDUK and other rural superfast broadband contracts. Where we have achieved certain service levels, or delivered the network more efficiently than anticipated, we have an obligation to either re-invest or repay grant funding. Where this is the case, we recognise deferred income in respect of the funding that will be re-invested or repaid, and make a corresponding adjustment to the carrying amount of the related property, plant and equipment. Assessing the timing of whether and when we change the estimated take-up assumption is judgemental as it involves considering information which is not always observable. Our consideration on whether and when to change the base case assumption is dependent on our expectation of the long-term take-up trend. Our assessment of how much grant income to defer includes consideration of the difference between the take-up percentage agreed with the local authority and the likelihood of actual take-up. The value of the government grants deferred is disclosed in note 18. 14. Property, plant and equipment continued Land and buildings \u00a3m Network infrastructure Other a \u00a3m Assets under construction \u00a3m Total \u00a3m Held by Openreach \u00a3m Held by other units \u00a3m Cost At 1 April 2021 946 29,108 25,488 1,520 990 58,052 Additions b 87 \u2013 111 89 3,548 3,835 Transfers 18 2,128 813 156 (3 ,117) (2) Disposals and adjustments c (28) 40 (1,974) (271) 29 (2,204) Transfer to assets held for sale d \u2013 \u2013 \u2013 (50) (4) (54) Exchange differences (1) \u2013 1 \u2013 \u2013 \u2013 At 31 March 2022 1,022 31,276 24,439 1,444 1,446 59,627 Additions b 7 \u2013 129 7 3,947 4,090 Transfers e 89 2,617 913 211 (3,822) 8 Disposals and adjustments c 31 (118) (183) (33) (70) (373) Transfer to assets held for sale d \u2013 \u2013 (108) (13) \u2013 (121) Exchange differences 16 \u2013 99 6 1 122 At 31 March 2023 1,165 33,775 25,289 1,622 1,502 63,353 Accumulated depreciation At 1 April 2021 612 16,076 20,946 1,137 \u2013 38,771 Depreciation charge for the year f 37 1,372 1,092 157 \u2013 2,658 Impairment f \u2013 \u2013 \u2013 11 \u2013 11 Transfers \u2013 \u2013 (1) 1 \u2013 \u2013 Disposals and adjustments c (28) 28 (1,985) (240) \u2013 (2,225) Transfer to assets held for sale d \u2013 \u2013 \u2013 (41) \u2013 (41) Exchange differences \u2013 \u2013 (2) \u2013 \u2013 (2) At 31 March 2022 621 17,476 20,050 1,025 \u2013 39,172 Depreciation charge for the year f 50 1,466 1,144 218 \u2013 2,878 Impairment f \u2013 \u2013 \u2013 11 \u2013 11 Transfers e \u2013 195 (192) (4) \u2013 (1) Disposals and adjustments c 32 (139) (133) (36) \u2013 (276) Transfer to assets held for sale d \u2013 \u2013 (106) (11) \u2013 (117) Exchange differences 13 \u2013 91 7 \u2013 111 At 31 March 2023 716 18,998 20,854 1,210 \u2013 41,778 Carrying amount At 31 March 2022 401 13,800 4,389 419 1,446 20,455 Engineering stores \u2013 \u2013 \u2013 \u2013 144 144 Total at 31 March 2022 401 13,800 4,389 419 1,590 20,599 At 31 March 2023 449 14,777 4,435 412 1,502 21,575 Engineering stores \u2013 \u2013 \u2013 \u2013 92 92 Total at 31 March 2023 449 14,777 4,435 412 1,594 21,667 a Other mainly comprises motor vehicles, computers and fixtures and fittings. b Net of government grants of \u00a3150m (FY22: \u00a378m). c Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully depreciated assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated depreciation following review of fixed asset registers, and adjustments resulting from changes in assumptions used in calculating lease-end obligations where the corresponding asset is capitalised. d Transfers to assets held for sale are detailed in note 23. e Following review of fixed asset registers during the year we transferred \u00a3195m accumulated depreciation relating to Openreach network infrastructure that was historically recorded against other units. Prior year comparatives have not been restated as the impact is not qualitatively material. There is no impact on the segmentation of the profit and loss depreciation charge as disclosed in note 4. f In previous years impairment charges were included within the depreciation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. 14. Property, plant and equipment continued Included within the above disclosure are assets used in arrangements which represent core business activities for the group and which meet the definition of operating leases: \u2013 \u00a314,777m (FY22: \u00a313,800m) of the carrying amount of the network infrastructure asset class represents Openreach\u2019s network infrastructure. The majority of the associated assets are used to deliver fixed-line telecommunications services that have been assessed as containing operating leases, to both internal and external communications providers. Network infrastructure held by Openreach is presented separately in the table above; however it is not practicable to separate out infrastructure not used in operating lease arrangements. \u2013 Other assets includes devices with a carrying amount of \u00a3163m (FY22: \u00a3169m) that are made available to retail customers under arrangements that contain operating leases. These are not presented separately in the table above as they are not material relative to the group\u2019s overall asset base. The carrying amount of land and buildings, including leasehold improvements, comprised: At 31 March 2023 \u00a3m 2022 \u00a3m Freehold 80 92 Leasehold 369 309 Total land and buildings 449 401 Network infrastructure Some of our network assets are jointly controlled by EE Limited with Hutchison 3G UK Limited. These relate to shared 3G network and certain elements of network for 4G rural sites. The net book value of the group\u2019s share of assets controlled by its joint operation MBNL is \u00a3721m (FY22: \u00a3562m) and is recorded within network infrastructure. Included within this is \u00a366m (FY22: \u00a373m), being the group\u2019s share of assets owned by its joint operation MBNL. Within network infrastructure are assets with a net book value of \u00a310.9bn (FY22: \u00a310.3bn) which have useful economic lives of more than 18 years. 15. Leases Significant accounting policies that apply to leases Identifying whether a lease exists At inception of a contract, we determine whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration. In making this assessment, we consider whether: \u2013 The contract involves the use of an identified asset, either explicitly or implicitly. The asset must be physically distinct or represent substantially all the capacity of a physically distinct asset. Assets that a supplier has a substantive right to substitute are not considered distinct. \u2013 The lessee (either the group, or the group\u2019s customers) has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and \u2013 The lessee has the right to direct the use of the asset, in other words, has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. Where practicable, and by class of underlying asset, we have elected to account for leases containing a lease component and one or more non-lease components as a single lease component. Where this election has been taken, it has been applied to the entire asset. Lessee accounting We recognise a lease liability and right-of-use asset at the commencement of the lease. Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using the group\u2019s incremental borrowing rate. The lease term is the non-cancellable period of the lease adjusted for the impact of any extension options that we are reasonably certain that the lessee will exercise, or termination options that we are reasonably certain that the lessee will not exercise. The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to obtain an asset of similar value. Lease payments include: \u2013 fixed payments \u2013 variable lease payments that depend on an index or rate \u2013 amounts expected to be paid under residual value guarantees \u2013 the exercise price of any purchase options that we are reasonably certain to exercise \u2013 payments due over optional renewal periods where we are reasonably certain to renew \u2013 penalties for early termination of the lease where we are reasonably certain to terminate early Lease liabilities are subsequently measured at amortised cost using the effective interest method. They are remeasured if there is a change in future lease payments, including changes in the index or rate used to determine those payments, or the amount we expect to be payable under a residual value guarantee. We also remeasure lease liabilities where the lease term changes. This occurs when the non-cancellable period of the lease changes, or on occurrence of a significant event or change in circumstances within the control of the lessee and which changes our initial assessment in regard to whether the lessee is reasonably certain to exercise extension options or not to exercise termination options. Where the lease term changes we remeasure the lease liability using the group\u2019s incremental borrowing rate at the date of reassessment. Where a significant event or change in circumstances does not occur, the lease term remains unchanged and the carrying amounts of the lease liability and associated right-of-use asset will decline over time. Right-of-use assets are initially measured at the initial amount of the corresponding lease liabilities, adjusted for any prepaid lease payments, plus any initial direct costs incurred and an estimate of any decommissioning costs that have been recognised as provisions, less any lease incentives received. They are subsequently depreciated using the straight-line method to the earlier of the end of the useful life of the asset or the end of the lease term. Right-of-use assets are tested for impairment following the policy set out in note 14 and are adjusted for any remeasurement of lease liabilities. We have elected not to recognise lease liabilities and right-of-use assets for short-term leases that have a lease term of 12 months or less, and leases of low-value assets with a purchase price under \u00a35,000. We recognise payments for these items as an expense on a straight-line basis over the lease term. Any variable lease payments that do not depend on an index or rate, such as usage-based payments, are recognised as an expense in the period to which the variability relates. Lessor accounting At inception or on modification of a contract that contains a lease component, we allocate the consideration in the contract to each lease component on the basis of their relative standalone prices. When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, we make an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, we consider certain indicators such as whether the lease is for the major part of the economic life of the asset. When we are an intermediate lessor, we account for our interests in the headlease and the sublease separately. We assess the lease classification of a sublease with reference to the right-of-use asset arising from the headlease, not with reference to the underlying asset. If a headlease is a short-term lease to which we apply the exemption described above, then we classify the sublease as an operating lease. If an arrangement contains lease and non-lease components, then we apply IFRS 15 to allocate the consideration in the contract. We apply the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. We further regularly review estimated unguaranteed residual values used in calculating the gross investment in the lease. We recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of \u2018other revenue\u2019. Significant judgements made in accounting for leases The lease term is a key determinant of the size of the lease liability and right-of-use asset recognised where the group acts as lessee; and the deferral period for any upfront connection charges where the group acts as lessor. Determining the lease term requires judgement to evaluate whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options. Key facts and circumstances that create an incentive to exercise those options are considered; these include: \u2013 Our anticipated operational, retail and office property requirements in the mid and long term. \u2013 The availability of suitable alternative sites. \u2013 Costs or penalties associated with exiting lease arrangements relative to the benefits to be gained, including costs of removing leasehold improvements or relocating, and indirect costs such as disruption to business. \u2013 Significant investments in leased sites, in particular those with useful lives beyond the lease term. \u2013 Costs associated with extending lease arrangements including rent increases during secondary lease periods. Our definition of \u2018reasonable certainty\u2019, and therefore the lease term, will often align with the judgements made in our medium-term plan, in particular for leases of non-specialised property and equipment on rolling (or \u2018evergreen\u2019) arrangements that continue until terminated and which can be exited without significant penalty. Following initial determination of the lease term, we exercise judgement in evaluating whether events or changes in circumstances are sufficiently significant to change the initial assessment of whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options; and in the subsequent reassessment of the lease term. Key judgements exercised in setting the lease term The quantum of the lease liability and right-of-use asset currently recognised on our balance sheet is most significantly affected by the judgement exercised in setting the lease term for the arrangement under which the bulk of our operational UK property estate is held. Setting the lease term for our leased cell sites has also involved the use of judgement, albeit to a lesser degree. 15. Leases continued UK operational property portfolio Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we may either vacate some or all properties or purchase the entire estate. If neither option is taken the lease continues to the next unilaterally available break point in 2041. The lease liability recognised for the arrangement reflects a lease end date of 2031. On initial recognition we concluded that, although the majority of these properties are expected to be needed on a long-term basis, we couldn\u2019t be reasonably certain that we wouldn\u2019t exercise the termination option or that we would exercise the purchase option. In coming to this conclusion, we had due regard to material sub-lease arrangements relating to the estate. As time progresses our assessment may change; if this happens, we will remeasure the lease liability and right-of-use asset to reflect either the rentals due for any properties we will continue to occupy, or the cost of purchasing the estate, using an updated discount rate. There would be no overall impact on net assets. If the assessment were to change at the balance sheet date 31 March 2023: \u2013 Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a33bn and \u00a35bn \u2013 Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a31bn and \u00a32bn Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects the significant uncertainty around key variables used to determine cash outflows, especially future inflation and which properties the group will be able to exit prior to or in 2031. Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated from the disposal, repurposing or subleasing of properties retained post-2031. We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were not reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these options. Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion. We exercise similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not exercise termination options associated with other leased properties. In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions to exit a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a termination option until implementation of the associated business plan has progressed to a stage that we are committed to exiting the property. At that point we reassess the lease term by reference to the time we expect to remain in occupation of the property and any notice period associated with exercise of the option. Cell sites Most of the liability recognised in respect of leased cell sites relates to multi-site arrangements with commercial providers. The fixed- term nature of these arrangements means it has not been necessary to exercise significant judgement when determining the lease term. Where the arrangements offer extension options we have been required to conclude whether the options are reasonably certain to be exercised. Although the balance sheet could be materially affected by the conclusion reached in regard to these options, we have not been required to exercise a significant degree of judgement in arriving at the lease term having regard to the period of time covered by the options, the difficulty in predicting the group\u2019s long-term network requirements, and the relatively high threshold that \u2018reasonably certain\u2019 represents. A smaller proportion of the cell site liability relates to arrangements with individual landlords which are either rolling or can be exited with notice. When setting the initial lease term for these arrangements we exercised significant judgement in establishing the period that we are reasonably certain to require use of the site. We broadly aligned lease terms with our medium-term planning horizon after assessing the relative strengths of the following factors: \u2013 Long-term economic incentives to remain on sites including existing capital improvements; \u2013 A need to maintain flexibility in our ability to develop and manage our network infrastructure to react quickly to technological developments and evolving capacity requirements; and \u2013 Incentives to renegotiate arrangements in the medium term to gain more security over sites to support future capital investment. Although significant judgement has been exercised in determining the lease term, reaching an alternative conclusion would not have a material impact on the balance sheet having regard to the most feasible alternative lease terms. Subsequently, we consider key events that trigger reassessment of lease terms to be developments which resolve uncertainty around our economic incentive to remain on individual sites in the long term. These are primarily lease renegotiations and significant capital investments, for example that associated with our 5G rollout and other capital refresh programmes. 15. Leases continued 15. Leases continued Right-of-use assets Most of our right-of-use assets are associated with our leased property portfolio, specifically our office, retail and exchange estate. We also lease a significant proportion of our network infrastructure, including mobile cell and switch sites. Land and buildings \u00a3m Network infrastructure \u00a3m Motor vehicles \u00a3m Other \u00a3m Total \u00a3m At 1 April 2021 4,332 145 375 11 4,863 Additions a 249 13 110 1 373 Depreciation charge for the year (526) (31) (115) (4) (676) Impairment b (6) (6) \u2013 \u2013 (12) Transfer to assets held for sale (2) \u2013 \u2013 \u2013 (2) Other movements c (106) (11) (1) 1 (117) At 31 March 2022 3,941 110 369 9 4,429 Additions a 203 16 150 2 371 Depreciation charge for the year (521) (32) (131) (5) (689) Impairment b (75) \u2013 \u2013 \u2013 (75) Transfer to assets held for sale (3) \u2013 \u2013 \u2013 (3) Other movements c (49) 1 (3) (1) (52) At 31 March 2023 3,496 95 385 5 3,981 a Additions comprise increases to right-of-use assets as a result of entering into new leases, and upwards remeasurement of existing leases arising from lease extensions or reassessments and increases to lease payments. b In previous years impairment charges were included within the depreciation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Impairment charge in FY23 relates primarily to the early exit of leases as a result of ongoing property rationalisation activity. c Other movements primarily relate to terminated leases and downwards remeasurements of right-of-use assets arising from reductions or reassessments of lease terms and decreases in lease payments. Lease liabilities Lease liabilities recognised are as follows: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Current 800 795 Non-current 4,559 4,965 5,359 5,760 The following amounts relating to the group\u2019s obligations under lease arrangements were recognised in the income statement in the year: \u2013 Interest expense of \u00a3133m (FY22: \u00a3133m) accrued on lease liabilities. \u2013 Variable lease payments of \u00a338m (FY22: \u00a324m) which are not dependent on an index or rate and which have not been included in the measurement of lease liabilities. Expenses relating to leases of low-value assets and short-term leases for which no right-of-use asset or lease liability has been recognised were not material. The total cash outflow for leases in the year was \u00a3860m (FY22: \u00a3792m). Our cash flow statement and normalised free cash flow reconciliation present \u00a3727m (FY22: \u00a3659m) of the cash outflow as relating to the principal element of lease liability payments, with the remaining balance of \u00a3133m (FY22: \u00a3133m) presented within interest paid. Note 29 presents a maturity analysis of the payments due over the remaining lease term for lease liabilities currently recognised on the balance sheet. This analysis only includes payments to be made over the reasonably certain lease term. Cash outflows are likely to exceed these amounts as payments will be made on optional periods that we do not currently consider to be reasonably certain, and in respect of leases entered into in future periods. 15. Leases continued Other information relating to leases At 31 March 2023 the group was committed to future minimum lease payments of \u00a3145m in respect of leases which have not yet commenced and for which no lease liability has been recognised (31 March 2022: \u00a339m). The following table analyses cash payments to be received across the remaining term of operating lease arrangements where BT is lessor: At 31 March 2023 To be recognised as revenue (note 5) \u00a3m To be recognised as other operating income (note 6) \u00a3m Total \u00a3m Less than one year 416 19 435 One to two years 131 15 146 Two to three years 46 15 61 Three to four years 13 14 27 Four to five years 10 13 23 More than five years \u2013 20 20 Total undiscounted lease payments 616 96 712 At 31 March 2022 Less than one year 446 20 466 One to two years 148 13 161 Two to three years 40 12 52 Three to four years 3 12 15 Four to five years 3 12 15 More than five years \u2013 24 24 Total undiscounted lease payments 640 93 733 16. Programme rights Significant accounting policies that apply to programme rights Programme rights are recognised on the balance sheet from the point at which the legally enforceable licence period begins. They are accounted for as inventory and held at the lower of cost and net realisable value. They are initially recognised at cost and are consumed from the point at which they are available for use, on a straight-line basis over the programming period, or the remaining licence term, as appropriate, which is generally 12 months. Additions reflect TV programme rights for which the legally enforceable licence period has started during the year. Rights for which the licence period has not started are disclosed as contractual commitments in note 32. Payments made to receive commissioned or acquired programming in advance of the legal right to broadcast the programmes are classified as prepayments (see note 17). No contractual commitments or prepayments exist in respect of programme rights at 31 March 2023 following the BT Sport divestment during the year. Programme rights were disposed in year as part of the BT Sport divestment, see note 23 for further details. Total \u00a3m At 1 April 2021 328 Additions 861 Release (879) At 1 April 2022 310 Additions 676 Release (354) Disposal (632) At 31 March 2023 \u2013 17. Trade and other receivables Significant accounting policies that apply to trade and other receivables Trade receivables are recognised where the right to receive payment from customers is conditional only on the passage of time. We initially recognise trade and other receivables at fair value, which is usually the original invoiced amount. They are subsequently carried at amortised cost using the effective interest method. The carrying amount of these balances approximates to fair value due to the short maturity of amounts receivable. We provide services to consumer and business customers, mainly on credit terms. We know that certain debts due to us will not be paid through the default of a small number of our customers. Because of this, we recognise an allowance for doubtful debts on initial recognition of receivables, which is deducted from the gross carrying amount of the receivable. The allowance is calculated by reference to credit losses expected to be incurred over the lifetime of the receivable. In estimating a loss allowance we consider historical experience and informed credit assessment alongside other factors such as the current state of the economy and particular industry issues. We consider reasonable and supportable information that is relevant and available without undue cost or effort. Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss experiences for the relevant aged category as well as forward-looking information and general economic conditions. Allowances are calculated by individual CFUs in order to reflect the specific nature of the customers relevant to that CFU. The group utilises factoring arrangements for selected trade receivables. Trade receivables that are subject to debt factoring arrangements are derecognised if they meet the conditions for derecognition detailed in IFRS 9 \u2018Financial instruments\u2019. Contingent assets such as any insurance recoveries which we expect to recoup, have not been recognised in the financial statements as these are only recognised within trade and other receivables when their receipt is virtually certain. At 31 March 2023 \u00a3m 2022 \u00a3m Current Trade receivables 1,395 1,339 Prepayments 545 523 Accrued income 158 150 Deferred contract costs 369 336 Finance lease receivables a 29 3 Amounts due from joint ventures 268 \u2013 Other assets a,b 296 273 3,060 2,624 Non-current Deferred contract costs 211 226 Finance lease receivables a 98 90 Other assets a,b 194 21 503 337 a In previous years finance lease receivables were included within other receivables but are now presented separately. FY22 comparatives have been re-presented for comparability. b Other assets comprise prepayments and \u00a370m (FY22: \u00a3nil) of deferred cash consideration relating to the disposal of BT Sport, see note 23. Amounts due from joint ventures relates to a sterling Revolving Credit Facility (RCF) provided to the Sports JV formed during the year, see note 23. The RCF is in place to provide short-term liquidity required by the Sports JV to fund working capital and commitments to sports rights holders, up to a maximum of \u00a3300m (expected to decrease to \u00a3200m during FY24). Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with group\u2019s external short-term borrowings, and is held as a financial asset at amortised cost. The expected loss provision is immaterial. Trade receivables are stated after deducting allowances for doubtful debts, as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 223 378 Expense 84 35 Utilised (142) (189) Exchange differences 3 (1) At 31 March 168 223 Included within the movements above are certain items which have been classified as a specific item (see note 9). In FY23, \u00a3nil of expected credit loss provisions recognised as a specific item were released (FY22: \u00a319m release) reflecting lower than expected credit losses. 17. Trade and other receivables continued The expected credit loss allowance for trade receivables was determined as follows: Past due and not specifically impaired At 31 March Not past due \u00a3m Trade receivables specifically impaired net of provision \u00a3m Between 0 and 3 months \u00a3m Between 3 and 6 months \u00a3m Between 6 and 12 months \u00a3m Over 12 months \u00a3m Total \u00a3m 2023 Expected loss rate % 1% 75% 10% 46% 41% 52% 11% Gross carrying amount 1,030 20 265 48 59 141 1,563 Loss allowance (8) (15) (26) (22) (24) (73) (168) Net carrying amount 1,022 5 239 26 35 68 1,395 2022 Expected loss rate % 1% 84% 12% 24% 33% 69% 14% Gross carrying amount 946 20 280 63 70 183 1,562 Loss allowance (8) (17) (34) (15) (23) (126) (223) Net carrying amount 938 3 246 48 47 57 1,339 Trade receivables not past due and accrued income are analysed below by CFU. Trade receivables not past due Accrued income At 31 March 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Consumer 309 324 82 76 Enterprise 180 168 2 \u2013 Global 533 446 \u2013 \u2013 Openreach \u2013 \u2013 70 71 Other \u2013 \u2013 4 3 Total 1,022 938 158 150 Given the broad and varied nature of our customer base, the analysis of trade receivables not past due and accrued income by CFU is considered the most appropriate disclosure of credit concentrations. Deferred contract costs Significant accounting policies that apply to deferred contract costs We capitalise certain costs associated with the acquisition and fulfilment of contracts with customers and amortise them over the period that we transfer the associated services. Connection costs are deferred as contract fulfilment costs because they allow satisfaction of the associated connection performance obligation and are considered recoverable. Sales commissions and other third party contract acquisition costs are capitalised as costs to acquire a contract unless the associated contract term is less than 12 months, in which case they are expensed as incurred. Capitalised costs are amortised over the minimum contract term. A portfolio approach is used to determine contract term. Where the initial set-up, transition and transformation phases of long-term contractual arrangements represent distinct performance obligations, costs in delivering these services are expensed as incurred. Where these services are not distinct performance obligations, we capitalise eligible costs as a cost of fulfilling the related service. Capitalised costs are amortised on a straight-line basis over the remaining contract term, unless the pattern of service delivery indicates a more appropriate profile. To be eligible for capitalisation, costs must be directly attributable to specific contracts, relate to future activity, and generate future economic benefits. Capitalised costs are regularly assessed for recoverability. 17. Trade and other receivables continued The following table shows the movement on deferred costs: Deferred connection costs \u00a3m Deferred contract acquisition costs \u2013 commissions \u00a3m Deferred contract acquisition costs \u2013 dealer incentives \u00a3m Transition and transformation \u00a3m Total \u00a3m At 1 April 2021 32 94 348 85 559 Additions 17 98 291 50 456 Amortisation (14) (78) (308) (33) (433) Impairment (1) (5) (10) (11) (27) Other (10) 15 3 (1) 7 At 31 March 2022 24 124 324 90 562 Additions 15 100 285 70 470 Amortisation (15) (94) (276) (67) (452) Impairment \u2013 (1) (1) \u2013 (2) Other (2) 2 (2) 4 2 At 31 March 2023 22 131 330 97 580 18. Trade and other payables Significant accounting policies that apply to trade and other payables We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently carry them at amortised cost using the effective interest method. We use a supply chain financing programme to extend payment terms with a limited number of suppliers to a more typical payment term. We also use a separate supply chain financing programme to allow suppliers to receive funding earlier than the invoice due date. We assess these arrangements against indicators to assess if debts which vendors have sold to the funder under the supplier financing schemes continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2023 the payables met the criteria of trade payables. Cash flows are presented in cash flows from operating activities. At 31 March 2023 \u00a3m 2022 \u00a3m Current Trade payables 4,196 4,143 Other taxation and social security 581 573 Minimum guarantee from BT Sport disposal a 195 \u2013 Accrued expenses 458 549 Deferred income b 532 345 Other payables c 602 532 6,564 6,142 Non-current Minimum guarantee from BT Sport disposal a 465 \u2013 Deferred income b 403 594 Other payables c 52 30 920 624 a See note 23. b Deferred income includes \u00a3258m (FY22: \u00a396m) current and \u00a3169m (FY22: \u00a3392m) non-current liabilities relating to Building Digital UK, for which grants received by the group may be subject to re-investment or repayment depending on the level of take-up. c During FY23 we reclassified \u00a3132m payables to provisions (note 19) following reassessment of the level of certainty over the timing and amount of any outflow of resources. Current trade and other payables at 31 March 2023 include: \u2013 \u00a3348m (31 March 2022: \u00a389m) of trade payables that have been factored by suppliers in a supply chain financing programme. These programmes are used with a limited number of suppliers with short payment terms to extend them to a more typical payment term. \u2013 \u00a3169m (31 March 2022: \u00a393m) of trade payables in a separate supply chain financing programme that allows suppliers the opportunity to receive funding earlier than the invoice due date. Financial institutions are used to support this programme but we continue to recognise the underlying payables as we continue to cash settle the supplier invoices in accordance with their terms. 19. Provisions & contingent liabilities Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset retirement obligations, network assets, third party claims, litigation and regulatory risks. Contingent liabilities primarily arise from litigation and regulatory matters that are not sufficiently certain to meet the criteria for recognition as provisions. Significant accounting policies that apply to provisions & contingent liabilities We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an outflow that is not probable or which cannot be reliably estimated. Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate. Key accounting estimates and significant judgements made in accounting for provisions & contingent liabilities We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are not recognised as liabilities on our balance sheet. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes where this can be reasonably determined. In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution. Key accounting estimates applied in accounting for provisions and contingent liabilities Other provisions may involve the use of key (but not critical) estimates as explained below. When measuring provisions we reflect the impact of inflation as appropriate particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows. Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made estimates of the costs associated with the restoration of properties by reference to any relevant guidance such as rate cards. Cash outflows occur as and when properties are vacated and the obligations are settled. Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the site. The provision represents the group\u2019s best estimate of the costs to dismantle equipment and restore the sites. Obligations are settled as and when sites are vacated and the timing is largely influenced by the group\u2019s network strategy. Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical regulatory matters. The charge/credit for the year represents the outcome of management\u2019s re-assessment of the estimates and regulatory risks across a range of issues, including price and service issues. The prices at which certain services are charged are regulated and may be subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk we make key judgements, including in regard to interpreting Ofcom regulations and past and current claims. The precise outcome of each matter depends on whether it becomes an active issue, and the extent to which negotiation or regulatory and compliance decisions will result in financial settlement. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against the group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice received. Provisions recognised are inherently judgemental and could change over time as matters progress. Establishing contingent liabilities associated with litigation brought against the group may involve the use of key estimates and assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further information in relation to specific matters in the \u2018contingent liabilities\u2019 section below. Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties, with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle accident claims, and our in-house insurance teams review our exposure to other risks. Other provisions do not include any individually material provisions. For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual outcome of any settlement. Property a \u00a3m Network ARO a \u00a3m Regulatory \u00a3m Litigation \u00a3m Third party claims b \u00a3m Other c,d \u00a3m Total \u00a3m At 1 April 2021 138 158 96 109 91 123 715 Additions 17 25 14 7 6 22 91 Unwind of discount \u2013 1 \u2013 \u2013 \u2013 \u2013 1 Utilised (9) (3) (26) \u2013 (5) (11) (54) Released (2) \u2013 (18) (31) \u2013 (38) (89) Transfers (2) \u2013 (1) \u2013 \u2013 \u2013 (3) Exchange differences \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 At 31 March 2022 142 181 65 85 92 96 661 IAS 37 opening balance adjustment e \u2013 \u2013 \u2013 \u2013 \u2013 12 12 At 1 April 2022 142 181 65 85 92 108 673 Additions 43 \u2013 16 6 35 15 115 Unwind of discount 1 3 \u2013 \u2013 \u2013 \u2013 4 Utilised (8) (4) (1) (41) (30) (7) (91) Released (37) (87) (16) (9) (43) (42) (234) Transfers f \u2013 \u2013 4 \u2013 132 (11) 125 Exchange differences 1 \u2013 \u2013 3 1 1 6 At 31 March 2023 142 93 68 44 187 64 598 a Timing of expected cash flows associated with property and network ARO provisions varies depending on the exit dates of individual properties and sites. Provision releases during FY23 primarily relate to the remeasurement of provisions using increased discount rates that reflect an increase in risk-free rates. b Third party claims described as insurance in prior periods, relabelled to better reflect the nature of the underlying exposures. Within this balance \u00a377m held in respect of our gross exposure to latent disease claims from former colleagues and \u00a330m for motor vehicle claims, with no individually material items in the remaining balance. c Network share provisions were previously presented separately but are now presented within Other provisions due to their relative immateriality. FY22 comparatives have been restated for comparability. Network share provisions were \u00a35m at 31 March 2022 and \u00a35m at 31 March 2023. d Other provisions include contract loss provisions of \u00a38m (FY22: \u00a31m) relating to the anticipated total losses in respect of certain contracts. e Opening balance adjustment arising on adoption of the amendments to IAS 37, see note 1. f Transfers into third party claims in FY23 relate to the reclassification of balances previously presented in other payables (note 18) following reassessment of the level of certainty over the timing and amount of any outflow of resources. At 31 March 2023 \u00a3m 2022 \u00a3m Analysed as: Current 229 222 Non-current 369 439 598 661 19. Provisions & contingent liabilities continued 19. Provisions & contingent liabilities continued Contingent liabilities and legal proceedings In the ordinary course of business, we are periodically notified of actual or threatened litigation, and regulatory and compliance matters and investigations. We have disclosed below a number of such matters including any matters where we believe a material adverse impact on the operations or financial condition of the group is possible and the likelihood of a material outflow of resources is more than remote. Where the outflow of resources is considered probable, and a reasonable estimate can be made of the amount of that obligation, a provision is recognised for these amounts and reflected in the table above. Where an outflow is not probable but is possible, or a reasonable estimate of the obligation cannot be made, a contingent liability exists. In respect of each of the claims below, the nature and progression of such proceedings and investigations can make it difficult to predict the impact they will have on the group. There are many reasons why we cannot make these assessments with certainty, including, among others, that they are in early stages, no damages or remedies have been specified, and/or the often slow pace of litigation. Class action claim In January 2021, law firm Mishcon de Reya applied to the Competition Appeal Tribunal to bring a proposed class action claim for damages they estimated at \u00a3608m (inclusive of compound interest) or \u00a3589m (inclusive of simple interest) on behalf of our landline customers alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline services. Ofcom considered this topic more than five years ago. At that time, Ofcom\u2019s final statement made no finding of excessive pricing or breach of competition law more generally. The claim seeks to hold against us the fact that we implemented a voluntary commitment to reduce prices for customers that have a BT landline only and not to increase those prices beyond inflation (CPI). At the reporting date we are not aware of any evidence to indicate that a present obligation exists such that any amount should be provided for. In September 2021 the Competition Appeal Tribunal certified the claim to proceed to a substantive trial on an opt-out basis (class members are automatically included in the claim unless they choose to opt-out). We appealed the opt-out nature of that decision and in May 2022 the Court of Appeal determined that the claim should proceed on an opt-out basis. A hearing window has been set for January \u2013 April 2024. BT intends to defend itself vigorously. Italian business Milan Public Prosecutor prosecutions: in February 2019 the Milan Public Prosecutor served BT Italia S.P.A. (BT Italia) with a notice (which named BT Italia, as well as various individuals) to record the Prosecutor\u2019s view that there is a basis for proceeding with its case against BT Italia for certain potential offences, namely the charge of having adopted, from 2011 to 2016, an inadequate management and control organisation model for the purposes of Articles 5 and 25 of Legislative Decree 231/2001. BT Italia disputes this and maintains in a defence brief filed in April 2019 that: (a) BT Italia did not gain any interest or benefit from the conduct in question; and (b) in any event, it had a sufficient organisational, management and audit model that was circumvented/overridden by individuals acting in their own self-interest. However, following a series of committal hearings in Autumn 2020, on 10 November 2020, the Italian court agreed (as is the normal process unless there are limitation or other fundamental issues with the claim) that BT Italia, and all but one of the individuals, should be committed to a full trial. The trial commenced on 26 January 2021 and is ongoing. On 23 April 2021, the Italian court allowed some parties to be joined to the criminal proceedings as civil parties (\u2018parte civile\u2019) \u2013 a procedural feature of the Italian criminal law system. These claims are directed at certain individual defendants (which include former BT/ BT Italia employees). Those parties have now successfully joined BT Italia as a respondent to their civil claims (\u2018responsabile civile\u2019) on the basis that it is vicariously responsible for the individuals\u2019 wrongdoing. If successful, the quantum of those claims is not anticipated to be material. Accounting misstatement claims: a law firm acting on behalf of a group of investors has made claims under s.90A of the Financial Services & Markets Act 2000, alleging that untrue or misleading statements were made in relation to the historical irregular accounting practices in BT\u2019s Italian business (which have been the subject of previous disclosures). No value is stated and the matter is in the very early stages. As mentioned in our earlier reports, the accounting issues in Italy have previously been the subject of class actions in the US that were dismissed by the US courts. Phones 4U Since 2015 the administrators of Phones 4U Limited have made allegations that EE and other mobile network operators colluded to procure Phones 4U\u2019s insolvency. Legal proceedings for an unquantified amount were issued in December 2018 by the administrators. The trial on the question of liability/breach ran from May to July 2022. The parties are now awaiting judgment, and the court has not yet indicated when it will be delivered. A second trial on quantum would be required in the event of a finding for the claimant. We continue to dispute these allegations vigorously. UK Competition and Markets Authority (CMA) investigation On 12 July 2022 the CMA opened a competition law investigation into BT and other companies involved in the purchase of freelance services for the production and broadcasting of sports content in the UK. The investigation is focused on BT Sport. In February 2023, the CMA extended its investigation to include suspected breaches of competition law in relation to the employment of staff supporting the production and broadcasting of sports content in the UK. The CMA has said no assumption should be made at this stage that competition law has been infringed. BT is cooperating with the investigation. 20. Retirement benefit plans Background to BT\u2019s pension plans The group has both Defined Benefit and Defined Contribution retirement benefit plans. The group\u2019s main plans are in the UK: \u2013 The BT Pension Scheme (BTPS) is the largest UK Defined Benefit plan. It was closed to future benefit accrual in 2018 for the majority of members, and has 62,000 deferred members and 208,000 pensioners. All BTPS members receive pensions benefits at retirement based on salary and years of service, and some members also receive a lump sum payment at retirement. Increases for the majority of benefits are linked to either the Retail Price Index (RPI) or the Consumer Price Index (CPI). The scenarios on page 196 illustrate how sensitive the BTPS liabilities are to inflation expectations. The BTPS constitutes 97% of BT Group\u2019s IAS 19 liability. \u2013 The EE Pension Scheme (EEPS) has a Defined Benefit section that was closed to future benefit accrual in 2014 and a Defined Contribution section. The Defined Benefit section constitutes 2% of BT Group\u2019s IAS 19 liability. \u2013 The BT Retirement Saving Scheme (BTRSS) is a Defined Contribution, contract-based, plan operated by Standard Life which new UK employees join. There are around 65,000 employees building benefits in the BTRSS. The group also has retirement arrangements around the world in line with local markets and culture. Types of retirement benefit plans Defined benefit (\u201cDB\u201d) plans DB plan benefits are determined by the plan rules, typically dependent on factors such as age, years of service and pensionable pay, but not on the value of actual contributions made by the company and members. The group is exposed to investment and other experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from regular contributions, expected investment income and assets held. The net defined benefit liability, or deficit, is the present value of all expected future benefit cash flows to be paid by each plan, calculated using the projected unit credit method by professionally qualified actuaries (also known as the Defined Benefit Obligation (DBO) or liabilities) less the fair value of the plan assets. Defined contribution (\u201cDC\u201d) plans DC plan benefits are linked to the value of each member\u2019s fund, which is based on contributions paid and the performance of each individual\u2019s chosen investments. The group has no exposure to investment and other experience risks. Amounts in the financial statements Group income statement The expense arising from the group\u2019s retirement benefit arrangements recognised in the group income statement is shown below. Year ended 31 March 2023 \u00a3m 2022 \u00a3m Recognised in the income statement before specific items (note 6) \u2013 Service cost: \u2013 DB plans 17 20 \u2013 DC plans 537 525 \u2013 Past service cost/(credit) (2) (1) \u2013 Administration expenses and PPF levy 38 47 Subtotal 590 591 Recognised in the income statement as specific items (note 9) \u2013 Costs to close BTPS and provide transition payments a for affected employees 13 14 \u2013 Interest on pensions deficit 18 93 Subtotal 31 107 Total recognised in the income statement 621 698 a All employees impacted by the closure of the BTPS were eligible for transition payments from the date of closure into their BTRSS pot for a period linked to the employee\u2019s age. 20. Retirement benefit plans continued Group balance sheet The net defined benefit liability in respect of defined benefit plans reported in the group balance sheet are set out below. EEPS is in a surplus position in FY23 (FY22: deficit position) so assets and liabilities are presented within non-current assets (FY22: non-current liabilities). 2023 2022 At 31 March Assets \u00a3m Liabilities \u00a3m Deficit a \u00a3m Assets \u00a3m Liabilities \u00a3m Deficit a \u00a3m Recognised in non-current liabilities BTPS 38,673 (41,575) (2,902) 53,465 (54,309) (844) EEPS n/a n/a n/a 1,004 (1,017) (13) Unfunded plans \u2013 (92) (92) \u2013 (115) (115) Other funded plans 65 (210) (145) 468 (639) (171) Asset ceiling a \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Total 38,738 (41,877) (3,139) 54,937 (56,080) (1,143) Recognised in non-current assets EEPS 749 (713) 36 \u2013 \u2013 \u2013 Funded plans 321 (305) 16 \u2013 \u2013 \u2013 Asset ceiling a \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Total 1,070 (1, 018) 52 \u2013 \u2013 \u2013 a In the context of IFRIC 14, BT is not required to limit any pension surplus or recognise additional pensions liabilities in individual plans as economic benefits are available in the form of either future refunds or reductions to future contributions. In particular, a refund of surplus is available following the gradual settlement of the liabilities over time when there are no members remaining in the BTPS or EEPS. The table below shows the group\u2019s defined benefit liability net of tax. At 31 March 2023 \u00a3m 2022 \u00a3m Balance sheet position (net of tax) Surplus/(deficit) (3,087) (1,143) Deferred tax asset (note 10) 618 190 Total (net of tax) (2,469) (953) 20. Retirement benefit plans continued Movements in defined benefit plan assets and liabilities The table below shows the movements in the defined benefit plan assets and liabilities and shows where they are reflected in the financial statements. Assets \u00a3m Liabilities \u00a3m Deficit \u00a3m At 31 March 2021 54,612 (59,708) (5,096) Service cost (including administration expenses and PPF levy) (47) (20) (67) Past service credit \u2013 1 1 Interest on net pension deficit 1,095 (1,188) (93) Included in the group income statement (159) Return on plan assets above the amount included in the group income statement 780 \u2013 780 Actuarial gain arising from changes in financial assumptions \u2013 2,932 2,932 Actuarial gain arising from changes in demographic assumptions \u2013 804 804 Actuarial (loss) arising from experience adjustments a \u2013 (1,651) (1,651) Included in the group statement of comprehensive income 2,865 Regular contributions by employer 114 \u2013 114 Deficit contributions by employer 1,121 \u2013 1,121 Included in the group cash flow statement 1,235 Contributions by employees 1 (1) \u2013 Benefits paid (2,748) 2,748 \u2013 Other (e.g. foreign exchange) 9 3 12 Other movements 12 At 31 March 2022 54,937 (56,080) (1,14 3) Service cost (including administration expenses and PPF levy) (38) (17) (55) Past service credit \u2013 2 2 Interest on net pension deficit 1,480 (1,498) (18) Included in the group income statement (71) Return on plan assets below the amount included in the group income statement (14, 911) \u2013 (14 , 911) Actuarial gain arising from changes in financial assumptions \u2013 12,279 12,279 Actuarial gain arising from changes in demographic assumptions \u2013 891 891 Actuarial (loss) arising from experience adjustments a \u2013 (1,135) (1,135) Included in the group statement of comprehensive income (2,876) Regular contributions by employer 22 \u2013 22 Deficit contributions by employer 994 \u2013 994 Included in the group cash flow statement 1,016 Contributions by employees 1 (1) \u2013 Benefits paid (2,686) 2,686 \u2013 Other (e.g. foreign exchange) 9 (22) (13) Other movements (13) At 31 March 2023 39,808 (42 ,895) (3,087) a Primarily reflects the impact on the liabilities of actual inflation being higher than assumed at the prior reporting date. There has been a broadly equivalent benefit to inflation- linked assets from higher inflation. How is the BTPS governed and managed? BT Pension Scheme Trustees Limited (the Trustee) has been appointed by BT as an independent trustee to administer and manage the BTPS on behalf of the members in accordance with the terms of the BTPS Trust Deed and Rules and relevant legislation (principally the pensions acts of 1993, 1995, 2004 and 2021). The Trustee\u2019s key powers include setting the investment strategy of BTPS (after consultation with BT) and agreeing with BT the actuarial assumptions to be used when assessing the BTPS funding position and the resulting contributions that will be paid. There are nine Trustee directors, all of whom are appointed by BT, as illustrated below. Trustee directors are usually appointed for a three- year term but are then eligible for re-appointment. Chairman of the Trustee directors Appointed by BT after consultation with, and with the agreement of, the relevant trade unions. Employer nominated Trustee directors Appointed by BT. Two normally hold senior positions within the group and two normally hold (or have held) senior positions in commerce or industry. Member nominated Trustee directors Appointed by BT based on nominations by trade unions. 20. Retirement benefit plans continued BTPS IAS 19 assets Critical accounting estimates and significant judgements made when valuing the BTPS assets Under IAS 19, plan assets are measured at fair value at the balance sheet date and include quoted and unquoted investments. Valuation of main quoted investments \u2013 Equities listed on recognised stock exchanges are valued at closing bid prices. \u2013 Bonds that are regularly traded are valued using broker quotes. \u2013 Exchange traded derivative contracts are valued based on closing bid prices Valuation of main unquoted investments A portion of unquoted investments are valued based on inputs that are not directly observable, which require more judgement. The assumptions used in valuing unquoted investments are affected by market conditions. \u2013 Equities are valued using the International Private Equity and Venture Capital (IPEVC) guidelines where the most significant assumptions are the discount rate and earnings assumptions. \u2013 Property investments are valued on the basis of open market value by an independent valuer using RICS guidelines. The significant assumptions used in the valuation are rental yields and occupancy rates. \u2013 Bonds, including those issued by BT, that are not regularly traded are valued by an independent valuer using pricing models making assumptions for credit risk, market risk and market yield curves. \u2013 Holdings in investment funds are typically valued at the Net Asset Value provided by the fund administrator or investment manager. The significant assumption used in the valuation is the Net Asset Value. \u2013 Infrastructure investments are valued by an independent valuer using a model-based valuation such as a discounted cash flow approach, or at the price of recent market transactions if they represent fair value. Where a discounted cash flow model is used, the significant assumptions used in the valuation are the discount rate and the expected cash flows. \u2013 Over the counter derivatives are valued by an independent valuer using cash flows discounted at market rates. The significant assumptions used in the valuation are the yield curves and cost of carry. \u2013 The longevity insurance contract is measured by discounting the projected cash flows payable under the contract (projected by an actuary, consistent with the terms of the contract). The significant assumptions used to value the asset are the discount rate (including adjustments to the risk free rate) and the mortality assumptions. \u00a36.4bn of unquoted investments that are formally valued periodically by the investment manager have a latest valuation that precedes the balance sheet date. These assets consist of: \u00a33.7bn non-core credit; \u00a31.2bn mature infrastructure; \u00a31.1bn private equity; \u00a30.2bn secure income; and \u00a30.2bn overseas property. These valuations have been adjusted for cash movements between the previous valuation date and 31 March 2023. The valuation approach and inputs for these investments would only be approximately updated where there were indications of significant movements, for example implied by market indicators. No such adjustment was required at 31 March 2023. Asset-backed funding arrangement The asset-backed funding arrangement, issued to the BTPS in May 2021, has a fair value of \u00a31.3bn at 31 March 2023 (2022: \u00a31.4bn) calculated as the present value of the future stream of payments, allowing for the probability of the BTPS becoming fully funded and therefore the payments to the BTPS ending early. It is not recognised as a pension asset when measuring the group\u2019s IAS 19 net defined benefit liability as it is a non-transferable financial instrument issued by the group. How are the BTPS assets invested? The Trustee regularly reviews the allocation of assets between different investment classes, taking into account current market conditions and trends. The allocations reflect the Trustee\u2019s views on a range of areas, including: i) the balance between seeking returns and incurring risk; ii) the extent to which the assets should be allocated to match movements in the liabilities due to changes in interest rates, inflation and/or longevity (i.e. liability-driven investments, or LDI); iii) the extent to which the assets should provide cash flows to meet expected payments to beneficiaries; and iv) liquidity needed to meet benefit payments and collateral requirements for derivatives contracts. Financial derivatives (e.g. swaps) are used to reduce the mismatch between movements in the liabilities and the assets from changes in interest rates, inflation, and exchange rates. This provides greater stability in the funding position, and therefore the deficit contributions that may be required from BT. The sensitivity chart on page 198 shows how the use of some of these derivatives adjusts outcomes for the BTPS. While the use of derivatives reduces funding risk, it increases the Scheme\u2019s liquidity requirements which is factored into the overall investment strategy. Following the impact of the September 2022 mini-budget on derivatives, the Bank of England and the Pensions Regulator issued guidance on the minimum level of collateral pension schemes should hold. At 31 March 2023, the BTPS held more collateral than these minimum levels. 20. Retirement benefit plans continued The table below analyses the fair value of the BTPS assets by asset category, subdivided by valuations based on a quoted market price in an active market, and those that are not (such as investment funds). 2023 2022 At 31 March Total assets a \u00a3bn of which quoted \u00a3bn Total assets a \u00a3bn of which quoted \u00a3bn Growth Equities UK 0.1 \u2013 0.3 0.2 Overseas developed 1.7 0.6 6.5 5.6 Emerging markets \u2013 \u2013 1.0 0.9 Private Equity 1.1 \u2013 1.2 \u2013 Property UK 2.6 \u2013 3.4 \u2013 Overseas 0.8 \u2013 0.8 \u2013 Other growth assets Absolute Return b 0.9 \u2013 1.0 \u2013 Non Core Credit c 4.2 0.4 4.7 1.4 Mature Infrastructure 1.2 \u2013 1.4 \u2013 Liability matching Government bonds d UK 13.2 13.1 15.1 15.1 Investment grade credit Global 10.4 8.2 13.9 11.7 Secure income assets e 3.7 \u2013 2.6 \u2013 Cash, derivatives and other Cash balances 3.0 \u2013 2.9 \u2013 Financial derivative contracts (4.2) \u2013 0.6 \u2013 Longevity insurance contract f (0.8) \u2013 (1.0) \u2013 Other g 0.8 \u2013 (0.9) \u2013 Total 38.7 22.3 53.5 34.9 a At 31 March 2023, the BTPS held nil (FY22: nil) equity issued by the group and \u00a31,550m (FY22: \u00a31,930m) of bonds issued by the group. b This allocation seeks to generate a positive return in all market conditions. c This allocation includes a range of credit investments, including emerging market, sub-investment grade and unrated credit. The allocation seeks to exploit investment opportunities within credit markets using the expertise of a range of specialist investment managers. d Around 72% (2022: 83%) of these are index-linked gilts with the remainder in conventional gilts. e This allocation includes property, infrastructure and credit investments and provides the BTPS contractual income and expected return in excess of corporate bonds. f The value reflects experience to date on the contract from higher than expected deaths; This partly offset a corresponding reduction in BTPS\u2019s liabilities over the same period. g Other balances comprise net amounts receivable / (payable) by the BTPS, including investment balances due to and from brokers. BTPS IAS 19 Liabilities Critical accounting estimates and significant judgements made when valuing our pension liabilities The measurement of the service cost and the liabilities involves judgement about uncertain events including the life expectancy of members, price inflation and the discount rate used to calculate the net present value of the future pension payments. We use estimates for all of these uncertain events. Our assumptions reflect historical experience, market expectations (where relevant), actuarial advice and our judgement regarding future expectations at the balance sheet date. What are the forecast benefits payable from the BTPS? There are c 270,000 members, and their dependents, who will be receiving benefits from the BTPS for the remainder of their lives. Members currently receiving pension benefits make up around 69% of the liability and 77% of the membership. Forecasting the benefit payments involves judgement about uncertain events. While assumptions are made for these events, actual benefit payments in a given year may be higher or lower than the assumption, for example if members retire sooner or later than assumed. The liabilities are the present value of the future expected benefit payments. The chart below illustrates how the forecast benefits payable from the BTPS, and IAS 19 liabilities, projected using the IAS 19 assumptions evolve over time. While benefit payments are expected to increase in the early years, as non-pensioners retire, the value of the liabilities is expected to reduce.
20. Retirement benefit plans continued
Forecast benefits payable by BTPS at 31 March 2023 (unaudited)
3.0
45
2.5
2.0
30
1.5
1.0
15
0.5
0
0
2023 2043 2063 2083
Forecast benefit payments (left axis)
IAS 19 Defined Benefit Obligations (right axis)
The estimated duration of the BTPS liabilities, which is an indicator of the weighted average term of the discounted future payments, is 12
years (2022: 14 years) using the IAS 19 assumptions. The duration is sensitive to the assumptions and has reduced following the increase in
bond yields, and therefore discount rate, over the year.
What are the most significant assumptions, and how have they been set?
The most significant financial assumptions used to calculate the IAS 19 liabilities for the BTPS are the discount rate and inflation. The most
significant demographic assumption used is how life expectancy will evolve over time which is illustrated as forecast life expectancies for
members aged 60 in the table below.
At 31 March 2023 2022
Discount rate 4.85% 2.75%
Inflation \u2013 average increase in RPI 3.35% 3.70%
Inflation \u2013 average increase in CPI 2.85% 3.25%
Life expectancy \u2013 male in lower pension bracket 24.7 years 25.2 years
Life expectancy \u2013 male in higher pension bracket 26.9 years 27.3 years
Life expectancy \u2013 female 27.5 years 27.8 years
Average additional life expectancy for a male member retiring at age 60 in 10 years\u2019 time 0.4 years 0.4 years
While the financial assumptions are typically scheme specific, the average financial assumptions weighted by liabilities across all schemes
Benefit payments (\u00a3bn)
are within 0.05% of the figures shown in the table above.
The table below summarises how these assumptions have been set, including key changes over the year.
Detail
Discount
The discount rate assumption is calculated by applying the projected BTPS benefit cash flows to a corporate bond yield
rate
curve constructed by our external actuary based on the yield on AA-rated \u00a3-denominated corporate bonds at the balance
sheet date. In setting the yield curve, judgement is required on the selection of appropriate bonds to be included in the
universe and the approach used to then derive the yield curve.
The increase in the discount rate over the year reflects changes in the market yield of corporate bonds.
RPI and CPI
RPI inflation expectations are calculated by applying the projected BTPS benefit cash flows to an inflation curve derived
inflation
from market yields on UK government bonds, and making a deduction for an inflation risk premium (to reflect the extra
premium paid by investors for inflation linked assets) of 0.2% pa before 2030 and 0.3% pa thereafter.
CPI inflation expectations are set with reference to the RPI inflation assumption taking into account market data and
independent estimates of the expected difference. Before 2030, CPI inflation is assumed to be 1.0% lower than RPI
inflation (2022: 1.0%). RPI will be aligned with CPIH from 2030, and we assume a nil gap between CPI and CPIH inflation
as historically these measures have been broadly comparable.
Pension
Benefits are assumed to increase in line with the RPI or CPI inflation assumptions. Under the BTPS rules, benefit increases
increases
prior to retirement are primarily linked to CPI capped at 5%, and the majority of benefits increase after retirement linked
to either CPI for Sections A and B or RPI with a 5% cap for Section C.
Longevity The longevity assumption takes into account:
\u2013 the actual mortality experience of the BTPS pensioners, based on a formal review carried out for the 2020 triennial
funding valuation
\u2013 future improvements in longevity based on the CMI\u2019s 2021 Mortality Projections model published by the UK actuarial
profession
There is significant uncertainty as to the impact of the Covid-19 pandemic on future life expectancy. We continue to
assume that following the pandemic there is a short-term increase in deaths compared to the assumptions adopted prior
to the pandemic and we have fully allowed for population mortality data from 2022, but not data from 2020 and 2021.
Allowing for the 2022 data reduced the BTPS liabilities by \u00a30.7bn.
We continue to assume mortality will improve in the long term by 1% per year.
IAS 19 liabilities (\u00a3bn)
20. Retirement benefit plans continued Risks underlying the BTPS deficit Background A large increase in our pension scheme obligations could stop us from being able to fund our business cash flows or meet our payment commitments. Things like future low investment returns, high inflation, longer life expectancy and regulatory changes may all mean the BTPS becomes more of a financial burden to BT. Changes in external factors, such as bond yields, can have an impact on the IAS 19 and funding assumptions, impacting the measurement of BTPS liabilities. These factors can also impact the BTPS assets. A summary is set out in the table below: Change in Impact Government bond yields A fall in government bond yields will: \u2013 increase the IAS 19 liabilities, driven by the fall in the discount rate. \u2013 increase the assets, driven by an increase in the value of government bonds, corporate bonds and interest rate derivatives held by the BTPS. Credit spreads A fall in credit spreads will lead to a fall in corporate bond yields, and therefore an increase in the IAS 19 liabilities and a corresponding but smaller increase in both asset values and funding liabilities. Inflation expectations A significant proportion of the benefits paid to members are currently increased in line with RPI or CPI inflation. Changes in average inflation expectations over the lifetime of the plan An increase in average inflation expectations will: \u2013 increase the IAS 19 liabilities \u2013 increase the value of index-linked bonds, other inflation linked assets and inflation derivatives held by the BTPS Changes in inflation over the next year If inflation over the next year is lower or higher than assumed, it would lead to a fall or increase in the IAS 19 liabilities. We estimate the change in asset values will broadly offset the movement in both the IAS 19 liabilities and funding liabilities. If inflation is higher than the caps that apply to benefits, the assets will increase by more than the liabilities. Similarly, in a deflationary environment, the asset values are expected to fall by more than the IAS 19 liabilities and funding liabilities since the payments on index-linked gilts would be reduced but pensions paid by the BTPS would not. Growth assets A significant proportion of the BTPS assets are invested in growth assets, such as equities and property. Although the BTPS has temporary hedges in place to partly offset the impact of a fall in equity markets, and adopts a diverse portfolio, a fall in these growth assets will increase the IAS 19 and funding deficit. Life expectancy An increase in the life expectancy of members will result in benefits being paid out for longer, leading to an increase in the IAS 19 liabilities and funding liabilities. The BTPS holds a longevity insurance contract which covers around 20% of the BTPS\u2019s total exposure to improvements in longevity, providing long-term protection and income to the BTPS in the event that members live longer than currently expected. Other risks include: changes in legislation or regulation which impact the value of the liabilities or assets; and member take-up of options before and at retirement to reshape their benefits. The scale of the BTPS means that investment changes and any future de-risking actions need to be planned and executed carefully, potentially over an extended timeframe or multiple transactions. Scenario analysis The potential negative impact of these risks is illustrated by the following five scenarios. These have been assessed by BT\u2019s independent actuary as scenarios that might occur no more than once in every 20 years. The scenarios have been updated to reflect market experience over the last year. 1-in-20 events Scenario 2023 2022 1. Fall in bond yields a 1.2% 0.8% 2. Increase in credit spreads b 0.9% 0.7% 3. Increase to average inflation expectations over the lifetime of the plan c 1.1% 0.6% 4. Fall in growth assets d 20.0% 20.0% 5. Increase to life expectancy 1.30 years 1.00 years a Scenario assumes a fall in the yields on both government and corporate bonds. b Scenario assumes an increase in the yield on corporate bonds, with no change to yield on government bonds. c Scenario assumes average RPI and CPI inflation expectations over the lifetime of the plan increase by the same amount. d Impact includes the potential impact of temporary equity hedges held by the BTPS. Scenario considers combinations of changes to the key inputs used to value the growth assets, leading to a 20% fall in the aggregate value of the growth assets prior to temporary hedges held by the BTPS. The impact shown under each scenario looks at each event in isolation. In practice a combination of events could arise, and the effects are not additive nor are they linear (e.g. doubling the change in bond yields assumed will not exactly double the impact). 20. Retirement benefit plans continued Impact of illustrative scenarios which might occur no more than once in every 20 years 6.1 \u00a3bn 10 8 6 2 4 0 (2) (4) (6) 2.3 5.0 (3.7) (0.8) 4.2 2.0 2.8 0.0 0.3 (2.5) 1.9 0.4 1.2 percentage point fall in bond yields 0.9 percentage point increase in credit spreads 1.1 percentage point increase to inflation rate 20% fall in growth assets 1.30 year increase in life expectancy Increase/(decrease) in liabilities Increase/(decrease) in assets \u2013 Physical assets Increase/(decrease) in assets \u2013 Derivatives / synthetic assets Scenario analysis \u2013 IAS 19 position at 31 March 2023 The sensitivities have been prepared using the same approach as FY22 which involves calculating the liabilities and assets allowing for the change in market conditions assumed under the scenario. The change in impact from FY22 is due to a combination of: changes in the scenarios, the significant fall in asset and liability values over the year, and changes in the scheme\u2019s investment strategy in line with the agreed de-risking plan. BTPS funding Triennial funding valuation A funding valuation is carried out for the Trustee by a professionally qualified independent actuary at least every three years. The funding valuation assesses the ongoing financial health of the Scheme. If there are insufficient assets to meet the estimated future benefit payments to members (i.e. a funding deficit), BT and the Trustee agree the amount and timing of additional cash contributions. It is prepared using the principles set out in UK Pension legislation, such as the 2004 and 2021 pensions acts, and uses a prudent approach overall when setting the actuarial assumptions. Some of the key differences compared to the IAS 19 deficit are set out in the table below. IAS 19 Funding Purpose Balance sheet in BT plc accounts Assessing the ongoing financial health and setting cash payments Regulation IFRS 2004 and 2021 pensions acts Frequency Semi-annually At least every three years Key assumptions Determined by BT BT and BTPS agreement Discount rate Yield curve based on AA corporate bonds Yield curve reflecting prudent return expected from BTPS assets Other assumptions Best estimate Prudent overall approach The different purpose and principles lead to different assumptions being used, and therefore a different estimate for the liabilities and deficit. The next funding valuation is scheduled to take place as at 30 June 2023. The latest funding valuation was performed as at 30 June 2020 and the results are shown below. 30 June 2020 \u00a3bn Funding liabilities (65.3) Assets 57.3 BTPS Funding deficit (8.0) Percentage of accrued benefits covered by the BTPS assets at valuation date 88% Key assumptions at valuation date: Discount rate a 1.4% Inflation \u2013 average increase in RPI 3.2% Inflation \u2013 average increase in CPI 2.4% Life expectancy \u2013 60 year old male in lower pension bracket 25.8 years Life expectancy \u2013 60 year old male in higher pension bracket 28.0 years Life expectancy \u2013 60 year old female 28.5 years Average additional life expectancy for a male member retiring at age 60 in 10 years\u2019 time 0.9 years a The discount rate at 30 June 2020 was derived from prudent return expectations that reflect the investment strategy over time, allowing for the BTPS to de-risk to a portfolio consisting predominantly of bond and bond-like investments by 2034.
20. Retirement benefit plans continued
Interim updates of the funding position (unaudited)
The Scheme Actuary carried out an interim assessment as at 30 June 2022, estimating the BTPS\u2019s funding position to have improved from
a deficit of \u00a38.0bn to \u00a34.4bn, predominantly reflecting \u00a33.5bn of contributions from BT. BT and the Trustee will agree cash contributions in
the usual way at the next full triennial funding valuation, scheduled to take place as at 30 June 2023.
The impact of changes in market conditions on the funding liabilities differs to the impact on the IAS 19 liabilities. For example, the funding
liabilities use a discount rate linked to a risk-free rate and a fixed margin which is reviewed at each triennial valuation, whereas the IAS 19
liabilities use a discount rate based on corporate bond yields (and so are affected by changes in credit spreads). The chart below illustrates
the impact of the scenarios set on page 196 on the 30 June 2022 interim assessment of the funding position.
\u00a3bn
10
8
6
2
4
0
(2)
(4)
(6)
1.2 percentage point
fall in bond yields
0.9 percentage point
increase in credit spreads
1.1 percentage point
increase to inflation rate
20% fall in
growth assets
1.30 year
increase in life
expectancy
Increase/(decrease) in liabilities
Increase/(decrease) in assets \u2013 Physical assets
Increase/(decrease) in assets \u2013 Derivatives / synthetic assets
Scenario analysis \u2013 Funding position at 30 June 2022
9.6 3.8
5.2
0.0 (1.0) 7.6 2.7
3.0
0.0 0.7
(3.9)
2.3 0.5
The figures shown in the table apply to the BTPS assets and funding liabilities as at 30 June 2022; an increase in the assets or funding
liabilities will increase the impact of the scenarios shown.
Deficit payments from the Group
The 2020 funding valuation showed a deficit of \u00a38.0bn, which was agreed to be met as follows:
\u2013 \u00a32bn of the deficit met through an Asset Backed Funding arrangement (ABF), providing cash payments of \u00a3180m pa which are secured
on EE Limited. The BTPS is entitled to the full value of these future payments in the unlikely event that BT becomes insolvent. If the BTPS
reaches full funding at any 30 June, the payments to the BTPS will cease.
\u2013 Annual cash contributions until June 2023 paid directly to the BTPS
\u2013 Annual cash contributions from July 2023 to June 2030 paid either to the BTPS directly, or to a co-investment vehicle where they will
be invested as if part of the overall BTPS investment strategy.
These payments are summarised in the table below:
Year to 31 March 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Payments from BT plc 610
a
600
b
600
b
600
b
600
b
600
b
600
b
500
b
\u2013 \u2013 \u2013
Payments from ABF 180 180 180 180 180 180 180 180 180 180 180
Total 790 780 780 780 780 780 780 680 180 180 180
a \u00a3500m due by 30 June.
b \u00a3490m of each payment due by 30 June. \u00a310m is directly payable to the BTPS, and BT has the option to pay remaining amounts into the co-investment vehicle.
ABF
The future payments from the ABF have a present value of \u00a31.4bn at 31 March 2023. The fair value of the ABF is \u00a31.3bn at 31 March 2023
and allows for the probability of the BTPS becoming fully funded, and therefore the payments to the BTPS ending early.
The fair value of the ABF is included in the assets of the BTPS when assessing the funding deficit. Payments from the ABF to BTPS are
treated in the same way as coupon payments from bonds, and do not affect the funding deficit when they are paid.
The fair value of the ABF is not included in the assets of the BTPS when assessing the IAS 19 deficit in the group consolidated accounts,
as it is a non-transferable asset issued by the group. Payments from the ABF to BTPS are treated as deficit contributions, and reduce the
IAS 19 deficit, when they are paid.
20. Retirement benefit plans continued Co-investment vehicle At 31 March 2023, the fair value of assets in the co-investment vehicle was less than \u00a31m (2022: less than \u00a31m). The fair value of assets in the co-investment vehicle are included in the assets of the BTPS when assessing the IAS 19 and funding deficits. The co-investment vehicle provides BT with some protection against the risk of overfunding by allowing money to be returned to BT if not needed by the BTPS, enabling BT to provide upfront funding with greater confidence. To the extent there is a funding deficit at 30 June 2034, the co-investment vehicle will pay funds to the BTPS. BT will receive tax relief on funds paid at this point, rather than in the year when funds are paid from BT into the vehicle. Any remaining funds in the co-investment vehicle will then be returned to BT in three annual payments in 2035, 2036 and 2037, unless the BTPS has subsequently moved into funding deficit or the Trustee, acting prudently but reasonably, decides to defer or reduce these payments. Protections for BTPS (going concern) BT has agreed to provide the Trustee with certain protections. These will predominantly be in place until 2035, or until the Protections Deficit (which is calculated in line with the funding liabilities but with an adjustment to the discount rate) has reduced below \u00a32bn. A \u00a32bn deficit on this measure is currently broadly equivalent to a nil funding deficit. The protections include: Feature Detail Future funding commitment BT will provide additional contributions, of between \u00a3150m pa and \u00a3200m pa, should the funding deficit fall more than \u00a31bn behind plan at any 30 June interim assessment. The payments will stop once an interim assessment shows the funding deficit is back on plan, i.e. the recovery plan agreed at the last triennial valuation is sufficient to meet the funding deficit. The next annual test will be carried out as at 30 June 2023. Shareholder distributions BT will provide additional payments to the BTPS by the amount that shareholder distributions exceed a threshold. For the three years following the 2020 valuation, the threshold allows for 10% per year dividend per share growth based on dividends restarting at 7.7p per share in FY22. BT has agreed to implement a similar protection at each subsequent valuation, with the terms to be negotiated at the time. BT will consult with the Trustee if: \u2013 it considers share buybacks for any purpose other than relating to employee share awards; \u2013 it considers making any shareholder distributions in any of the next 3 years if annual normalised free cash flow of the group is below \u00a31bn in the year and distributions within the year would be in excess of 120% of the above threshold; or \u2013 it considers making a special dividend. Material corporate events In the event that BT generates net cash proceeds greater than a threshold from disposals (net of acquisitions) in any financial year, BT will make additional contributions to the BTPS. The threshold is \u00a3750m until 30 June 2023, and \u00a31bn thereafter (increased by CPI from 30 June 2020). The amount payable is one third of the total net cash proceeds, or the amount by which the Protections Deficit exceeds \u00a32bn if lower. BT will consult with the Trustee if: \u2013 it considers making acquisitions with a total cost of more than \u00a31.0bn in any 12-month period; \u2013 it considers making any disposal of more than \u00a31.0bn; \u2013 it considers making a Class 1 transaction which will have a material impact on the BTPS (acquisition or disposal); \u2013 it is likely to be subject to a takeover offer; or \u2013 there is any other corporate or third party events which may have a material detrimental impact on BT\u2019s covenant to the BTPS, and BT will use best endeavours to agree appropriate mitigation This obligation is ongoing until otherwise terminated. Negative pledge A negative pledge that future creditors will not be granted superior security to the BTPS in excess of a \u00a30.5bn threshold, to cover any member of the BT Group. Business as usual financing arrangements are not included within the \u00a30.5bn threshold. No additional contributions were triggered during FY23. 21. Own shares Significant accounting policies that apply to own shares Own shares are recorded at cost and deducted from equity. When shares held for the beneficial ownership of employees vest unconditionally or are cancelled they are transferred from the own shares reserve to retained earnings at their weighted average cost. Treasury shares a Employee share ownership trust a Total millions \u00a3m millions \u00a3m millions \u00a3m At 1 April 2021 51 (132) 9 (11) 60 (14 3) Own shares purchased b \u2013 \u2013 114 (210) 114 (210) Yourshare issue (1) 2 (18) 34 (19) 36 Share options exercised b (9) 22 \u2013 \u2013 (9) 22 Share awards vested \u2013 \u2013 (11) 21 (11) 21 At 31 March 2022 41 (108) 94 (16 6) 135 (274) Own shares purchased b \u2013 \u2013 114 (187) 114 (187) Share options exercised b (5) 14 \u2013 \u2013 (5) 14 Share awards vested \u2013 \u2013 (14) 25 (14) 25 At 31 March 2023 36 (94) 194 (328) 230 (422) a At 31 March 2023, 36,190,551 shares (FY22: 41,429,938) with an aggregate nominal value of \u00a32m (FY22: \u00a32m) were held at cost as treasury shares and 193,798,578 shares (FY22: 94,120,883) with an aggregate nominal value of \u00a310m (FY22: \u00a35m) were held in the Trust. b See group cash flow statement. The cash paid for the repurchase of ordinary shares was \u00a3138m (FY22: \u00a3184m). 40m shares (FY22: 15m) were purchased via forward contracts. The cash received from proceeds on the issue of treasury shares was \u00a35m (FY22: \u00a313m). The treasury shares reserve represents BT Group plc shares purchased directly by the group. The BT Group Employee Share Ownership Trust (the Trust) also purchases BT Group plc shares. The treasury shares and the shares in the Trust are being used to satisfy our obligations under employee share plans, further details of which are provided in note 22. 20. Retirement benefit plans continued Protections for BTPS (insolvency) The Scheme Actuary assumes that in the highly unlikely event that the group were to become insolvent, the Trustee would continue to run the Scheme with a low-risk, closely-matched investment strategy including additional margins for risk. On this basis and assuming no further contribution from BT, it was estimated that at 30 June 2020 the assets of the Scheme would have met around 71% of the liabilities. Were this to occur, BTPS members would benefit from the following additional protections: Feature Detail Crown Guarantee The Crown Guarantee was granted by the Government when the group was privatised in 1984 and would only come into effect upon the insolvency of BT. In July 2014, the courts established that: \u2013 the Crown Guarantee covers BT\u2019s funding obligation in relation to the benefits of members of the BTPS who joined post-privatisation as well as those who joined pre-privatisation (subject to certain exceptions) \u2013 the funding obligation to which the Crown Guarantee relates is measured with reference to BT\u2019s obligation to pay deficit contributions under the rules of the BTPS. The Crown Guarantee is not taken into account for the purposes of the actuarial valuation of the BTPS and is an entirely separate matter, only being relevant in the highly unlikely event that BT became insolvent. Pension Protection Fund (PPF) Further protection is also provided by the PPF which is the fund responsible for paying compensation in schemes where the employer becomes insolvent. EEPS funding valuation The most recent triennial valuation of the defined benefit section was performed as at 31 December 2021 and agreed in March 2023. This showed a funding deficit of \u00a3218m. The group is scheduled to contribute \u00a31.7m each month until 31 July 2025 plus a one-off contribution of \u00a311.7m in April 2023. A further payment of up to \u00a380m is payable by 31 March 2026, subject to the results of the 2024 triennial valuation. \u00a313.3m (FY22: \u00a340.0m) of deficit contributions were paid by the group to the EEPS during the year. At the triennial valuation date, the EEPS had a diversified investment strategy, investing scheme assets in: global equities (25%), property & illiquid alternatives (20%), an absolute return portfolio (24%) and a liability-driven investment portfolio (31%). The asset allocation at 31 March 2023 was: global equities (1%), property & illiquid alternatives (36%), an absolute return portfolio (7%) and a liability-driven investment portfolio (56%). 22. Share-based payments Significant accounting policies that apply to share-based payments We operate a number of equity-settled share-based payment arrangements, under which we receive services from employees in consideration for equity instruments (share options and shares) of the group. Equity-settled share-based payments are measured at fair value at the date of grant. Market-based performance criteria and non-vesting conditions (for example, the requirement for employees to make contributions to the share purchase programme) are reflected in this measurement of fair value. The fair value determined at the grant date is recognised as an expense on a straight-line basis over the vesting period, based on the group\u2019s estimate of the options or shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations, whichever is more appropriate to the share-based payment arrangement. Service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions which are taken into account to determine the fair value of equity instruments granted. In the case that an award or option does not vest as a result of a failure to meet a non-vesting condition that is within the control of either counterparty, this is accounted for as a cancellation. Cancellations are treated as accelerated vesting and all remaining future charges are immediately recognised in the income statement. As the requirement to save under an employee saveshare arrangement is a non-vesting condition, employee cancellations, other than through a termination of service, are treated as an accelerated vesting. No adjustment is made to total equity for awards that lapse or are forfeited after the vesting date. Year ended 31 March 2023 \u00a3m 2022 \u00a3m Employee saveshare plans 21 29 Yourshare 12 28 Executive share plans: Incentive Share Plan (ISP) \u2013 14 Deferred Bonus Plan (DBP) 12 11 Retention and Restricted Share Plans (RSP) 35 26 80 108 What share incentive arrangements do we have? Our plans include savings-related share option plans for employees and those of participating subsidiaries and several share plans for executives. All share-based payment plans are equity-settled. Details of these plans are set out below. Employee Saveshare Plans Under HMRC-approved savings-related share option plans, employees save on a monthly basis, over a three- or five-year period, towards the purchase of shares at a fixed price determined when the option is granted. This price is set at a 20% discount to the market price for five-year plans and 10% for three-year plans. The options must be exercised within six months of maturity of the savings contract, otherwise they lapse. Similar plans operate for our overseas employees. The scheme did not operate in FY23 or FY22. Yourshare In FY22 and FY21, all eligible employees of the group were awarded \u00a3500 of BT shares. The shares are held in trust for a three-year vesting period after which they will be transferred to employees, providing they have been continuously employed during that time. A similar plan operates for overseas employees. Under the terms of Yourshare and the executive share plans, dividends are reinvested in shares that are added to the relevant share awards. Incentive Share Plan (ISP) Participants are entitled to shares under the ISP in full at the end of a three-year period only if the group has met the relevant pre- determined corporate performance measures and if the participants are still employed by the group. The last ISP award was granted in 2019 and vested in 2022. For this award, 40% of each award is linked to a total shareholder return (TSR) target for a comparator group of companies from the beginning of the relevant performance period; 40% is linked to a three-year cumulative normalised free cash flow measure; and 20% to growth in underlying revenue. Deferred Bonus Plan (DBP) Awards are granted annually to selected employees. Shares in the group are transferred to participants at the end of three years if they continue to be employed by the group throughout that period. Retention and Restricted Share Plans (RSP) Awards are granted to selected employees. Shares in the group are transferred to participants at the end of a specified retention or restricted period if they continue to be employed by the group throughout that period. 22. Share-based payments continued Employee Saveshare Plans Movements in Employee Saveshare options are shown below. Number of share options Weighted average exercise price Year ended 31 March 2023 millions 2022 millions 2023 pence 2022 pence Outstanding at 1 April 342 414 113 121 Granted \u2013 \u2013 \u2013 \u2013 Forfeited (42) (41) 130 127 Exercised (5) (9) 96 152 Expired (26) (22) 208 229 Outstanding at 31 March 269 342 102 113 Exercisable at 31 March \u2013 \u2013 \u2013 \u2013 The weighted average share price for all options exercised during FY23 was 153p (FY22: 185p). The following table summarises information relating to options outstanding and exercisable under Employee Saveshare plans at 31 March 2023. Normal dates of vesting and exercise (based on calendar years) Exercise price per share Weighted average exercise price Number of outstanding options millions Weighted average remaining contractual life (months) 2023 82p \u2013 170p 107p 87 10 2024 164p 164p 37 22 2025 82p 82p 145 34 Total 102p 269 25 Executive share plans Movements in executive share plan awards are shown below: Number of shares (millions) ISP DBP RSP Total At 1 April 2021 66 20 47 133 Awards granted \u2013 7 23 30 Awards vested \u2013 (4) (7) (11) Awards lapsed (35) (1) (6) (42) Dividend shares reinvested \u2013 \u2013 1 1 At 31 March 2022 31 22 58 111 Awards granted \u2013 6 29 35 Awards vested (5) (5) (4) (14) Awards lapsed (26) (1) (7) (34) Dividend shares reinvested \u2013 2 4 6 At 31 March 2023 \u2013 24 80 104 Fair values There were no grants under Employee Saveshare or the ISP in FY22 or FY23. Employee Saveshare grants are valued using a Binomial options pricing model. Awards under the ISP were valued using Monte Carlo simulations. TSRs are generated for BT and the comparator group at the end of the three-year performance period, using each company\u2019s volatility and the cross correlation between pairs of stocks. Volatility has been determined by reference to BT\u2019s historical volatility which is expected to reflect the BT share price in the future. An expected life of six months after vesting date is assumed for Employee Saveshare options. For all other awards the expected life is equal to the vesting period. The risk-free interest rate is based on the UK gilt curve in effect at the time of the grant, for the expected life of the option or award. The fair values for the DBP and RSP were determined using the market price of the shares at the grant date. The weighted average share price for DBP awards granted in FY23 was 188p (FY22: 203p) and for RSP awards granted in FY23 was 183p (FY22: 201p). 23. Divestments and assets & liabilities classified as held for sale Significant accounting policies that apply to divestments and assets & liabilities classified as held for sale We classify non-current assets or a group of assets and associated liabilities, together forming a disposal group, as \u2018held for sale\u2019 when their carrying amount will be recovered principally through disposal rather than continuing use and the sale is highly probable. Sale is considered to be highly probable when management are committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed divestment within one year from the date of classification. We measure non-current assets or disposal groups classified as held for sale at the lower of their carrying amount and fair value less costs of disposal. Intangible assets, property, plant and equipment and right-of-use assets classified as held for sale are not depreciated or amortised. Upon completion of a divestment, we recognise a profit or loss on disposal calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest less costs incurred in disposing of the asset or disposal group and (ii) the carrying amount of the asset or disposal group (including goodwill). The profit or loss on disposal is recognised as a specific item, see note 9. In the event that non-current assets or disposal groups held for sale form a separate and identifiable major line of business, the results for both the current and comparative periods are reclassified as \u2018discontinued operations\u2019. Divestments During the year, we completed the disposal of BT Sport operations through forming a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD). We recognised a profit on disposal after tax of \u00a328m, see below for further details. We disclosed a profit on disposal after tax of \u00a33m in our Q2 results which has subsequently been adjusted to \u00a328m for FY23. The difference is driven by a \u00a333m increase in the profit on disposal before tax, as a result of correcting certain errors in the provisional calculation of the minimum guarantee liability completed at Q2, offset by an \u00a38m decrease in the related deferred tax credit recorded on the same liability. The difference is not quantitatively material and does not impact qualitative disclosures of our KPIs. In FY22 we completed the disposals of Diamond IP, a non-core software business in America, and certain business units in Italy serving customers in the public administration and SME sectors, recording a combined net gain of \u00a335m. The disposals in the current or prior year have not been reclassified as discontinued operations as they do not meet our definition of a separate major line of business. The net consideration recognised on completion of these divestments was as follows: 2023 a \u00a3m 2022 \u00a3m Intangible assets (including goodwill) b 88 12 Property, plant and equipment 13 6 Right-of-use assets 1 1 Other assets c 760 27 Liabilities c (357) (15) Net assets of operations disposed 505 31 Recycling from translation reserve \u2013 (1) Net financial liabilities recognised d 534 \u2013 Net impact on the consolidated balance sheet 1,039 30 Profit on disposal, after tax e 28 41 Net consideration 1,067 71 Satisfied by Proceeds received in the year per the cash flow statement 29 76 Deferred cash consideration f 70 (2) Investment in A preference shares in Sports JV (note 25) 428 \u2013 Investment in C preference shares in Sports JV (note 25) g 161 \u2013 Ordinary equity interest in Sports JV (note 25) 414 \u2013 Transaction costs (35) (3) Net consideration 1,067 71 a Balances in FY23 only include the BT Sport disposal. b Includes allocated goodwill of \u00a383m (FY22: \u00a37m). c Other assets includes \u00a3632m of capitalised programme rights (note 16) and \u00a3104m prepayments relating to rights payments made for licence periods that had not yet started. Liabilities include \u00a3351m relating to outstanding trade payables to broadcast rights holders for the current licence period. d FY23 balance comprises the fair value of BT\u2019s obligation under the minimum revenue commitment of \u00a3712m, less tax credit of \u00a3178m. e Profit on disposal has been recognised as a specific item, refer to note 9. f FY23 deferred cash consideration balance relates to the discounted cash flows due to BT from fixed consideration payable by WBD in instalments over the next three years. g Expected to be sold to WBD at the end of BT\u2019s earn-out entitlement in consideration for any programme rights funded by BT and is therefore akin to deferred consideration for pre-funded programme rights contributed by BT in to the Sports JV at formation. 23. Divestments and assets & liabilities classified as held for sale continued BT Sport In August 2022 the group formed a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD) combining BT Sport and WBD\u2019s Eurosport UK business. As part of the transaction, the group\u2019s wholly owned subsidiary, British Telecommunications plc (BT plc or BT) and WBD has each contributed, sub-licensed or delivered the benefit of their respective sports rights and distribution businesses for the UK & Ireland to the Sports JV. Both parties each hold a 50% interest and equal voting rights in the Sports JV. BT Sport\u2019s distribution agreement with Virgin Media has transferred to the Sports JV, and the Sports JV has also entered into a new agreement with Sky extending beyond 2030 to provide for its distribution of the Sports JV\u2019s combined sports content. The production and operational assets of BT Sport have transferred to WBD who will manage and operate the production of the Sports JV\u2019s sport content. BT plc has entered into a distribution agreement with the Sports JV to procure the sport content required to continue to supply our broadband, TV and mobile customers. BT plc\u2019s agreement with the Sports JV will extend beyond 2030 and for the first four years includes a minimum revenue guarantee of approximately \u00a3500m per annum, after which the agreement will change to a fully variable arrangement. At completion of the transaction, BT no longer has control of the BT Sport operations based on the assessment of ownership and joint control over the key decisions of the Sports JV (50/50 with WBD) established through the Sports JV agreement. The group\u2019s retained ordinary equity interest in the combined business has been classified as a joint venture under IFRS 11. WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports JV (Call Option). The price payable under the Call Option will be 50% of the fair market value of the Sports JV to be determined at the time of the exercise, plus any unpaid fixed consideration and remaining earn-out as described below. If the Call Option is not exercised, BT plc will have the ability to exit its shareholding in the Sports JV either through a sale or IPO after the initial four-year period. Critical & key accounting estimates and significant judgements made in accounting for the BT Sport disposal Assessment of whether BT has joint control over the Sports JV See note 25 for assessment on control. Valuation of investment in A preference shares (akin to contingent consideration) BT will receive an earn-out from the Sports JV (subject to liquidity and usual UK company law requirements), which will end at the earliest of: \u2013 four years post completion of the transaction; \u2013 the exercise by WBD of the Call Option; and \u2013 if the earn-out reaches an agreed cap. The earn-out cash flows to BT are dependent on the cash profit generation of the Sports JV over the earn-out period and is therefore akin to contingent consideration, initially recorded at a fair value of \u00a3428m reflecting the present value of expected cash flows. The valuation of the earn-out consideration is supported by a jointly-agreed business plan and internal valuation model. The key assumptions within the jointly-agreed business plan and internal valuation model are: \u2013 approximately 50% of revenues and 80% of costs during the four years of the jointly-agreed business plan are contractually committed; \u2013 material contracts are renewed at an economic value no less than current terms; \u2013 the total premium sports subscriber base does not materially grow or decline over the earn-out period; and \u2013 revenue growth and production costs are driven by contractual terms. We have also assumed that the earn-out period ends at four years post completion of the transaction; however given the mechanics of the deal arrangements if there is an earlier exercise by WBD of their Call Option this would also not materially impact the amounts disclosed in the financial statements. Subsequent to the initial recognition, the group\u2019s carried forward investment in A preference shares will be remeasured to fair value at each reporting date in accordance with IFRS 9, see note 25. Valuation of the minimum revenue guarantee in BT\u2019s distribution agreement with the Sports JV BT plc\u2019s obligation under the minimum revenue guarantee of c. \u00a32bn over the first four years of the Sports JV represents both a trading arrangement on market terms and a financing arrangement for the off-market element of the revenue guarantee, which has been recorded as a financial liability within trade and other payables on the balance sheet. The liability will be held at amortised cost and will unwind through payments made to the Sports JV over the next four years on the minimum revenue guarantee. The valuation of this financial liability, and what a fair cost-per-subscriber would be, is sensitive to a number of assumptions on volumes and price, and there is a range of outcomes which we could have arrived at. Alternative scenarios considered, based on the different prices and terms used with other market participants, could have resulted in a liability ranging from \u00a3543m to \u00a3837m, and we initially recognised a financial liability of \u00a3712m. The key assumptions in calculating the financial liability are in estimating what is a market wholesale price at market volume commitment that is supported by the forecast volumes for the related revenue streams. The volumes used are consistent with those included in the jointly-agreed business plan as described above. We note that the bottom of the range disclosed above is based on the price that we will pay after four years when the minimum revenue guarantee has ended, however we do not believe that is an appropriate rate from the outset due to existing volume commitments. Valuation of BT\u2019s equity interest in the Sports JV WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports JV. If the Call Option is not exercised, BT will have the ability to exit its shareholding in the JV either through a sale or IPO. The group has valued its interest in the Sports JV based on the estimated fair value at exit and using the following key assumptions: \u2013 BT expect to realise its interest in the Sports JV through exit rather than ongoing value in use; \u2013 BT expect WBD to exercise its option to acquire BT\u2019s 50% interest in the Sports JV at the end of the first four years of the Sports JV; and \u2013 An earnings multiple has been applied to the expected year 5 EBITDA per the jointly-agreed business plan \u2013 the multiple is at the lower end of a possible range identified from comparable peers and transactions in the premium sports subscription and broadcasting market. As the group\u2019s interest is recorded on a point in time valuation, based on forecast earnings and current market returns on similar investments, it carries both upside and downside risk from changes in micro- and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities on these risk factors: \u2013 EBITDA impact from revenue loss due to ongoing cost of living pressures or changes in the Sports JV\u2019s rights portfolio; \u2013 An increase or decrease in the valuation multiple achieved; and \u2013 An increase or decrease in the discount rate applied. None of these sensitivities individually resulted in a material change to the investment value. All downside or upside factors in combination could lead to a \u00a370m decrease or \u00a3200m increase in the fair value respectively. However, in our view, combining all downside factors is not a reasonable scenario given the financial and commercial levers available to both the JV and BT to mitigate the impact; and we have taken a prudent approach in not recognising a higher investment value upfront based on possible but uncertain changes in market conditions in the future. The investment will be subsequently accounted for using the equity method and will be subject to impairment testing at each reporting period, with any impairment losses recognised through specific items, see note 25. Discounting of cash flows All cash flows expected to be received or paid over time have been discounted at a rate applicable to the risks associated with the cash flows: \u2013 Deferred payments due to BT from WBD have been discounted at an appropriate post-tax cost of debt (3.3%); \u2013 BT\u2019s earn-out from the Sports JV has been discounted at the weighted average cost of capital for the Sports JV at completion date (6.7%); and \u2013 BT\u2019s commitments under the minimum guarantee have been discounted at the group\u2019s post-tax cost of debt (2.8%). We do not consider the net present value of the transaction would be materially affected by a reasonable change in the discount rate. Assets and liabilities held for sale Assets and liabilities held for sale at 31 March 2023 relate to certain city fibre networks and associated infrastructure assets in Germany and Pelipod Limited, a connected-locker business used in our UK supply chain operations. The Competition and Markets Authority (CMA) formally opened its investigation into the proposed disposal of Pelipod Limited on 29 March 2023 which we expect to conclude by 31 May 2023. We have classified the business as held for sale on the basis that the IFRS 5 criteria have been met at 31 March 2023. In FY22, the group had one disposal group held for sale, BT Sport. The assets of the disposal groups have been tested for impairment under existing relevant standards immediately prior to classification as held for sale with no impairment recognised. As the estimated fair value from the transactions, net of any costs incurred or liabilities recognised, is higher than the carrying value of the disposal group, no impairment has been recognised subsequent to classification as held for sale. 23. Divestments and assets & liabilities classified as held for sale continued 23. Divestments and assets & liabilities classified as held for sale continued Where the group is disposing of 100% of underlying operations and assets, we used the selling price agreed with the prospective purchaser as the fair value for the impairment test, which was classified as Level 3 on the fair value hierarchy. For the BT Sport transaction, we used the discounted cash flows due to BT over the first four years of the Sports JV, plus a potential exit value from the sale of the group\u2019s equity interest, as total gross consideration; BT\u2019s obligation under the minimum revenue guarantee in the distribution agreement has been treated as a reduction to the fair value of the consideration in the impairment test. The inputs into the fair value calculation are classified as Level 3 on the fair value hierarchy and supported by internal valuation models over which we have applied sensitivities on the future cash flows from the Sports JV and the trading multiples for the exit valuation. These operations have not been reclassified as a discontinued operation as it does not meet our definition of a separate major line of business. The disposal groups held for sale comprised the following assets and liabilities: At 31 March 2023 \u00a3m 2022 \u00a3m Assets Intangible assets a 13 55 Property, plant and equipment 4 13 Right-of-use assets 3 2 Inventories \u2013 \u2013 Trade and other receivables 1 10 Assets held for sale b 21 80 Liabilities Trade and other payables 1 38 Lease liabilities 3 2 Liabilities held for sale 4 40 a Intangible assets includes goodwill of \u00a313m (FY22: \u00a351m) that has been allocated to the disposal group. b \u00a3310m of programme rights relating to sports broadcasting rights acquired for the BT Sport operations were not reclassified to held for sale in FY22 as the carrying amount of these assets were principally recovered through continuing use before completion of the transaction. 24. Investments Significant accounting policies that apply to investments Investments classified as amortised cost These investments are measured at amortised cost. The carrying amount of these balances approximates to fair value. Any gain or loss on derecognition is recognised in the income statement. Investments classified as fair value through profit and loss These investments are initially recognised at fair value plus direct transaction costs. They are re-measured at subsequent reporting dates to fair value and changes are recognised directly in the income statement. Equity instruments classified as fair value through other comprehensive income We have made an irrevocable election to present changes in the fair value of equity investments that are not held for trading in other comprehensive income. All gains or losses are recognised in other comprehensive income and are not reclassified to the income statement when the investments are disposed of, aside from dividends which are recognised in the income statement when our right to receive payment is established. Equity investments are recorded in non-current assets unless they are expected to be sold within one year. At 31 March 2023 \u00a3m 2022 \u00a3m Non-current assets Fair value through other comprehensive income 23 34 Fair value through profit or loss 6 \u2013 Total non-current asset investments 29 34 Current assets Investments held at amortised cost 3,548 2,679 Current asset investments 3,548 2,679 Investments held at amortised cost relate to money market investments denominated in sterling of \u00a33,094m (FY22: \u00a32,225m), in euros of \u00a3446m (FY22: \u00a3436m) and in US dollars of \u00a38m (FY22: \u00a318m). Within these amounts are investments in liquidity funds of \u00a33,491m (FY22: \u00a31,912m), \u00a348m collateral paid on swaps (FY22: \u00a367m), Interest on investments of \u00a39m (FY22: \u00a3nil ) and repurchase agreements \u00a3nil (FY22: \u00a3700m). 25. Joint ventures and associates At 31 March 2023 \u00a3m 2022 \u00a3m Interest in joint ventures 354 2 Interest in associates 5 3 Total 359 5 The \u00a3352m movement in joint ventures relates to the disposal of BT Sport and creation of a new sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), see below. This is the only material equity-accounted investment held by the group. Sports JV with Warner Bros. Discovery In August 2022, we formed the Sports JV with WBD, combining BT Sport and WBD\u2019s Eurosport UK business. Further details on the BT Sport transaction are provided in note 23. Significant judgements made in accounting for the sports joint venture Assessment of whether BT has joint control over the Sports JV The Sports JV is classified as a joint venture and hence has been deconsolidated from the group based on an assessment under IFRS 10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD. Factors relevant to our assessment: \u2013 Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new or existing sports rights and distribution arrangements. \u2013 Unequal cash distribution during the first four years due to the earn-out mechanism and relative size of businesses contributed into the Sports JV. \u2013 Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and commitments to sports rights holders. \u2013 WBD\u2019s call option to acquire BT\u2019s 50% interest in the Sports JV is not exercisable before key decisions over material activities of the Sports JV are made such that joint control still applies at the outset. The assessment whether joint control remains in place is reviewed at each reporting period . 24. Investments continued Fair value estimation Fair value hierarchy At 31 March 2023 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total held at fair value \u00a3m Non-current and current investments Fair value through other comprehensive income \u2013 \u2013 23 23 Fair value through profit or loss 6 \u2013 \u2013 6 Total 6 \u2013 23 29 At 31 March 2022 Non-current and current investments Fair value through other comprehensive income 4 \u2013 30 34 Total 4 \u2013 30 34 The three levels of valuation methodology used are: \u2013 Level 1 \u2013 uses quoted prices in active markets for identical assets or liabilities. \u2013 Level 2 \u2013 uses inputs for the asset or liability other than quoted prices that are observable either directly or indirectly. \u2013 Level 3 \u2013 uses inputs for the asset or liability that are not based on observable market data, such as internal models or other valuation methods. Level 3 balances consist of investments classified as fair value through other comprehensive income of \u00a323m (FY22: \u00a330m) which represent investments in a number of private companies. If specific market data is not available, these investments are held at cost, adjusted as necessary for impairments, which approximates to fair value. Accounting policies adopted by the Sports JV The Sports JV has a financial year-end of 31 July and therefore has not yet prepared its first set of audited financial statements. In order to recognise our share of the Sports JV\u2019s results for our equity-accounted investment, we have prepared the Sports JV\u2019s financial information disclosed below based on management accounts for the period ending 31 March 2023 after making certain adjustments to comply with IFRS. Significant judgements made in preparing the Sports JV\u2019s financial information: \u2013 IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future value of programme rights, and goodwill. \u2013 Revenues from the minimum guarantee in the Sports JV\u2019s distribution agreement with BT should be adjusted to reflect a trading agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 \u2013 this mirrors the accounting treatment applied by BT (see note 23). \u2013 A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss under IFRS 9. \u2013 Hedge accounting should be applied on the Sports JV\u2019s forward contracts with BT (see note 31) with fair value movements on the derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the forward contracts. \u2013 Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed by the Sports JV on a straight-line basis over the programming period which is generally 12 months \u2013 this is consistent with the group\u2019s accounting policy (see note 16). Accounting policies in other areas are consistent with those applied by the group. Ordinary equity shares On completion of the BT Sport transaction, the group recorded an investment in joint venture at an initial fair value of \u00a3414m, relating to our retained ordinary equity interest in the Sports JV entity, in accordance with IFRS 10 and IAS 28. The group has valued this interest in the Sports JV at the estimated fair value at exit, see note 23. Consistent with our accounting policy on associates and joint ventures, we will recognise our share of the change in the Sports JV\u2019s net assets under the equity method of accounting. Year ended 31 March 2023 \u00a3m Group's equity-accounted investment in the Sports JV at formation 414 Share of total comprehensive loss (62) Dividends received during the year \u2013 Carrying amount at the end of the year 352 As required by IAS 36, we have assessed the investment for impairment. There is no impairment at 31 March 2023 as the fair value less costs to sell is higher than the carrying amount of the investment. See below for sensitivities we have applied in determining the fair value less costs to sell. The following is summarised and unaudited financial information for the Sports JV prepared in accordance with IFRS and including adjustments required to align with the group\u2019s accounting policies and provisional fair value adjustments. These results are subject to true-up within the 12 months from Sports JV formation, however any adjustments are not expected to materially impact our share of the Sports JV\u2019s results recorded in the period. Summarised statement of total comprehensive income for year ended 31 March 2023 \u00a3m Revenue 557 Loss for the year a (121) Other comprehensive loss (2) Total comprehensive loss (123) Summarised balance sheet at 31 March 2023 \u00a3m Current assets b 1,106 Non-current assets c 1,236 Current liabilities d (702) Non-current liabilities e (543) Net assets 1,097 a Includes amortisation of \u00a356m on acquired intangibles based on provisional fair value adjustments, net finance income of \u00a36m, and tax income of \u00a317m (current tax charge of \u00a34m less deferred tax credit of \u00a321m). b Includes cash and cash and cash equivalents of \u00a311m. c Includes goodwill and acquired intangibles of \u00a3645m. d Includes current financial liabilities (excluding trade and other payables and provisions) of \u00a3(281)m of which \u00a3(268)m relates to the outstanding liability on the RCF provided by BT (see note 24). e Includes non-current financial liabilities (excluding trade and other payables and provisions) of \u00a3(416)m. 25. Joint ventures and associates continued 25. Joint ventures and associates continued The Sports JV\u2019s accounting loss for the year reflects amortisation of acquired intangibles from the BT Sport and Eurosport business transfers, reduced revenues from IFRS 15 adjustments for the off-market minimum guarantee with BT (see note 23) and underperformance against business plan. Underperformance has been driven by cost of living pressures affecting the premium sports subscription market and impacts from a prolonged winter break in European club football from the World Cup. Underlying trading, before accounting adjustments, is expected to recover in the medium to long term as wider macroeconomic and inflationary pressures ease and through the Sports JV reducing its cost base to mitigate any future revenue loss. Preference shares In addition to BT\u2019s ordinary shareholding, BT held the following investments in preference shares in the Sports JV that have not been included within the equity-accounted interest above. At 31 March 2023 \u00a3m 2022 \u00a3m Investment in A preference shares 429 \u2013 Investment in C preference shares 126 \u2013 Total 555 \u2013 \u2013 A preference shares \u2013 we expect these shares to be redeemed by the Sports JV over the 4-year earn-out period in order to effect the distribution of cash to BT under our earn-out entitlement. The fair value of the shares is driven by the underlying cash profit generation of the Sports JV and therefore have been classified as a fair value through profit or loss (FVTPL) financial asset under IFRS 9. In our view, the cash flows due to BT from the A preference shares are akin to contingent consideration and therefore the fair value of \u00a3428m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a31m of fair value gain has been recognised through specific items (see note 9) driven by an increase in forecasted cash flows offset by an increase in the discount rate applied to cash flows. \u2013 C preference shares \u2013 these shares are expected to be sold to WBD at the end of BT\u2019s earn-out entitlement in consideration for any sports rights funded by BT at that point and have been recognised as a financial asset held at FVTPL under IFRS 9. In our view, the cash flows due to BT from the C preference shares are akin to deferred consideration and therefore the fair value of \u00a3161m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a335m of fair value loss has been recognised through specific items (see note 9) driven by an expected reduction in the Sports JV\u2019s cost base to mitigate short- to medium-term revenue loss, which will reduce the expected payment to BT for pre-funded sports rights. The preference shares are held at Level 3 on the fair value hierarchy, reflecting a valuation methodology that does not use inputs based on observable market data. See note 24 for further details on fair value estimation. See below for sensitivities we have applied in determining the fair value. Sensitivities The group\u2019s ordinary equity and preference share investments in the Sports JV, carry both upside and downside risk from changes in micro and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities to these risk factors: \u2013 EBITDA decline from loss of material sports rights or a significant decline in the Sports JV\u2019s revenues from ongoing cost of living pressures; \u2013 EBITDA improvement from outperformance against revised forecasts, particularly with respect to wholesale revenues; \u2013 an increase or decrease in the valuation multiple achieved; and \u2013 an increase or decrease in the discount rate applied. Sensitivity Fair value of A and C preference shares in Sports JV Headroom on impairment test over equity-accounted investment 5% increase or decrease in EBITDA +/- \u00a332m +/- \u00a326m 10pp increase or decrease in discount rate +/- \u00a38m +/- \u00a315m 10% change in valuation multiple \u2013 +/- \u00a352m None of these sensitivities generated an impairment on the group\u2019s equity-accounted investment in the Sports JV. Headroom on the investment has increased since formation of the Sports JV driven by an expected increase in long-term value from the Sports JV reducing its cost base. 26. Cash and cash equivalents Significant accounting policies that apply to cash and cash equivalents Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily convertible to cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less. All are held at amortised cost on the balance sheet, equating to fair value. For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above net of outstanding bank overdrafts. Bank overdrafts are included within the current element of loans and other borrowings (note 27). At 31 March 2023 \u00a3m 2022 \u00a3m Cash at bank and in hand 336 324 Cash equivalents UK deposits \u2013 353 Indian rupee deposits 55 90 Other deposits 1 10 Total cash equivalents a 56 453 Total cash and cash equivalents 392 777 Bank overdrafts (note 27) (11) (85) Cash and cash equivalents per the cash flow statement 381 692 a Total cash equivalents have fallen in line with our treasury strategy. Cash and cash equivalents include restricted cash of \u00a3131m (FY22: \u00a324m), of which \u00a323m (FY22: \u00a322m) was held in countries where local capital or exchange controls currently prevent us from accessing cash balances. The remaining balance of \u00a3108m (FY22: \u00a32m) was held in escrow accounts, or in commercial arrangements akin to escrow. Following an IFRIC agenda decision relating to demand deposits the group identified one bank account with restrictions on use that nonetheless meets the IAS 7 definition of cash. This bank account, which has a balance of \u00a396m (FY22: \u00a3148m) is now reflected in cash and cash equivalents. Comparatives have not been restated as the impact is not considered material. Please see note 1 for further information. 27. Loans and other borrowings Significant accounting policies that apply to loans and other borrowings We initially recognise loans and other borrowings at the fair value of amounts received net of transaction costs. They are subsequently measured at amortised cost using the effective interest method and, if included in a fair value hedge relationship, are re-valued to reflect the fair value movements on the associated hedged risk. The resulting amortisation of fair value movements, on de-designation of the hedge, is recognised in the income statement. What\u2019s our capital management policy? The objective of our capital management policy is to target an overall level of debt consistent with our credit rating target while investing in the business, supporting the pension scheme and meeting our distribution policy. In order to meet this objective, we may issue or repay debt, issue new shares, repurchase shares, or adjust the amount of dividends paid to shareholders. We manage the capital structure and make adjustments to it accordingly to reflect changes in economic conditions and the risk characteristics of the group. The Board regularly reviews the capital structure. No changes were made to these objectives and processes during FY23. For details of share issues and repurchases in the year see note 21. Our capital structure consists of net debt and shareholders\u2019 equity. The analysis below summarises the components which we manage as capital. At 31 March 2023 \u00a3m 2022 \u00a3m Net debt 18,859 18,009 Total parent shareholders\u2019 equity a 14,490 15,274 Capital structure 33,349 33,283 a Excludes non-controlling interests of \u00a324m (FY22: \u00a322m). 27. Loans and other borrowings continued Net debt and net financial debt Net debt consists of loans and other borrowings and lease liabilities, less current asset investments and cash and cash equivalents, including items which have been classified as held for sale on the balance sheet. Currency denominated balances within net debt are translated to sterling at swapped rates where hedged. Fair value adjustments and accrued interest applied to reflect the effective interest method are removed. Amounts due to joint ventures held within loans and borrowings are also excluded. Net financial debt is net debt excluding lease liabilities. Net debt and net financial debt are considered to be alternative performance measures as they are not defined in IFRS. The most directly comparable IFRS measure is the aggregate of loans and other borrowings and lease liabilities (current and non-current), current asset investments and cash and cash equivalents. A reconciliation from these IFRS measures to net debt and net financial debt is given below. At 31 March Notes 2023 \u00a3m 2022 \u00a3m Loans and other borrowings a 18,521 16 ,185 Lease liabilities 15 5,359 5,760 Net lease liabilities classified as held for sale b 23 3 2 Less: Cash and cash equivalents 26 (392) (777) Current asset investments 24 (3,548) (2,679) 19,943 18,491 Adjustments: To retranslate debt balances at swap rates where hedged by currency swaps c (819) (234) To remove accrued interest applied to reflect the effective interest method and fair value adjustments (254) (248) Loans with joint ventures 31 (11) \u2013 Net debt 18,859 18,009 Lease liabilities 15 (5,359) (5,760) Lease liabilities classified as held for sale b (3) (2) Net financial debt 13,497 12,247 a Includes overdrafts of \u00a311m at 31 March 2023 (FY22: \u00a385m). b There are lease liabilities classified as held for sale, refer to note 23. c The translation difference between spot rate and hedged rate of loans and borrowings denominated in foreign currency. 27. Loans and other borrowings continued The table below shows the key components of net debt and the increase of \u00a3850m this year. At 31 March 2022 \u00a3m Cash flows \u00a3m Net lease additions a \u00a3m Foreign exchange \u00a3m Transfer to within one year \u00a3m Other movements d \u00a3m At 31 March 2023 \u00a3m Loans and other borrowings due within one year b 873 (136) \u2013 65 943 27 1,772 Lease liabilities due within one year 795 (859) \u2013 1 863 \u2013 800 Loans and other borrowings due after one year 15,312 1,746 \u2013 525 (943) 109 16,749 Lease liabilities due after one year 4,965 \u2013 449 11 (863) (3) 4,559 Liabilities classified as held for sale 2 \u2013 \u2013 \u2013 \u2013 1 3 Impact of cross-currency swaps c (234) \u2013 \u2013 (585) \u2013 \u2013 (819) Removal of the accrued interest and fair value adjustments (251) \u2013 \u2013 \u2013 \u2013 (13) (264) Removal of loans with joint ventures \u2013 (11) \u2013 \u2013 \u2013 \u2013 (11) Gross debt 21,462 740 449 17 \u2013 121 22,789 Less: Cash and cash equivalents (777) 379 \u2013 3 \u2013 3 (392) Current asset investments (2,679) (885) \u2013 (21) \u2013 37 (3,548) Removal of accrued interest c 3 \u2013 \u2013 \u2013 \u2013 7 10 Net debt 18,009 234 449 (1) \u2013 168 18,859 At 31 March 2021 \u00a3m Cash flows \u00a3m Net lease additions a \u00a3m Foreign exchange \u00a3m Transfer to within one year \u00a3m Other movements d \u00a3m At 31 March 2022 \u00a3m Loans and other borrowings due within one year b 911 (1,421) \u2013 59 1,341 (17) 873 Lease liabilities due within one year 730 (792) \u2013 \u2013 857 \u2013 795 Loans and other borrowings due after one year 15,774 743 \u2013 71 (1,341) 65 15,312 Lease liabilities due after one year 5,422 \u2013 397 3 (857) \u2013 4,965 Liabilities classified as held for sale \u2013 \u2013 \u2013 \u2013 \u2013 2 2 Impact of cross-currency swaps c (142) \u2013 \u2013 (92) \u2013 \u2013 (234) Removal of the accrued interest and fair value adjustments (242) \u2013 \u2013 \u2013 \u2013 (9) (251) Gross debt 22,453 (1,470) 397 41 \u2013 41 21,462 Less: Cash and cash equivalents (1,000) 226 \u2013 (3) \u2013 \u2013 (777) Current asset investments (3,652) 970 \u2013 3 \u2013 \u2013 (2,679) Removal of accrued interest c 1 \u2013 \u2013 \u2013 \u2013 2 3 Net debt 17,802 (274) 397 41 \u2013 43 18,009 a Net lease additions are net non-cash movements in lease liabilities during the period, and primarily comprise new and terminated leases, remeasurements of existing leases and lease interest charges. b Includes accrued interest and bank overdrafts. c Translation of debt balances at swap rates where hedged by cross-currency swaps. d Other movements include removal of accrued interest applied to reflect the effective interest rate method, removal of fair value adjustments and movements relating to held for sale assets and liabilities (see note 23). Cash flows from gross debt of \u00a3740m outflow (FY22: \u00a31,470m outflow) include repayment of borrowings \u00a3513m (FY22: \u00a31,374m outflow), proceeds from bank loans and bonds \u00a32,203m inflow (FY22: \u00a3744m), cash flows from collateral received \u00a317m outflow (FY22: \u00a329m outflow), payment of lease liabilities \u00a3727m outflow (FY22: \u00a3659m outflow), interest paid on lease liabilities \u00a3143m outflow (FY22: \u00a3133m outflow), increase in amounts owed to joint venture \u00a311m (FY22: \u00a3nil), and change in bank overdraft \u00a374m outflow (FY22: \u00a319m outflow). 27. Loans and other borrowings continued The table below gives details of the listed bonds and other debt. At 31 March 2023 \u00a3m 2022 \u00a3m 0.875% \u20ac500m bond due September 2023 a,d 270 423 4.5% $675m bond due December 2023 a 554 520 1% \u20ac575m bond due June 2024 a,d 415 489 1% \u20ac1,100m bond due November 2024 a,d 726 929 3.50% \u00a3250m index linked bond due April 2025 524 468 0.5% \u20ac650m bond due September 2025 a 571 549 1.75% \u20ac1,300m bond due March 2026 a 1,143 1,098 1.5% \u20ac1,150m bond due June 2027 a 1,017 977 2.75% \u20ac500m bond due August 2027 a 530 \u2013 2.125% \u20ac600m bond due September 2028 a 442 425 5.125% $700m bond due December 2028 a 573 537 5.75% \u00a3600m bond due December 2028 669 680 1.125% \u20ac750m bond due September 2029 a 657 631 3.25% $1,000m bond due November 2029 a 812 762 9.625% $2,670m bond due December 2030 a (minimum 8.625% b ) 2,214 2,077 3.75% \u20ac800m bond due February 2031 a 704 \u2013 3.125% \u00a3500m bond due November 2031 503 503 3.375% \u20ac500m bond due August 2032 a 445 \u2013 3.64% \u00a3330m bond due June 2033 339 339 1.613% \u00a3330m index linked bond due June 2033 380 362 6.375% \u00a3500m bond due June 2037 a 523 523 3.883% \u00a3330m bond due June 2039 340 340 1.739% \u00a3330m index linked bond due June 2039 381 363 5.75% \u00a3350m bond due February 2041 347 \u2013 3.924% \u00a3340m bond due June 2042 350 350 1.774% \u00a3340m index linked bond due June 2042 392 374 2.08% JPY10,000m bond due February 2043 a 61 \u2013 3.625% \u00a3250m bond due November 2047 250 250 4.25% $500m bond due November 2049 a 408 383 1.874% \u20ac500m bond due August 2080 a,c 443 426 4.250% $500m Hybrid bond due November 2081 a,c 404 383 4.875% $500m Hybrid bond due November 2081 a,c 409 384 Total listed bonds 17,796 15,545 Other loans e 714 555 Bank overdrafts (note 26) 11 85 Total other loans and borrowings 725 640 Total loans and other borrowings 18,521 16,185 a Designated in a cash flow hedge relationship. b The interest rate payable on this bond attracts an additional 0.25% for rating category downgrade by either Moody\u2019s or Standard & Poor\u2019s to the group\u2019s senior unsecured debt below A3/A\u2013 respectively. In addition, if Moody\u2019s or Standard & Poor\u2019s subsequently increase the ratings then the interest rate will be decreased by 0.25% for each rating category upgrade by either rating agency. In no event will the interest rate be reduced below the minimum rate reflected in the above table. c Includes call options between 2.5 years and 8.5 years. d Bond partially redeemed in February 2023. e Includes \u00a3100m relating to an asset monetisation programme, further details below. Unless previously designated in a fair value hedge relationship, all loans and other borrowings are carried on our balance sheet and in the table above at amortised cost. The fair value of listed bonds is \u00a316,979m (FY22: \u00a316,750m). The fair value of our listed bonds is estimated on the basis of quoted market prices (Level 1). The carrying amount of other loans and bank overdrafts equates to fair value due to the short maturity of these items (Level 3). The interest rates payable on loans and borrowings disclosed above reflect the coupons on the underlying issued loans and borrowings and not the interest rates achieved through applying associated cross-currency and interest rate swaps in hedge arrangements. During the period the group entered into the sale of cash flows related to contract assets related to mobile handsets where the performance obligations have been substantially delivered to the customer in the amount of \u00a3100m (FY22: \u00a3nil). The right to receive cash is dependent on the group\u2019s further performance in relation to airtime and so a financial liability has been recognised and the related cash flows have been included within financing activities in the cash flow statement. 28. Finance expense Year ended 31 March 2023 \u00a3m 2022 \u00a3m Finance expense Interest on: Financial liabilities at amortised cost and associated derivatives 753 628 Lease liabilities 133 133 Derivatives 9 4 Fair value movements on derivatives not in a designated hedge relationship 1 4 Reclassification of cash flow hedge from other comprehensive income (21) 64 Unwinding of discount on provisions and other payables 14 \u2013 Total finance expense before specific items 889 833 Specific items (note 9) a 5 101 Total finance expense 894 934 a Includes \u00a313m credit (FY22: \u00a38m charge) reclassification of cash flow hedge from other comprehensive income. 27. Loans and other borrowings continued Loans and other borrowings are analysed as follows: At 31 March 2023 \u00a3m 2022 \u00a3m Current liabilities Listed bonds 1,075 233 Amounts owed to joint ventures 11 \u2013 Other loans and bank overdrafts a 686 640 Total current liabilities 1,772 873 Non-current liabilities Listed bonds 16,722 15,312 Other loans and bank overdrafts a 27 \u2013 Total non-current liabilities 16,749 15,312 Total loans and other borrowings 18,521 16,185 a Includes collateral received on swaps of \u00a3557m (FY22: \u00a3555m). The carrying values disclosed in the above table reflect balances at amortised cost adjusted for accrued interest and fair value adjustments to the relevant loans or borrowings. These do not reflect the final principal repayments that will arise after taking account of the relevant derivatives in hedging relationships which are reflected in the table below. All borrowings as at 31 March 2023 were unsecured. The principal repayments of loans and borrowings at hedged rates amounted to \u00a317,442m (FY22: \u00a315,700m) and repayments fall due as follows: 2023 2022 At 31 March Carrying amount \u00a3m Effect of hedging and interest \u00a3m Principal repayments at hedged rates \u00a3m Carrying amount \u00a3m Effect of hedging and interest \u00a3m Principal repayments at hedged rates \u00a3m Within one year, or on demand 1,772 (271) 1,501 873 (233) 640 Between one and two years 1,165 15 1,180 935 43 978 Between two and three years 2,669 (141) 2,528 1,415 76 1,491 Between three and four years 404 (33) 371 2,532 (59) 2,473 Between four and five years 1,539 (14) 1,525 379 (8) 371 After five years 10,983 (646) 10,337 10,041 (294) 9,747 Total due for repayment after more than one year 16,760 (819) 15,941 15,302 (242) 15,060 Total repayments 18,532 (1,090) 17,442 16,175 (475) 15,700 Non cash adjustments a (11) 10 Total loans and other borrowings 18,521 16,185 a Fair value adjustments and unamortised bond fees. 29. Financial instruments and risk management We issue or hold financial instruments mainly to finance our operations; to finance corporate transactions such as share buybacks and acquisitions; for the temporary investment of short-term funds; and to manage currency and interest rate risks. In addition, various financial instruments, for example trade receivables and payables arise directly from operations. How do we manage financial risk? Our activities expose us to a variety of financial risks: market risk (including interest rate risk and foreign exchange risk), credit risk and liquidity risk. Treasury operation We have a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as our exposure to associated market risks, and credit risk. Treasury policy Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of borrowing, investments and group-wide exposures. The Board has delegated authority to operate these policies to a series of panels responsible for the management of key treasury risks and operations. Appointment to and removal from the key panels requires approval from two of the following: the Chairman, the Chief Executive or the Chief Financial Officer. There has been no change in the nature of our risk profile between 31 March 2023 and the date of approval of these financial statements. How do we manage interest rate risk? Management policy Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable rates, partially offset by cash held at variable rates. Fair value interest rate risk arises from borrowings issued at fixed rates. Our policy, as set by the Board, is to ensure that at least 70% of ongoing net debt is at fixed rates. Short-term interest rate management is delegated to the treasury operation while long-term interest rate management decisions require further approval by the chief financial officer, the corporate finance director or the group treasury director who each have been delegated such authority from the Board. Hedging strategy In order to manage our interest rate profile, we enter into cross-currency and interest rate swap agreements to vary the amounts and periods for which interest rates on borrowings are fixed. The duration of the swap agreements matches the duration of the debt instruments. The majority of the group\u2019s long-term borrowings are subject to fixed sterling interest rates after applying the impact of these hedging instruments. How do we manage foreign exchange risk? Management policy Foreign currency hedging activities protect the group from the risk that changes in exchange rates will adversely affect future net cash flows. The Board\u2019s policy for foreign exchange risk management defines the types of transactions typically covered, including significant operational, funding and currency interest exposures, and the period over which cover should extend for each type of transaction. The Board has delegated short-term foreign exchange management to the treasury operation and long-term foreign exchange management decisions require further approval from the chief financial officer, the corporate finance director or the group treasury director. Hedging strategy A significant proportion of our external revenue and costs arise within the UK and are denominated in sterling. Our non-UK operations generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility. We enter into forward currency contracts to hedge foreign currency capital purchases, purchase and sale commitments, interest expense and foreign currency investments. The commitments hedged are principally denominated in US dollar, euro, Indian rupees and Hungarian forint. As a result, our exposure to foreign currency arises mainly on non-UK subsidiary investments and on residual currency trading flows. 29. Financial instruments and risk management continued We use cross-currency swaps to swap foreign currency borrowings into sterling. The table below reflects the currency and interest rate profile of our loans and borrowings after the impact of hedging. 2023 2022 At 31 March Fixed rate interest \u00a3m Floating rate interest \u00a3m Total \u00a3m Fixed rate interest \u00a3m Floating rate interest \u00a3m Total \u00a3m Sterling 15,210 1,773 16,983 13,515 1,746 15,261 Euro \u2013 443 443 \u2013 436 436 Other \u2013 16 16 \u2013 3 3 Total 15,210 2,232 17, 4 42 13,515 2,185 15,700 Ratio of fixed to floating 87% 13% 100% 86% 14% 100% Weighted average effective fixed interest rate \u2013 sterling 4.0% 3.9% The floating rate loans and borrowings and committed facilities bear interest rates fixed in advance for periods up to one year, primarily by reference to RPI, CPI and ARRs where applicable. Sensitivity analysis The income statement and shareholders\u2019 equity are exposed to volatility arising from changes in interest rates and foreign exchange rates. To demonstrate this volatility, management has concluded that the following are reasonable benchmarks for performing sensitivity analysis: \u2013 For interest, a 1% increase in interest rates and parallel shift in yield curves across sterling, US dollar and euro currencies. \u2013 For foreign exchange, a 10% strengthening of sterling against other currencies. The impact on equity, before tax and excluding any impact related to retirement benefit plans, of a 1% increase in interest rates and a 10% strengthening of sterling against other currencies is as detailed below: At 31 March 2023 \u00a3m Increase (reduce) 2022 \u00a3m Increase (reduce) Sterling interest rates 579 666 US dollar interest rates (371) (429) Euro interest rates (284) (247) Sterling strengthening (169) (203) A 1% decrease in interest rates and 10% weakening of sterling against other currencies would have broadly the same impact in the opposite direction. The impact of a 1% change in interest rates on the group\u2019s annual net finance expense and our exposure to foreign exchange volatility in the income statement, after hedging, (excluding translation exposures) would not have been material in FY23 and FY22. Credit ratings We continue to target a BBB+/Baa1 credit rating over the cycle, with a BBB/Baa2 floor. We regularly review the liquidity of the group and our funding strategy takes account of medium-term requirements. These include the pension deficit and shareholder distributions. Our December 2030 bond contains terms that require us to pay higher rates of interest when our credit ratings are below A3 in the case of Moody\u2019s or A\u2013 in the case of Standard & Poor\u2019s (S&P). Additional interest of 0.25% per year accrues for each ratings category downgrade by each agency below those levels effective from the next coupon date following a downgrade. Based on the total notional value of debt outstanding of \u00a32.2bn at 31 March 2023, our finance expense would increase/decrease by approximately \u00a311m a year if the group\u2019s credit rating were to be downgraded/upgraded, respectively, by one credit rating category by both agencies. Our credit ratings were as detailed below: 2023 2022 At 31 March Rating Outlook Rating Outlook Rating agency Fitch BBB Stable BBB Stable Moody\u2019s Baa2 Stable Baa2 Negative Standard & Poor\u2019s BBB Stable BBB Stable 29. Financial instruments and risk management continued How do we manage liquidity risk? Management policy We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding requirements, determined by using short- and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and approves the long-term funding requirements of the group and on an ongoing basis considers any related matters. We manage refinancing risk by limiting the amount of borrowing that matures within any specified period and having appropriate strategies in place to manage refinancing needs as they arise. The maturity profile of our loans and borrowings at 31 March 2023 is disclosed in note 27. We have term debt maturities of \u00a30.8bn in FY24. Our treasury operation reviews and manages our short-term requirements within the parameters of the policies set by the Board. We hold cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March 2023 we had undrawn committed borrowing facilities of \u00a32.1bn (FY22: \u00a32.1bn) maturing in March 2027. The following table provides an analysis of the remaining cash flows including interest payable for our non-derivative financial liabilities on an undiscounted basis, which may therefore differ from both the carrying value and fair value. Non-derivative financial liabilities At 31 March 2023 Loans and other borrowings \u00a3m Interest on loans and other borrowings \u00a3m Trade and other payables \u00a3m Provisions \u00a3m Lease liabilities \u00a3m Total \u00a3m Due within one year 1,512 643 5,451 3 800 8,409 Between one and two years 1,165 637 \u2013 2 774 2,578 Between two and three years 2,669 616 \u2013 2 676 3,963 Between three and four years 404 575 \u2013 2 640 1,621 Between four and five years 1,539 558 \u2013 2 612 2,711 After five years 10,983 2,891 \u2013 \u2013 2,529 16,403 18,272 5,920 5,451 11 6,031 35,685 Interest payments not yet accrued \u2013 (5,660) \u2013 \u2013 \u2013 (5,660) Fair value adjustment (11) \u2013 \u2013 \u2013 \u2013 (11) Impact of discounting \u2013 \u2013 \u2013 (1) (672) (673) Carrying value on the balance sheet a,b 18,261 260 5,451 10 5,359 29,341 At 31 March 2022 Due within one year 640 568 5,224 4 788 7, 224 Between one and two years 935 564 \u2013 4 784 2,287 Between two and three years 1,415 538 \u2013 3 729 2,685 Between three and four years 2,532 515 \u2013 \u2013 626 3,673 Between four and five years 379 477 \u2013 \u2013 589 1,445 After five years 10,041 2,809 \u2013 \u2013 2,983 15,833 15,942 5,471 5,224 11 6,499 33,147 Interest payments not yet accrued \u2013 (5,238) \u2013 \u2013 \u2013 (5,238) Fair value adjustment 10 \u2013 \u2013 \u2013 \u2013 10 Impact of discounting \u2013 \u2013 \u2013 \u2013 (739) (739) Carrying value on the balance sheet a,b 15,952 233 5,224 11 5,760 27,18 0 a Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest cash flows were calculated using the most recent interest or indexation rates at the relevant balance sheet date. b The carrying amount of trade and other payables excludes \u00a3920m (FY22: \u00a3624m) of non-current trade and other payables which relates to non-financial liabilities, and \u00a31,113m (FY22: \u00a3918m) of other taxation, social security and deferred income. Trade and other payables are held at amortised cost. The carrying amount of these balances approximates to fair value due to the short maturity of amounts payable. 29. Financial instruments and risk management continued The following table provides an analysis of the contractually agreed cash flows in respect of the group\u2019s derivative financial instruments. Cash flows are presented on a net or gross basis in accordance with settlement arrangements of the instruments. Derivatives \u2013 Analysed by earliest payment date a Derivatives \u2013 Analysis based on holding instrument to maturity Derivative financial liabilities At 31 March 2023 Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Due within one year 47 2,184 (2,088) 143 47 2,184 (2,088) 143 Between one and two years 47 1,125 (1,058) 114 47 1,125 (1,058) 114 Between two and three years 94 939 (882) 151 46 939 (882) 103 Between three and four years 111 381 (364) 128 46 381 (364) 63 Between four and five years 16 161 (135) 42 46 161 (135) 72 After five years 47 2,127 (2,011) 163 130 2,127 (2,011) 246 Total b 362 6,917 (6,538) 741 362 6,917 (6,538) 741 At 31 March 2022 Due within one year 300 940 (873) 367 77 940 (873) 144 Between one and two years 247 1,615 (1,508) 354 77 1,615 (1,508) 184 Between two and three years 18 1,679 (1,566) 131 77 1,679 (1,566) 190 Between three and four years 17 736 (685) 68 77 736 (685) 128 Between four and five years 17 511 (513) 15 77 511 (513) 75 After five years 65 4,789 (4,725) 129 279 4,789 (4,725) 343 Total b 664 10,270 (9,870) 1,064 664 10,270 (9,870) 1,064 a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty have the right to terminate the swap on certain dates. If the break clause was exercised, the mark to market position would be settled in cash. b Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest rate cash flows were calculated using the most recent rate applied at the relevant balance sheet date. How do we manage energy price risk? Management policy UK (excluding Northern Ireland) and European energy prices continue to be exposed to volatility driven by fears of reduced gas supply as Europe continues the shift from Russian gas to LNG and renewables (which themselves are subject to short-term fluctuations given their intermittent nature). In order to manage our exposure to fluctuating energy prices, we have a target for UK (excluding Northern Ireland) energy demand to be at least 80% hedged one quarter before the start of the next financial year, and 50% hedged for the following financial year. We achieve this through forward over the counter hedges and a mixture of new and existing power purchase agreements (PPAs) and derivative virtual PPAs (vPPAs). Hedging strategy In each financial year our strategy is to build our PPA and vPPA portfolio, exploring opportunities with 5-10 year contracts delivering favourable net present values. We complement this by monitoring the markets and forward purchasing electricity (power) when the market is favourable. In the forthcoming financial year (FY24) the aim is to be 95% hedged, which allows for headroom for increased outputs from the renewable sources should weather conditions prevail. How do we manage credit risk? Management policy Our exposure to credit risk arises from financial assets transacted by the treasury operation (primarily derivatives, investments, cash and cash equivalents) and from trading-related receivables. For treasury-related balances, the Board\u2019s defined policy restricts exposure to any one counterparty by setting credit limits based on the credit quality as defined by Moody\u2019s and Standard & Poor\u2019s. The minimum credit ratings permitted with counterparties in respect of new transactions are A3/A\u2013 for long-term and P1/A1 for short-term investments. If counterparties in respect of existing transactions fall below the permitted criteria we will take action where appropriate. The treasury operation continuously reviews the limits applied to counterparties and will adjust the limit according to the nature and credit standing of the counterparty, and in response to market conditions, up to the maximum allowable limit set by the Board. Operational management policy Our credit policy for trading-related financial assets is applied and managed by each of the customer-facing units (CFUs) to ensure compliance. The policy requires that the creditworthiness and financial strength of customers are assessed at inception and on an ongoing basis. Payment terms are set in accordance with industry standards. Where appropriate, we may minimise risks by requesting securities such as deposits, guarantees and letters of credit. We take proactive steps including constantly reviewing credit ratings of counterparties to minimise the impact of adverse market conditions on trading-related financial assets. 29. Financial instruments and risk management continued Exposures The maximum credit risk exposure of the group\u2019s financial assets at the balance sheet date is as follows: At 31 March Notes 2023 \u00a3m 2022 \u00a3m Derivative financial assets 1,479 1,091 Investments 24 3,577 2,713 Trade and other receivables a 17 1,821 1,489 Contract assets 5 1,934 1,915 Cash and cash equivalents 26 392 777 Total 9,203 7, 985 a The carrying amount excludes \u00a3503m (FY22: \u00a3337m) of non-current trade and other receivables which relate to non-financial assets, and \u00a31,239m (FY22: \u00a31,135m) of prepayments, deferred contract costs, finance lease receivables and other assets. The credit quality and credit concentration of cash equivalents, current asset investments and derivative financial assets are detailed in the tables below. Where the opinion of Moody\u2019s and Standard & Poor\u2019s (S&P) differ, the lower rating is used. Moody\u2019s/S&P credit rating of counterparty 2023 \u00a3m 2022 \u00a3m Aa2/AA and above 3,498 1,946 Aa3/AA\u2013 115 1,118 A1/A+ 957 768 A2/A 400 269 A3/A\u2013 53 122 Baa1/BBB+ \u2013 \u2013 Baa2/BBB and below a 60 \u2013 Total b 5,083 4,223 a Baa2/BBB rated exposure represents the energy derivatives and carrying value of forward currency contracts with Sports JV. b We hold cash collateral of \u00a3557m (FY22: \u00a3555m) in respect of derivative financial assets with certain counterparties. The concentration of credit risk for our trading balances is provided in note 17, which analyses outstanding balances by CFU. Where multiple transactions are undertaken with a single financial counterparty or group of related counterparties, we enter into netting arrangements to reduce our exposure to credit risk by making use of standard International Swaps and Derivatives Association (ISDA) documentation. We have also entered into credit support agreements with certain swap counterparties whereby, on a daily, weekly and monthly basis, the fair value position on notional \u00a32,024m (FY22: \u00a32,024m) of long-dated cross-currency swaps and interest rate swaps is collateralised. Offsetting of financial instruments The table below shows our financial assets and liabilities that are subject to offset in the group\u2019s balance sheet and the impact of enforceable master netting or similar agreements. Related amounts not set off in the balance sheet Financial assets and liabilities At 31 March 2023 Amounts presented in the balance sheet \u00a3m Right of set off with derivative counterparties \u00a3m Cash collateral \u00a3m Net amount \u00a3m Derivative financial assets 1,479 (323) (557) 599 Derivative financial liabilities (383) 323 48 (12) Total 1,096 \u2013 (509) 587 At 31 March 2022 Derivative financial assets 1,091 (431) (555) 105 Derivative financial liabilities (870) 431 67 (372) Total 221 \u2013 (488) (267) Derivatives and hedging We use derivative financial instruments mainly to reduce exposure to foreign exchange and interest rate risks. Derivatives may qualify as hedges for accounting purposes if they meet the criteria for designation as cash flow hedges or fair value hedges in accordance with IFRS 9. 29. Financial instruments and risk management continuedSignificant accounting policies that apply to derivatives and hedge accounting All of our derivative financial instruments are held at fair value on the balance sheet. Derivatives designated in a cash flow hedge The group designates certain derivatives in a cash flow hedge relationship. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge. To qualify for hedge accounting, hedge documentation must be prepared at inception, the hedge must be in line with BT\u2019s risk management strategy and there must be an economic relationship based on the currency, amount and timing of the respective cash flows of the hedging instrument and hedged item. This is assessed at inception and in subsequent periods in which the hedge remains in operation. Hedge accounting is discontinued when it is no longer in line with BT\u2019s risk management strategy or if it no longer qualifies for hedge accounting. The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument is assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of altered timing, cash flows or value. When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from equity and recognised in the same line of the income statement and in the same period or periods that the hedged transaction affects the income statement. Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income statement. Other derivatives Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some derivatives may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset is more appropriate. We effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including those relating to inflationary features. These derivatives are classified as fair value through profit and loss and are recognised at fair value. Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement are recognised in the income statement in the line that most appropriately reflects the nature of the item or transaction to which they relate. Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from the transaction price, a day one gain or loss will arise which is not recognised in the income statement. Such gains and losses are deferred and amortised to the income statement based on the remaining contractual term and as observable market data becomes available. The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and market rates of interest and foreign exchange at the balance sheet date. At 31 March 2023 Current asset \u00a3m Non-current asset \u00a3m Current liability \u00a3m Non-current liability \u00a3m Designated in a cash flow hedge 78 1,330 62 255 Other 4 67 24 42 Total derivatives 82 1,397 86 297 At 31 March 2022 Designated in a cash flow hedge 77 878 25 712 Other 11 125 26 107 Total derivatives 88 1,003 51 819 All derivative financial instruments are categorised at Level 2, with the exception of the energy contracts which are categorised at Level 3 of the fair value hierarchy as defined in note 24. Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro, US dollar and Japanese yen- denominated borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings relating to the group\u2019s 2030 US dollar bond. The hedged cash flows will affect the group\u2019s income statement as interest and principal amounts are repaid over the remaining term of the borrowings (see note 27). We hedge forecast foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint 12 months forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement over this period. 29. Financial instruments and risk management continued The amounts related to items designated as hedging instruments were as follows: Hedged items At 31 March 2023 Notional principal \u00a3m Asset \u00a3m Liability \u00a3m Balance in cash flow hedge related reserves (gain)/loss \u00a3m Fair value (gain)/loss recognised in OCI \u00a3m Amount recycled from cash flow hedge related reserves to P&L \u00a3m Sterling, euro, US dollar and Japanese yen denominated borrowings a 12,888 1,316 (290) (316) (887) 597 Step up interest on the 2030 US dollar bond b 115 \u2013 (2) (31) (8) 6 Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint c 1, 211 34 (24) (35) (75) 61 Energy contracts d 58 (1) (64) (85) 49 Total cash flow hedges 14,214 1,408 (317) (446) (1,0 55) 713 Deferred tax \u2013 \u2013 106 Derivatives not in a designated hedge relationship 71 (66) \u2013 Carrying value on the balance sheet 1,479 (383) (340) At 31 March 2022 Sterling, euro and US dollar denominated borrowings a 11,688 889 (731) (26) (83) 61 Step up interest on the 2030 US dollar bond b 122 5 \u2013 (29) (6) 3 Foreign currency purchases, principally denominated in US dollar, euro and Indian rupees c 946 30 (3) (21) (51) (10) Energy contracts d 31 (3) (28) (64) \u2013 Total cash flow hedges 12,756 955 (737) (104) (204) 54 Deferred tax \u2013 \u2013 16 Derivatives not in a designated hedge relationship 136 (133) \u2013 Carrying value on the balance sheet 1,091 (870) (88) a Sterling, euro, US dollar and Japanese yen denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are presented within operating costs and finance expense. b Step up interest on US dollar denominated borrowings are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within finance expense. c Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item. d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long-term power cost certainty. Amounts recycled to profit and loss are presented within operating costs. All hedge relationships were fully effective in the period. 30. Other reserves Other comprehensive income Capital redemption reserve \u00a3m Cash flow reserve a \u00a3m Fair value reserve \u00a3m Cost of hedging reserve b \u00a3m Translation reserve c,d \u00a3m Total \u00a3m At 1 April 2021 27 (90) \u2013 59 440 436 Exchange differences e \u2013 \u2013 \u2013 \u2013 65 65 Net fair value gain (loss) on cash flow hedges f \u2013 59 \u2013 145 \u2013 204 Movements in relation to cash flow hedges recognised in income and expense g \u2013 (86) \u2013 32 \u2013 (54) Fair value movement on assets at fair value through other comprehensive income \u2013 \u2013 6 \u2013 \u2013 6 Tax recognised in other comprehensive income \u2013 (31) \u2013 \u2013 \u2013 (31) Transfer to realised profit h \u2013 \u2013 (7) \u2013 \u2013 (7) At 31 March 2022 27 (14 8) (1) 236 505 619 Reclassification i \u2013 472 \u2013 (472) \u2013 \u2013 Exchange differences e \u2013 \u2013 \u2013 \u2013 89 89 Net fair value gain (loss) on cash flow hedges f \u2013 864 \u2013 191 \u2013 1,055 Movements in relation to cash flow hedges recognised in income and expense g \u2013 (721) \u2013 8 \u2013 (713) Fair value movement on assets at fair value through other comprehensive income \u2013 \u2013 (3) \u2013 \u2013 (3) Tax recognised in other comprehensive income \u2013 (90) \u2013 \u2013 \u2013 (90) At 31 March 2023 27 377 (4) (37) 594 957 a The cash flow 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. b The cost of hedging reserve reflects the gain or loss on the portion excluded from the designated hedging instrument that relates to the currency basis element of our cross-currency swaps and forward points on certain foreign exchange contracts. It is initially recognised in other comprehensive income and accounted for similarly to gains or losses in the cash flow reserve. c The translation reserve is used to record cumulative translation differences on the net assets of foreign operations. The cumulative translation differences are recycled to the income statement on disposal of the foreign operation. d Movement in translation reserve includes \u00a3nil (FY22: \u00a31m) which relate to disposals (see note 23). e Excludes \u00a32m (FY22: \u00a31m) of exchange differences in relation to retained earnings attributed to non-controlling interests. f The large swing in the year of \u00a31,055m (FY22: \u00a3204m) was due to large fluctuations in interest rates, energy prices and foreign exchange rates. g Movements in cash flow hedge-related reserves recognised in income and expense of \u00a3713m (FY22: \u00a354m) include a net charge to other comprehensive income of \u00a3679m (FY22: \u00a3126m) which have been reclassified to operating costs, and a net charge of \u00a334m (FY22: credit of \u00a372m) which have been reclassified to finance expense (see note 28). h Realised profit includes profit on disposal of investments held at fair value through other comprehensive income. i Reclassification on cash flow hedges includes \u00a3472m (FY22: \u00a3nil) reclassification from cash flow hedge reserve to cost of hedging reserve. 31. Related party transactions Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is disclosed in note 6. Amounts paid to the group\u2019s retirement benefit plans are set out in note 20. Associates and joint ventures related parties include the Sports JV formed in August 2022 (see note 23). Sales of services to the Sports JV during FY23 were \u00a323m and purchases from the Sports JV were \u00a3176m. The amount receivable from the Sports JV as at 31 March 2023 was \u00a310m and the amount payable to the Sports JV was \u00a3123m. As part of the BT Sport transaction, the group has committed to providing the Sports JV with a sterling Revolving Credit Facility (RCF), up to a maximum for \u00a3300m, for short-term liquidity required by the Sports JV to fund its working capital and commitments to sports rights holders. Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with the group\u2019s external short-term borrowings. The outstanding balance under the RCF of \u00a3268m is treated as a loan receivable and held at amortised cost, see note 17. The capacity of the RCF is expected to reduce to \u00a3200m during FY24. There is also a loan payable to the Sports JV of \u00a311m, see note 27. The Sports JV has a foreign exchange hedging arrangement with the group to secure Euros required to meet its commitments to certain sports rights holders; the group has external forward contracts in place to purchase the Euros at an agreed sterling rate in order to mitigate its exposure to exchange risk. The group holds a \u00a314m derivative liability in respect of forward contracts provided to the Sports JV. Transactions from commercial trading arrangements with associates and joint ventures, including the Sports JV, are shown below: At 31 March 2023 \u00a3m 2022 \u00a3m Sales of services to associates and joint ventures 29 5 Purchases from associates and joint ventures 216 44 Amounts receivable from associates and joint ventures 10 2 Amounts payable to associates and joint ventures 124 1 Other related party transactions include the purchase of energy from an entity owned by the BT Pension Scheme. Total purchases during the year were \u00a313m (FY22: \u00a312m). \u00a31m was due to the other party as at 31 March 2023 (FY22: \u00a31m). The balance is unsecured and no guarantees have been given. 32. Financial commitments Financial commitments as at 31 March 2023 include capital commitments of \u00a31,480m (FY22: \u00a31,596m) and device purchase commitments of \u00a3217m (FY22: \u00a3295m). TV programme rights commitments were \u00a3nil (FY22: \u00a3997m) as these were transferred to the Sports JV formed with Warner Bros. Discovery (WBD) during FY23 (see note 23); both the group and WBD have guaranteed the Sports JV\u2019s obligations under certain programme rights commitments but we consider the risk of these guarantees being called as remote. Other than as disclosed below and in note 19, there were no contingent liabilities or guarantees at 31 March 2023 other than those arising in the ordinary course of the group\u2019s business and on these no material losses are anticipated. We have insurance cover to certain limits for major risks on property and major claims in connection with legal liabilities arising in the course of our operations. Otherwise, the group generally carries its own risks. Guarantees BT plc From March 2019 a formal guarantee was put in place by BT Group plc to fully and unconditionally guarantee the obligations of its wholly owned subsidiary British Telecommunications plc (\u201cBT plc\u201d) under its corporate bonds. This guarantee has been given in respect of all bonds issued since that date and was retrospectively applied to bonds issued prior to that date. It applies to all bonds issued in BT plc\u2019s Yankee, Euro Medium Term Note and hybrid bond programmes, and under the BT plc \u00a3600m 5.75% bonds due in 2028. Legal and regulatory proceedings See note 19 for contingent liabilities associated with legal and regulatory proceedings. 33. Post balance sheet events No material post balance sheet events have been identified.", "dimensions": { "concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-539": { "value": "The consolidated financial statements are prepared on a going concern basis. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-540": { "value": "The consolidated financial statements are presented in sterling, the functional currency of BT Group plc. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-541": { "value": "New and amended accounting standards effective during the year The following amended standards were effective during the year: Amendments to IAS 37 for onerous contracts The group adopted Onerous Contracts \u2013 Costs of Fulfilling a Contract (Amendments to IAS 37) from 1 April 2022. This resulted in a change in accounting policy for performing an onerous contracts assessment. Previously, only incremental costs to fulfil a contract were included when determining whether that contract was onerous. The revised policy is to include both incremental costs and an allocation of other costs directly attributable to the fulfilment of a contract. The amendments apply prospectively to contracts existing at the date when the amendments are first applied. We analysed contracts existing at 1 April 2022 and identified the cumulative effect of applying the revised policy to be a \u00a312m increase in the onerous contract provision. This has been recorded as an opening balance adjustment to retained earnings. Comparative figures have not been restated. IFRS Interpretations Committee agenda decisions The IFRS Interpretations Committee (IFRIC) periodically issues agenda decisions which explain and clarify how to apply the principles and requirements of IFRS standards. Agenda decisions are authoritative and may require the group to revise accounting policies or practice to align with the interpretations set out in the decision. We regularly review IFRIC updates and assess the impact of agenda decisions. The following were identified as being potentially significant to the group: Demand Deposits with Restrictions on Use arising from a Contract with a Third Party In its agenda decision, the IFRIC concluded that restrictions on the use of demand deposits arising from a contract with a third party do not result in the deposits being declassified as cash and cash equivalents, unless those restrictions change the nature of the deposit in a way such that it would no longer meet the definition of cash in IAS 7. Application of this agenda decision to deposits held by the group identified one bank account with restrictions on use that nonetheless meets the IAS 7 definition of cash. This bank account was subsequently recognised on the group balance sheet and is now reflected in the cash and cash equivalents balance presented throughout the financial statements. An equal and opposite amount was recognised in trade payables. The balance on this account was \u00a396m at 31 March 2023 and \u00a3148m at 31 March 2022. Prior period comparatives have not been restated as the impact is not considered material, having regard to the fact that a corresponding liability is recognised within trade payables and therefore has no bearing on the group\u2019s net assets. The impact on the cash flow statement is not considered to be material and recognition of the balance is presented as an increase in trade and other payables. Cash flows relating to the account which have already been accounted for within normalised cash flow (including its initial recognition) will be excluded from this metric. Other The following changes have not had a significant impact on our consolidated financial statements: \u2013 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) \u2013 Annual Improvements to IFRS Standards 2018-2020 \u2013 Reference to the Conceptual Framework \u2013 Amendments to IFRS 3 ", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-542": { "value": "New and amended accounting standards that have been issued but are not yet effective The following new or amended standards and interpretations are applicable in future periods: IFRS 17 Insurance Contracts BT adopted IFRS 17 with retrospective application on 1 April 2023. It is therefore effective from FY24 onwards. The standard establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. The measurement method for insurance contracts required by IFRS 17 is a probability weighted discounted cash flow model, including a best estimate and an adjustment for non-financial risk calculated for groups of similar contracts. IFRS 17 primarily impacts insurance entities, however as it applies to individual contracts it is possible that non-insurers could issue contracts that are in scope of the standard such as product breakdown contracts or warranties. We have assessed the impact of the standard on the group and the BT Group plc legal entity, and concluded that its impact is not material. Contracts in scope of the standard entered into by the group are restricted to intragroup insurance arrangements, and the group does not issue external insurance contracts. Contracts in scope of the standard entered into by the BT Group plc legal entity are restricted to parent company guarantees, which we have assessed to have no material impact. The following are not expected to have a significant impact on the consolidated financial statements: \u2013 Classification of Liabilities as Current or Non-current (Amendments to IAS 1) \u2013 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) \u2013 Definition of Accounting Estimate (Amendments to IAS 8) \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) \u2013 Non-Current Liabilities with Covenants (Amendments to IAS 1) \u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) ", "dimensions": { "concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-506": { "value": "2. Critical & key accounting estimates and significant judgements The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying our accounting policies. We continually evaluate our estimates, assumptions and judgements based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. Our critical accounting estimates are those estimates that carry a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year. We also make other key estimates when preparing the financial statements, which, while not meeting the definition of a critical estimate, involve a higher degree of complexity and can reasonably be expected to be of relevance to a user of the financial statements. Management has discussed its critical and other key accounting estimates and associated disclosures with the Audit and Risk Committee. Significant judgements are those made by management in applying our significant accounting policies that have a material impact on the amounts presented in the financial statements. We may exercise significant judgement in our critical and key accounting estimates. Our critical and key accounting estimates and significant judgements are described in the following notes to the financial statements. They can be identified by the following symbol . Note Critical estimate Key estimate Significant judgement 10. Current and deferred income tax \u00fc \u00fc 13. Goodwill impairment \u00fc \u00fc 15. Reasonable certainty and determination of lease terms \u00fc 19. Contingent liabilities associated with litigation \u00fc \u00fc 19. Other provisions and contingent liabilities \u00fc \u00fc 20. Valuation of pension assets and liabilities \u00fc \u00fc 25. BT Sport joint venture \u00fc \u00fc Key accounting estimates and significant judgements made in accounting for taxation We seek to pay tax in accordance with the laws of the countries where we do business. However, in some areas these laws are unclear, and it can take many years to agree an outcome with a tax authority or through litigation. We estimate our tax on country-by-country and issue-by-issue bases. Our key uncertainties are whether our intra-group trading model will be accepted by a particular tax authority; whether intra-group payments are subject to withholding taxes and the deductibility of certain compensation payments made in prior years. We provide for the predicted outcome where an outflow is probable, but the agreed amount can differ materially from our estimates. Approximately 75% by value of the provisions are under active tax authority examination and are therefore likely to be re-estimated or resolved in the coming 12 months. \u00a3104m (FY22: \u00a3194m) is included in current tax liabilities or offset against current tax assets where netting is appropriate. Under a downside case an additional amount of \u00a3174m could be required to be paid. This amount is not provided as we don\u2019t consider this outcome to be probable. Deciding whether to recognise deferred tax assets is judgemental. We only recognise them when we consider it is probable that they can be recovered. In making this judgement we consider evidence such as historical financial performance, future financial plans and trends, the duration of existing customer contracts and whether our intra-group pricing model has been agreed by the relevant tax authority. The value of the group\u2019s income tax assets and liabilities is disclosed on the group balance sheet. The value of the group\u2019s deferred tax assets and liabilities is disclosed below. Significant judgements and key accounting estimates made in reviewing goodwill for impairment Determining our CGUs The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these generate independent revenue streams. Our determination of CGUs is unchanged from FY22. From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs into a combined \u2018Consumer\u2019 CGU. Estimating value in use Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have not been adjusted. Significant judgements made in accounting for leases The lease term is a key determinant of the size of the lease liability and right-of-use asset recognised where the group acts as lessee; and the deferral period for any upfront connection charges where the group acts as lessor. Determining the lease term requires judgement to evaluate whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options. Key facts and circumstances that create an incentive to exercise those options are considered; these include: \u2013 Our anticipated operational, retail and office property requirements in the mid and long term. \u2013 The availability of suitable alternative sites. \u2013 Costs or penalties associated with exiting lease arrangements relative to the benefits to be gained, including costs of removing leasehold improvements or relocating, and indirect costs such as disruption to business. \u2013 Significant investments in leased sites, in particular those with useful lives beyond the lease term. \u2013 Costs associated with extending lease arrangements including rent increases during secondary lease periods. Our definition of \u2018reasonable certainty\u2019, and therefore the lease term, will often align with the judgements made in our medium-term plan, in particular for leases of non-specialised property and equipment on rolling (or \u2018evergreen\u2019) arrangements that continue until terminated and which can be exited without significant penalty. Following initial determination of the lease term, we exercise judgement in evaluating whether events or changes in circumstances are sufficiently significant to change the initial assessment of whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options; and in the subsequent reassessment of the lease term. Key judgements exercised in setting the lease term The quantum of the lease liability and right-of-use asset currently recognised on our balance sheet is most significantly affected by the judgement exercised in setting the lease term for the arrangement under which the bulk of our operational UK property estate is held. Setting the lease term for our leased cell sites has also involved the use of judgement, albeit to a lesser degree. UK operational property portfolio Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we may either vacate some or all properties or purchase the entire estate. If neither option is taken the lease continues to the next unilaterally available break point in 2041. The lease liability recognised for the arrangement reflects a lease end date of 2031. On initial recognition we concluded that, although the majority of these properties are expected to be needed on a long-term basis, we couldn\u2019t be reasonably certain that we wouldn\u2019t exercise the termination option or that we would exercise the purchase option. In coming to this conclusion, we had due regard to material sub-lease arrangements relating to the estate. As time progresses our assessment may change; if this happens, we will remeasure the lease liability and right-of-use asset to reflect either the rentals due for any properties we will continue to occupy, or the cost of purchasing the estate, using an updated discount rate. There would be no overall impact on net assets. If the assessment were to change at the balance sheet date 31 March 2023: \u2013 Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a33bn and \u00a35bn \u2013 Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a31bn and \u00a32bn Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects the significant uncertainty around key variables used to determine cash outflows, especially future inflation and which properties the group will be able to exit prior to or in 2031. Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated from the disposal, repurposing or subleasing of properties retained post-2031. We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were not reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these options. Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion. We exercise similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not exercise termination options associated with other leased properties. In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions to exit a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a termination option until implementation of the associated business plan has progressed to a stage that we are committed to exiting the property. At that point we reassess the lease term by reference to the time we expect to remain in occupation of the property and any notice period associated with exercise of the option. Cell sites Most of the liability recognised in respect of leased cell sites relates to multi-site arrangements with commercial providers. The fixed- term nature of these arrangements means it has not been necessary to exercise significant judgement when determining the lease term. Where the arrangements offer extension options we have been required to conclude whether the options are reasonably certain to be exercised. Although the balance sheet could be materially affected by the conclusion reached in regard to these options, we have not been required to exercise a significant degree of judgement in arriving at the lease term having regard to the period of time covered by the options, the difficulty in predicting the group\u2019s long-term network requirements, and the relatively high threshold that \u2018reasonably certain\u2019 represents. A smaller proportion of the cell site liability relates to arrangements with individual landlords which are either rolling or can be exited with notice. When setting the initial lease term for these arrangements we exercised significant judgement in establishing the period that we are reasonably certain to require use of the site. We broadly aligned lease terms with our medium-term planning horizon after assessing the relative strengths of the following factors: \u2013 Long-term economic incentives to remain on sites including existing capital improvements; \u2013 A need to maintain flexibility in our ability to develop and manage our network infrastructure to react quickly to technological developments and evolving capacity requirements; and \u2013 Incentives to renegotiate arrangements in the medium term to gain more security over sites to support future capital investment. Although significant judgement has been exercised in determining the lease term, reaching an alternative conclusion would not have a material impact on the balance sheet having regard to the most feasible alternative lease terms. Subsequently, we consider key events that trigger reassessment of lease terms to be developments which resolve uncertainty around our economic incentive to remain on individual sites in the long term. These are primarily lease renegotiations and significant capital investments, for example that associated with our 5G rollout and other capital refresh programmes. Key accounting estimates and significant judgements made in accounting for provisions & contingent liabilities We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are not recognised as liabilities on our balance sheet. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes where this can be reasonably determined. In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution. Key accounting estimates applied in accounting for provisions and contingent liabilities Other provisions may involve the use of key (but not critical) estimates as explained below. When measuring provisions we reflect the impact of inflation as appropriate particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows. Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made estimates of the costs associated with the restoration of properties by reference to any relevant guidance such as rate cards. Cash outflows occur as and when properties are vacated and the obligations are settled. Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the site. The provision represents the group\u2019s best estimate of the costs to dismantle equipment and restore the sites. Obligations are settled as and when sites are vacated and the timing is largely influenced by the group\u2019s network strategy. Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical regulatory matters. The charge/credit for the year represents the outcome of management\u2019s re-assessment of the estimates and regulatory risks across a range of issues, including price and service issues. The prices at which certain services are charged are regulated and may be subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk we make key judgements, including in regard to interpreting Ofcom regulations and past and current claims. The precise outcome of each matter depends on whether it becomes an active issue, and the extent to which negotiation or regulatory and compliance decisions will result in financial settlement. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against the group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice received. Provisions recognised are inherently judgemental and could change over time as matters progress. Establishing contingent liabilities associated with litigation brought against the group may involve the use of key estimates and assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further information in relation to specific matters in the \u2018contingent liabilities\u2019 section below. Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties, with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle accident claims, and our in-house insurance teams review our exposure to other risks. Other provisions do not include any individually material provisions. For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual outcome of any settlement. Critical accounting estimates and significant judgements made when valuing the BTPS assets Under IAS 19, plan assets are measured at fair value at the balance sheet date and include quoted and unquoted investments. Valuation of main quoted investments \u2013 Equities listed on recognised stock exchanges are valued at closing bid prices. \u2013 Bonds that are regularly traded are valued using broker quotes. \u2013 Exchange traded derivative contracts are valued based on closing bid prices Valuation of main unquoted investments A portion of unquoted investments are valued based on inputs that are not directly observable, which require more judgement. The assumptions used in valuing unquoted investments are affected by market conditions. \u2013 Equities are valued using the International Private Equity and Venture Capital (IPEVC) guidelines where the most significant assumptions are the discount rate and earnings assumptions. \u2013 Property investments are valued on the basis of open market value by an independent valuer using RICS guidelines. The significant assumptions used in the valuation are rental yields and occupancy rates. \u2013 Bonds, including those issued by BT, that are not regularly traded are valued by an independent valuer using pricing models making assumptions for credit risk, market risk and market yield curves. \u2013 Holdings in investment funds are typically valued at the Net Asset Value provided by the fund administrator or investment manager. The significant assumption used in the valuation is the Net Asset Value. \u2013 Infrastructure investments are valued by an independent valuer using a model-based valuation such as a discounted cash flow approach, or at the price of recent market transactions if they represent fair value. Where a discounted cash flow model is used, the significant assumptions used in the valuation are the discount rate and the expected cash flows. \u2013 Over the counter derivatives are valued by an independent valuer using cash flows discounted at market rates. The significant assumptions used in the valuation are the yield curves and cost of carry. \u2013 The longevity insurance contract is measured by discounting the projected cash flows payable under the contract (projected by an actuary, consistent with the terms of the contract). The significant assumptions used to value the asset are the discount rate (including adjustments to the risk free rate) and the mortality assumptions. \u00a36.4bn of unquoted investments that are formally valued periodically by the investment manager have a latest valuation that precedes the balance sheet date. These assets consist of: \u00a33.7bn non-core credit; \u00a31.2bn mature infrastructure; \u00a31.1bn private equity; \u00a30.2bn secure income; and \u00a30.2bn overseas property. These valuations have been adjusted for cash movements between the previous valuation date and 31 March 2023. The valuation approach and inputs for these investments would only be approximately updated where there were indications of significant movements, for example implied by market indicators. No such adjustment was required at 31 March 2023. Asset-backed funding arrangement The asset-backed funding arrangement, issued to the BTPS in May 2021, has a fair value of \u00a31.3bn at 31 March 2023 (2022: \u00a31.4bn) calculated as the present value of the future stream of payments, allowing for the probability of the BTPS becoming fully funded and therefore the payments to the BTPS ending early. It is not recognised as a pension asset when measuring the group\u2019s IAS 19 net defined benefit liability as it is a non-transferable financial instrument issued by the group.
Critical accounting estimates and significant judgements made when valuing our pension liabilities
The measurement of the service cost and the liabilities involves judgement about uncertain events including the life expectancy
of members, price inflation and the discount rate used to calculate the net present value of the future pension payments. We use
estimates for all of these uncertain events. Our assumptions reflect historical experience, market expectations (where relevant),
actuarial advice and our judgement regarding future expectations at the balance sheet date.
Critical & key accounting estimates and significant judgements made in accounting
for the BT Sport disposal
Assessment of whether BT has joint control over the Sports JV
See note 25 for assessment on control.
Valuation of investment in A preference shares (akin to contingent consideration)
BT will receive an earn-out from the Sports JV (subject to liquidity and usual UK company law requirements), which will end at the
earliest of:
\u2013 four years post completion of the transaction;
\u2013 the exercise by WBD of the Call Option; and
\u2013 if the earn-out reaches an agreed cap.
The earn-out cash flows to BT are dependent on the cash profit generation of the Sports JV over the earn-out period and is therefore
akin to contingent consideration, initially recorded at a fair value of \u00a3428m reflecting the present value of expected cash flows. The
valuation of the earn-out consideration is supported by a jointly-agreed business plan and internal valuation model.
The key assumptions within the jointly-agreed business plan and internal valuation model are:
\u2013 approximately 50% of revenues and 80% of costs during the four years of the jointly-agreed business plan are contractually
committed;
\u2013 material contracts are renewed at an economic value no less than current terms;
\u2013 the total premium sports subscriber base does not materially grow or decline over the earn-out period; and
\u2013 revenue growth and production costs are driven by contractual terms.
We have also assumed that the earn-out period ends at four years post completion of the transaction; however given the mechanics
of the deal arrangements if there is an earlier exercise by WBD of their Call Option this would also not materially impact the amounts
disclosed in the financial statements.
Subsequent to the initial recognition, the group\u2019s carried forward investment in A preference shares will be remeasured to fair value
at each reporting date in accordance with IFRS 9, see note 25.
Valuation of the minimum revenue guarantee in BT\u2019s distribution agreement with the Sports JV BT plc\u2019s obligation under the minimum revenue guarantee of c. \u00a32bn over the first four years of the Sports JV represents both a trading arrangement on market terms and a financing arrangement for the off-market element of the revenue guarantee, which has been recorded as a financial liability within trade and other payables on the balance sheet. The liability will be held at amortised cost and will unwind through payments made to the Sports JV over the next four years on the minimum revenue guarantee. The valuation of this financial liability, and what a fair cost-per-subscriber would be, is sensitive to a number of assumptions on volumes and price, and there is a range of outcomes which we could have arrived at. Alternative scenarios considered, based on the different prices and terms used with other market participants, could have resulted in a liability ranging from \u00a3543m to \u00a3837m, and we initially recognised a financial liability of \u00a3712m. The key assumptions in calculating the financial liability are in estimating what is a market wholesale price at market volume commitment that is supported by the forecast volumes for the related revenue streams. The volumes used are consistent with those included in the jointly-agreed business plan as described above. We note that the bottom of the range disclosed above is based on the price that we will pay after four years when the minimum revenue guarantee has ended, however we do not believe that is an appropriate rate from the outset due to existing volume commitments. Valuation of BT\u2019s equity interest in the Sports JV WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports JV. If the Call Option is not exercised, BT will have the ability to exit its shareholding in the JV either through a sale or IPO. The group has valued its interest in the Sports JV based on the estimated fair value at exit and using the following key assumptions: \u2013 BT expect to realise its interest in the Sports JV through exit rather than ongoing value in use; \u2013 BT expect WBD to exercise its option to acquire BT\u2019s 50% interest in the Sports JV at the end of the first four years of the Sports JV; and \u2013 An earnings multiple has been applied to the expected year 5 EBITDA per the jointly-agreed business plan \u2013 the multiple is at the lower end of a possible range identified from comparable peers and transactions in the premium sports subscription and broadcasting market. As the group\u2019s interest is recorded on a point in time valuation, based on forecast earnings and current market returns on similar investments, it carries both upside and downside risk from changes in micro- and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities on these risk factors: \u2013 EBITDA impact from revenue loss due to ongoing cost of living pressures or changes in the Sports JV\u2019s rights portfolio; \u2013 An increase or decrease in the valuation multiple achieved; and \u2013 An increase or decrease in the discount rate applied. None of these sensitivities individually resulted in a material change to the investment value. All downside or upside factors in combination could lead to a \u00a370m decrease or \u00a3200m increase in the fair value respectively. However, in our view, combining all downside factors is not a reasonable scenario given the financial and commercial levers available to both the JV and BT to mitigate the impact; and we have taken a prudent approach in not recognising a higher investment value upfront based on possible but uncertain changes in market conditions in the future. The investment will be subsequently accounted for using the equity method and will be subject to impairment testing at each reporting period, with any impairment losses recognised through specific items, see note 25. Discounting of cash flows All cash flows expected to be received or paid over time have been discounted at a rate applicable to the risks associated with the cash flows: \u2013 Deferred payments due to BT from WBD have been discounted at an appropriate post-tax cost of debt (3.3%); \u2013 BT\u2019s earn-out from the Sports JV has been discounted at the weighted average cost of capital for the Sports JV at completion date (6.7%); and \u2013 BT\u2019s commitments under the minimum guarantee have been discounted at the group\u2019s post-tax cost of debt (2.8%). We do not consider the net present value of the transaction would be materially affected by a reasonable change in the discount rate. Significant judgements made in accounting for the sports joint venture Assessment of whether BT has joint control over the Sports JV The Sports JV is classified as a joint venture and hence has been deconsolidated from the group based on an assessment under IFRS 10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD. Factors relevant to our assessment: \u2013 Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new or existing sports rights and distribution arrangements. \u2013 Unequal cash distribution during the first four years due to the earn-out mechanism and relative size of businesses contributed into the Sports JV. \u2013 Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and commitments to sports rights holders. \u2013 WBD\u2019s call option to acquire BT\u2019s 50% interest in the Sports JV is not exercisable before key decisions over material activities of the Sports JV are made such that joint control still applies at the outset. The assessment whether joint control remains in place is reviewed at each reporting period . Accounting policies adopted by the Sports JV The Sports JV has a financial year-end of 31 July and therefore has not yet prepared its first set of audited financial statements. In order to recognise our share of the Sports JV\u2019s results for our equity-accounted investment, we have prepared the Sports JV\u2019s financial information disclosed below based on management accounts for the period ending 31 March 2023 after making certain adjustments to comply with IFRS. Significant judgements made in preparing the Sports JV\u2019s financial information: \u2013 IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future value of programme rights, and goodwill. \u2013 Revenues from the minimum guarantee in the Sports JV\u2019s distribution agreement with BT should be adjusted to reflect a trading agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 \u2013 this mirrors the accounting treatment applied by BT (see note 23). \u2013 A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss under IFRS 9. \u2013 Hedge accounting should be applied on the Sports JV\u2019s forward contracts with BT (see note 31) with fair value movements on the derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the forward contracts. \u2013 Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed by the Sports JV on a straight-line basis over the programming period which is generally 12 months \u2013 this is consistent with the group\u2019s accounting policy (see note 16). Accounting policies in other areas are consistent with those applied by the group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-511": { "value": "Basis of consolidation The group financial statements consolidate the financial statements of BT Group plc and its subsidiaries, and include its share of the results of associates and joint ventures using the equity method of accounting. The group recognises its direct rights to (and its share of) jointly held assets, liabilities, revenues and expenses of joint operations under the appropriate headings in the consolidated financial statements. All business combinations are accounted for using the acquisition method regardless of whether equity instruments or other assets are acquired. A subsidiary is an entity that is controlled by another entity, known as the parent or investor. An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Non-controlling interests in the net assets of consolidated subsidiaries, which consist of the amounts of those interests at the date of the original business combination and non-controlling share of changes in equity since the date of the combination, are not material to the group\u2019s financial statements. The results of subsidiaries acquired or disposed of during the year are consolidated from and up to the date of change of control. Where necessary, accounting policies of subsidiaries have been aligned with the policies adopted by the group. All intra-group transactions including any gains or losses, balances, income or expenses are eliminated on consolidation. When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. The profit or loss on disposal is recognised as a specific item. Associates are those entities in which the group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the group has joint control, whereby the group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the activities that significantly affect the returns of the arrangement require the unanimous consent of the parties sharing control. Interests in associates and joint ventures are initially recognised at cost (including transaction costs) except where they relate to a retained non-controlling interest in a former subsidiary, which is initially recognised at a deemed cost being the fair value of the retained interest. Subsequent to initial recognition, the consolidated financial statements include the group\u2019s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-507": { "value": "Inventories Network maintenance equipment and equipment to be sold to customers are stated at the lower of cost or net realisable value, taking into account expected revenue from the sale of packages comprising a mobile handset and a subscription. Cost corresponds to purchase or production cost determined by either the first in first out (FIFO) or average cost method. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-508": { "value": "Government grants Government grants are recognised when there is reasonable assurance that the conditions associated with the grants have been complied with and the grants will be received. Grants for the purchase or production of property, plant and equipment are deducted from the cost of the related assets and reduce future depreciation expense accordingly. Grants for the reimbursement of operating expenditure are deducted from the related category of costs in the income statement. Estimates and judgements applied in accounting for government grants received in respect of Building Digital UK (BDUK) and other rural superfast broadband contracts are described in note 14. Once a government grant is recognised, any related deferred income is treated in accordance with IAS 20 \u2018Accounting for Government Grants and Disclosure of Government Assistance\u2019. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-509": { "value": "Foreign currencies Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. The functional currency of the group is sterling. Foreign exchange gains and losses resulting from the settlement of transactions and the translation of monetary assets and liabilities denominated in foreign currencies at period end exchange rates are recognised in the income statement line which most appropriately reflects the nature of the item or transaction. On consolidation, assets and liabilities of foreign undertakings are translated into sterling at year end exchange rates. The results of foreign undertakings are translated into sterling at the rates prevailing on the transaction dates. Foreign exchange differences arising on the retranslation of foreign undertakings are recognised directly in a separate component of equity, the translation reserve. In the event of the disposal of an undertaking with assets and liabilities denominated in a foreign currency, the cumulative translation difference associated with the undertaking in the translation reserve is charged or credited to the gain or loss on disposal recognised in the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-512": { "value": "Research and development Research expenditure is recognised in the income statement in the period in which it is incurred. Development expenditure, including the cost of internally developed software, is recognised in the income statement in the period in which it is incurred unless it is probable that economic benefits will flow to the group from the asset being developed, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Capitalisation ceases when the asset being developed is ready for use. Research and development costs include direct and indirect labour, materials and directly attributable overheads. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-510": { "value": "Termination benefits Termination benefits (leaver costs) are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. We recognise termination benefits when they are demonstrably committed to the affected employees leaving the group. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTerminationBenefits", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-513": { "value": "4. Segment information Significant accounting policies that apply to segment information Operating and reportable segments Our operating segments are reported based on financial information provided to the Executive Committee, which is the key management committee and represents the \u2018chief operating decision maker\u2019. Our organisational structure reflects the different customer groups to which we provide communications products and services via our customer-facing units (CFUs). The CFUs are our reportable segments and generate substantially all of our revenue. With effect from 1 January 2023 we formed the new Business unit, but its components, Global and Enterprise, continued to be managed separately and reported separately to the Executive Committee. At 31 March 2023 the group had four CFUs: Consumer, Enterprise, Global and Openreach. From 1 April 2023 Business will be a single unit and financial information for this unit will be provided to the Executive Committee on a consolidated basis only. From FY24 our CFUs will be Business, Consumer and Openreach. The CFUs are supported by technology units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management. TUs and CUs are not reportable segments as they did not meet the quantitative thresholds as set out in IFRS 8 \u2018Operating Segments\u2019 for any of the years presented. We aggregate the remaining operations and include within the \u2018Other\u2019 category to reconcile to the consolidated results of the group. The \u2018Other\u2019 category includes unallocated TU costs and our CUs. Allocation of certain items to segments Provisions for the settlement of significant legal, commercial and regulatory disputes, which are negotiated at a group level, are initially recorded in the \u2018Other\u2019 segment. On resolution of the dispute, the full impact is recognised in the results of the relevant CFU and offset in the group results through the utilisation of the provision previously charged to the \u2018Other\u2019 segment. Settlements which are particularly significant or cover more than one financial year may fall within the definition of specific items as detailed in note 9. The costs incurred by TUs and CUs are recharged to the CFUs to reflect the services provided to them. Depreciation and amortisation incurred by TUs in relation to the networks and systems they manage and operate on behalf of the CFUs is allocated to the CFUs based on their respective utilisation. Capital expenditure incurred by TUs for specific projects undertaken on behalf of the CFUs is allocated based on the value of the directly attributable expenditure incurred. Where projects are not directly attributable to a particular CFU, capital expenditure is allocated between them based on the proportion of estimated future economic benefits. Specific items are detailed in note 9 and are not allocated to the reportable segments as this reflects how they are reported to the Executive Committee. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the group. Measuring segment performance Performance of each reportable segment is measured based on adjusted EBITDA. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. Adjusted EBITDA is considered to be a useful measure of the operating performance of the CFUs because it approximates the underlying operating cash flow by eliminating depreciation and amortisation and also provides a meaningful analysis of trading performance by excluding specific items, which are disclosed separately by virtue of their size, nature or incidence. We also increasingly track adjusted operating profit which reflects the growing depreciation expense arising from our elevated network investment. Revenue recognition Our revenue recognition policy is set out in Note 5. Internal revenue and costs Most of our internal trading relates to Openreach and arises on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the other CFUs, including the use of BT Ireland\u2019s network. This occurs both directly, and also indirectly, through TUs which are included within the \u2018Other\u2019 segment. Enterprise internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning services. Internal revenue arising in Consumer relates primarily to employee broadband and wi-fi services. Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the sale of other products and services is agreed between the relevant CFUs and therefore the profitability of CFUs may be impacted by transfer pricing levels. Geographic segmentation The UK is our country of domicile and is where we generate the majority of our revenue from external UK customers. The geographic analysis of revenue is based on the country in which the customer is invoiced. The geographic analysis of non-current assets, which excludes derivative financial instruments, investments, preference shares in joint ventures, retirement benefit schemes in surplus and deferred tax assets, is based on the location of the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-543": { "value": "4. Segment information Significant accounting policies that apply to segment information Operating and reportable segments Our operating segments are reported based on financial information provided to the Executive Committee, which is the key management committee and represents the \u2018chief operating decision maker\u2019. Our organisational structure reflects the different customer groups to which we provide communications products and services via our customer-facing units (CFUs). The CFUs are our reportable segments and generate substantially all of our revenue. With effect from 1 January 2023 we formed the new Business unit, but its components, Global and Enterprise, continued to be managed separately and reported separately to the Executive Committee. At 31 March 2023 the group had four CFUs: Consumer, Enterprise, Global and Openreach. From 1 April 2023 Business will be a single unit and financial information for this unit will be provided to the Executive Committee on a consolidated basis only. From FY24 our CFUs will be Business, Consumer and Openreach. The CFUs are supported by technology units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management. TUs and CUs are not reportable segments as they did not meet the quantitative thresholds as set out in IFRS 8 \u2018Operating Segments\u2019 for any of the years presented. We aggregate the remaining operations and include within the \u2018Other\u2019 category to reconcile to the consolidated results of the group. The \u2018Other\u2019 category includes unallocated TU costs and our CUs. Allocation of certain items to segments Provisions for the settlement of significant legal, commercial and regulatory disputes, which are negotiated at a group level, are initially recorded in the \u2018Other\u2019 segment. On resolution of the dispute, the full impact is recognised in the results of the relevant CFU and offset in the group results through the utilisation of the provision previously charged to the \u2018Other\u2019 segment. Settlements which are particularly significant or cover more than one financial year may fall within the definition of specific items as detailed in note 9. The costs incurred by TUs and CUs are recharged to the CFUs to reflect the services provided to them. Depreciation and amortisation incurred by TUs in relation to the networks and systems they manage and operate on behalf of the CFUs is allocated to the CFUs based on their respective utilisation. Capital expenditure incurred by TUs for specific projects undertaken on behalf of the CFUs is allocated based on the value of the directly attributable expenditure incurred. Where projects are not directly attributable to a particular CFU, capital expenditure is allocated between them based on the proportion of estimated future economic benefits. Specific items are detailed in note 9 and are not allocated to the reportable segments as this reflects how they are reported to the Executive Committee. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the group. Measuring segment performance Performance of each reportable segment is measured based on adjusted EBITDA. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. Adjusted EBITDA is considered to be a useful measure of the operating performance of the CFUs because it approximates the underlying operating cash flow by eliminating depreciation and amortisation and also provides a meaningful analysis of trading performance by excluding specific items, which are disclosed separately by virtue of their size, nature or incidence. We also increasingly track adjusted operating profit which reflects the growing depreciation expense arising from our elevated network investment. Revenue recognition Our revenue recognition policy is set out in Note 5. Internal revenue and costs Most of our internal trading relates to Openreach and arises on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the other CFUs, including the use of BT Ireland\u2019s network. This occurs both directly, and also indirectly, through TUs which are included within the \u2018Other\u2019 segment. Enterprise internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning services. Internal revenue arising in Consumer relates primarily to employee broadband and wi-fi services. Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the sale of other products and services is agreed between the relevant CFUs and therefore the profitability of CFUs may be impacted by transfer pricing levels. Geographic segmentation The UK is our country of domicile and is where we generate the majority of our revenue from external UK customers. The geographic analysis of revenue is based on the country in which the customer is invoiced. The geographic analysis of non-current assets, which excludes derivative financial instruments, investments, preference shares in joint ventures, retirement benefit schemes in surplus and deferred tax assets, is based on the location of the assets. Segment revenue and profit Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Segment revenue 9,737 4,962 3,328 5,675 27 23,729 Internal revenue (57) (113) \u2013 (2,890) \u2013 (3,060) Adjusted a revenue from external customers 9,680 4,849 3,328 2,785 27 20,669 Adjusted EBITDA b 2,623 1,394 458 3,449 4 7,928 Depreciation and amortisation a (1,397) (842) (317) (2,059) (138) (4,753) Adjusted a operating profit (loss) 1,226 552 141 1,390 (134) 3,175 Specific operating profit (loss) \u2013 see note 9 (556) Operating profit 2,619 Net finance expense c (831) Share of post tax profit (loss) of associates and joint ventures (59) Profit before tax 1,729 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Segment revenue 9,858 5,157 3,362 5,441 27 23,845 Internal revenue (83) (105) \u2013 (2,812) \u2013 (3,000) Adjusted a revenue from external customers 9,775 5,052 3,362 2,629 27 20,845 Adjusted EBITDA b 2,262 1,636 456 3,179 44 7, 577 Depreciation and amortisation a (1,421) (724) (355) (1,876) (29) (4,405) Adjusted a operating profit (loss) 841 912 101 1,303 15 3,172 Specific operating profit (loss) \u2013 see note 9 (287) Operating profit 2,885 Net finance expense c (922) Share of post tax profit (loss) of associates and joint ventures \u2013 Profit before tax 1,963 a Before specific items. b Adjusted EBITDA, defined as profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. c Net finance expense includes specific item expense of \u00a35m (FY22: \u00a3101m). See note 9. Internal revenue and costs Internal cost recorded by Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Internal revenue recorded by Consumer \u2013 40 16 \u2013 1 57 Enterprise 26 \u2013 32 \u2013 55 113 Global \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Openreach 1,805 888 184 \u2013 13 2,890 Total 1,831 928 232 \u2013 69 3,060 Internal cost recorded by Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Internal revenue recorded by Consumer \u2013 47 18 \u2013 18 83 Enterprise 19 \u2013 26 \u2013 60 105 Global \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Openreach 1,649 937 212 \u2013 14 2,812 Total 1,668 984 256 \u2013 92 3,000 Capital expenditure Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Intangible assets a 530 257 81 87 63 1,018 Property, plant and equipment b 663 351 171 2,709 144 4,038 Capital expenditure 1,193 608 252 2,796 207 5,056 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m Intangible assets a 444 249 82 99 70 944 Property, plant and equipment b 754 320 119 2,449 221 3,863 Capital expenditure excluding spectrum 1,198 569 201 2,548 291 4,807 Purchase of spectrum a 388 91 \u2013 \u2013 \u2013 479 Capital expenditure 1,586 660 201 2,548 291 5,286 a Additions to intangible assets as presented in note 13. b Additions to property, plant and equipment as presented in note 14, inclusive of movement on engineering stores. Geographic segmentation Revenue from external customers Year ended 31 March 2023 \u00a3m 2022 \u00a3m UK 18,154 18,470 Europe, Middle East and Africa, excluding the UK 1,372 1,315 Americas 684 620 Asia Pacific 459 440 Adjusted a revenue 20,669 20,845 a Before specific items. Non-current assets Year ended 31 March 2023 \u00a3m 2022 \u00a3m UK 39,387 38,378 Europe, Middle East and Africa, excluding the UK 740 741 Americas 283 269 Asia Pacific 156 152 Non-current assets a 40,566 39,540 a Comprising the following balances presented in the group balance sheet: intangible assets, property, plant and equipment, right-of-use assets, joint ventures and associates and trade and other receivables and contract assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-15": { "value": "UK", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-544": { "value": "5. Revenue Significant accounting policies that apply to revenue Revenue from contracts with customers in scope of IFRS 15 Most revenue recognised by the group (excluding Openreach, where most revenue is recognised under the scope of IFRS 16) is in scope of IFRS 15 and is subject to the following revenue recognition policy. On inception of the contract we identify a \u201cperformance obligation\u201d for each of the distinct goods or services we have promised to provide to the customer. The consideration specified in the contract with the customer is allocated to each performance obligation identified based on their relative standalone selling prices, and is recognised as revenue as they are satisfied. The table below summarises the performance obligations we have identified for our major service lines and provides information on the timing of when they are satisfied and the related revenue recognition policy. Also detailed in this note is revenue expected to be recognised in future periods for contracts in place at 31 March 2023 that contain unsatisfied performance obligations. Service line Performance obligations Revenue recognition policy Information and communications technology (ICT) and managed networks Provision of networked IT services, managed network services, and arrangements to design and build software solutions. Performance obligations are identified for each distinct service or deliverable for which the customer has contracted, and are considered to be satisfied over the time period that we deliver these services or deliverables. Commitments to provide hardware to customers that are distinct from the other promises are considered to be satisfied at the point in time that control passes to the customer. Revenue for services is recognised over time using a measure of progress that appropriately reflects the pattern by which the performance obligation is satisfied. For time and materials contracts, revenue is recognised as the service is received by the customer. Where performance obligations exist for the provision of hardware, revenue is recognised at the point in time that the customer obtains control of the promised asset. For long-term fixed price contracts revenue recognition will typically be based on the satisfaction of performance obligations in respect of the achievement of contract milestones and customer acceptance, which is the best measure of progress towards the completion of the performance obligation. Fixed access subscriptions Provision of broadband, TV and fixed telephony services including national and international calls, connections, line rental and calling features. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Installation services are recognised as distinct performance obligations if their relationship with the other services in the contract is purely functional. These are satisfied when the customer benefits from the service. Connection services are not distinct performance obligations and are therefore combined with the associated service performance obligation. Fixed subscription charges are recognised as revenue on a straight-line basis over the period that the services are provided. Upfront charges for non-distinct connection and installation services are deferred as contract liabilities and are recognised as revenue over the same period. Variable charges such as call charges are recognised when the related services are delivered. Where installation activities are distinct performance obligations, revenue is recognised at the point in time that the installation is completed. Mobile subscriptions Provision of mobile postpaid and prepaid services, including voice minutes, SMS and data services. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Subscription fees, consisting primarily of monthly charges for access to internet or voice and data services, are recognised as the service is provided. One-off services such as calls outside of plan and excess data usage are recognised when the service is used. Equipment and other services Provision of equipment and other services, including mobile phone handsets and hardware such as set- top boxes and broadband routers provided as part of customer contracts. Performance obligations are satisfied at the point in time that control passes to the customer. For other services, performance obligations are identified based on the distinct goods and services we have committed to provide. Revenue from equipment sales is recognised at the point in time that control passes to the customer. Where payment is not received in full at the time of the sale, such as with equipment provided as part of mobile and fixed access subscriptions, contract assets are recognised for the amount due from the customer that will be recovered over the contract period. Revenue to be recognised is calculated by reference to the relative standalone selling price of the equipment. For other services, revenue is recognised when the related performance obligations are satisfied, which could be over time, in line with contract milestones, or at a point in time depending on the nature of the service. We recognise revenue based on the relative standalone selling price of each performance obligation. Determining the standalone selling price often requires judgement and may be derived from regulated prices, list prices, a cost-plus derived price or the price of similar products when sold on a standalone basis by BT or a competitor. In some cases it may be appropriate to use the contract price when this represents a bespoke price that would be the same for a similar customer in a similar circumstance. The fixed access and mobile subscription arrangements sold by our Consumer business are typically payable in advance, with any variable or one-off charges billed in arrears. Contracts are largely inflation-linked with price increases recognised when effective. Payment is received immediately for direct sales of equipment to customers. Where equipment is provided to customers under mobile and fixed access subscription arrangements, payment for the equipment is received over the course of the contract term. For sales by our enterprise businesses, invoices are issued in line with contractual terms. Payments received in advance are recognised as contract liabilities; amounts billed in arrears are recognised as contract assets. We are applying the practical expedient to recognise revenue \u201cas-invoiced\u201d for certain fixed access and mobile subscription services revenues. Where we have a right to invoice at an amount that directly corresponds with performance to date, we recognise revenue at that amount. We have also adopted the practical expedient not to calculate the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for these contracts. We do not have any material obligations in respect of returns, refunds or warranties. Where we act as an agent in a transaction, such as insurance services offered, we recognise commission net of directly attributable costs. Where the actual and estimated costs to completion of the contract exceed the estimated revenue, a loss is recognised immediately. We exercise judgement in assessing whether the initial set-up, transition and transformation phases of long-term contracts are distinct from the other services to be delivered under the contract and therefore represent distinct performance obligations. This determines whether revenue is recognised in the early stages of the contract, or deferred until delivery of the other services promised in the contract begins. We recognise immediately the entire estimated loss for a contract when we have evidence that the contract is unprofitable. If these estimates indicate that any contract will be less profitable than previously forecast, contract assets may have to be written down to the extent they are no longer considered to be fully recoverable. We perform ongoing profitability reviews of our contracts in order to determine whether the latest estimates are appropriate. Key factors reviewed include: \u2013 Transaction volumes or other inputs affecting future revenues which can vary depending on customer requirements, plans, market position and other factors such as general economic conditions. \u2013 Our ability to achieve key contract milestones connected with the transition, development, transformation and deployment phases for customer contracts. \u2013 The status of commercial relations with customers and the implications for future revenue and cost projections. \u2013 Our estimates of future staff and third party costs and the degree to which cost savings and efficiencies are deliverable. Revenue from lease arrangements in scope of IFRS 16 Some consumer broadband and TV products and arrangements to provide external communications providers with exclusive use of Openreach\u2019s fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16. At inception of a contract, we determine whether the contract is, or contains, a lease following the accounting policy set out in note 15. Arrangements meeting the definition of a lease in which we act as lessor are classified as operating or finance leases at lease inception based on an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case then the lease is a finance lease; if not, it is an operating lease. For sub-leases, we make this assessment by reference to the characteristics of the right-of-use asset associated with the head lease rather than the underlying leased asset. Income from arrangements classified as operating leases is presented as revenue where it relates to our core operating activities, for example leases of fixed-line telecommunications infrastructure to external communications providers and leases of devices to consumer customers as part of fixed access subscription products. Operating lease income from other arrangements is presented within other operating income (note 6). We recognise operating lease payments as income on a straight-line basis over the lease term. Any upfront payments received, such as connection fees, are deferred over the lease term. Determining the lease term is subject to the significant judgements set out in note 15. Where the contract contains both lease and non-lease components, the transaction price is allocated between the components on the basis of relative standalone selling price. Where an arrangement is assessed as a finance lease we derecognise the underlying asset and recognise a receivable equivalent to the net investment in the lease. Finance lease receivables are presented in note 17. The receivable is measured based on future payments to be received discounted using the interest rate implicit in the lease, adjusted for any direct costs. Any difference between the derecognised asset and the finance lease receivable is recognised in the income statement. Where the nature of services delivered relates to our core operating activities it is presented as revenue. Where it relates to non-core activities it is presented within other operating income (note 6). Disaggregation of external revenue The following table disaggregates external revenue by our major service lines and by reportable segment. Year ended 31 March 2023 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m ICT and managed networks \u2013 1,676 1,676 \u2013 \u2013 3,352 Fixed access subscriptions 4,059 1,625 268 2,716 \u2013 8,668 Mobile subscriptions 3,351 1,074 86 \u2013 \u2013 4 ,511 Equipment and other services 2,270 474 1,298 69 27 4,138 Revenue before specific items 9,680 4,849 3,328 2,785 27 20,669 Specific items a (note 9) 12 Revenue 20,681 Year ended 31 March 2022 Consumer \u00a3m Enterprise \u00a3m Global \u00a3m Openreach \u00a3m Other \u00a3m Total \u00a3m ICT and managed networks \u2013 1,715 1,672 \u2013 \u2013 3,387 Fixed access subscriptions 3,991 1,696 268 2,564 \u2013 8,519 Mobile subscriptions 3,247 1,176 87 \u2013 \u2013 4,510 Equipment and other services 2,537 465 1,335 65 27 4,429 Revenue before specific items 9,775 5,052 3,362 2,629 27 20,845 Specific items a (note 9) 5 Revenue 20,850 a Relates to regulatory matters classified as specific. See note 9. Revenue expected to be recognised in future periods for performance obligations that are not complete (or are partially complete) as at 31 March 2023 is \u00a312,792m (FY22: \u00a313,502m). Of this, \u00a36,592m (FY22: \u00a37,108m) relates to ICT and managed services contracts and equipment and other services which will substantially be recognised as revenue within three years. Fixed access and mobile subscription services typically have shorter contract periods and so \u00a36,200m (FY22: \u00a36,394m) will substantially be recognised as revenue within two years. Revenue recognised this year relating to performance obligations that were satisfied, or partially satisfied, in previous years was not material. Revenue related to customers\u2019 unexercised rights (for example, unused amounts on prepaid SIM cards) was not material. Lease income Presented within revenue is \u00a32,909m (FY22: \u00a32,745m) income from arrangements classified as operating leases under IFRS 16 and which represent core business activities for the group. Income relates predominantly to Openreach\u2019s leases of fixed-line telecommunications infrastructure to external communications providers, classified as fixed access subscription revenue in the table above, and leases of devices to Consumer customers as part of fixed access subscription offerings, classified as equipment and other services. During the year we also recognised: \u2013 \u00a329m (FY22: \u00a333m) operating lease income from non-core business activities which is presented in other operating income (note 6). Note 15 presents an analysis of payments to be received across the remaining term of operating lease arrangements. \u2013 \u00a358m (FY22: \u00a344m) revenue in relation to upfront gains from arrangements meeting the definition of a finance lease. These arrangements meet the criteria for revenue recognition as they concern leases and sub-leases of telecommunications infrastructure that represent core business activities of the group. \u00a369m (FY22: \u00a368m) of this income relates to the sub-leasing of right-of-use assets. These are primarily operating sub-leases of unutilised properties, and finance sub-leases of telecommunications infrastructure. Contract assets and liabilities Significant accounting policies that apply to contract assets and liabilities We recognise contract assets for goods and services for which control has transferred to the customer before we have the right to bill. These assets mainly relate to mobile handsets provided upfront but paid for over the course of a contract. Contract assets are reclassified as receivables when the right to payment becomes unconditional and we have billed the customer. Contract liabilities are recognised when we have received advance payment for goods and services that we have not transferred to the customer. These primarily relate to fees received for connection and installation services that are not distinct performance obligations. Where the initial set-up, transition or transformation phase of a long-term contract is considered to be a distinct performance obligation we recognise a contract asset for any work performed but not billed. Conversely a contract liability is recognised where these activities are not distinct performance obligations and we receive upfront consideration. In this case eligible costs associated with delivering these services are capitalised as fulfilment costs, see note 17. We provide for expected lifetime losses on contract assets following the policy set out in note 17. Contract assets and liabilities are as follows: At 31 March 2023 \u00a3m 2022 \u00a3m Contract assets Current 1,565 1,554 Non-current 369 361 1,934 1,915 Contract liabilities Current 859 833 Non-current 193 170 1,052 1,003 \u00a3903m of the contract liability at 31 March 2022 was recognised as revenue during the year (FY22: \u00a3880m). Impairment losses of \u00a346m were recognised on contract assets during the year (FY22: \u00a348m). The expected credit loss provisions recognised against contract assets vary across the group due to the nature of our customers; the expected loss rate at 31 March 2023 was 3% (FY22: 3%). ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-514": { "value": "Significant accounting policies that apply to revenue Revenue from contracts with customers in scope of IFRS 15 Most revenue recognised by the group (excluding Openreach, where most revenue is recognised under the scope of IFRS 16) is in scope of IFRS 15 and is subject to the following revenue recognition policy. On inception of the contract we identify a \u201cperformance obligation\u201d for each of the distinct goods or services we have promised to provide to the customer. The consideration specified in the contract with the customer is allocated to each performance obligation identified based on their relative standalone selling prices, and is recognised as revenue as they are satisfied. The table below summarises the performance obligations we have identified for our major service lines and provides information on the timing of when they are satisfied and the related revenue recognition policy. Also detailed in this note is revenue expected to be recognised in future periods for contracts in place at 31 March 2023 that contain unsatisfied performance obligations. Service line Performance obligations Revenue recognition policy Information and communications technology (ICT) and managed networks Provision of networked IT services, managed network services, and arrangements to design and build software solutions. Performance obligations are identified for each distinct service or deliverable for which the customer has contracted, and are considered to be satisfied over the time period that we deliver these services or deliverables. Commitments to provide hardware to customers that are distinct from the other promises are considered to be satisfied at the point in time that control passes to the customer. Revenue for services is recognised over time using a measure of progress that appropriately reflects the pattern by which the performance obligation is satisfied. For time and materials contracts, revenue is recognised as the service is received by the customer. Where performance obligations exist for the provision of hardware, revenue is recognised at the point in time that the customer obtains control of the promised asset. For long-term fixed price contracts revenue recognition will typically be based on the satisfaction of performance obligations in respect of the achievement of contract milestones and customer acceptance, which is the best measure of progress towards the completion of the performance obligation. Fixed access subscriptions Provision of broadband, TV and fixed telephony services including national and international calls, connections, line rental and calling features. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Installation services are recognised as distinct performance obligations if their relationship with the other services in the contract is purely functional. These are satisfied when the customer benefits from the service. Connection services are not distinct performance obligations and are therefore combined with the associated service performance obligation. Fixed subscription charges are recognised as revenue on a straight-line basis over the period that the services are provided. Upfront charges for non-distinct connection and installation services are deferred as contract liabilities and are recognised as revenue over the same period. Variable charges such as call charges are recognised when the related services are delivered. Where installation activities are distinct performance obligations, revenue is recognised at the point in time that the installation is completed. Mobile subscriptions Provision of mobile postpaid and prepaid services, including voice minutes, SMS and data services. Performance obligations exist for each ongoing service provided to the customer and are satisfied over the period that the services are provided. Subscription fees, consisting primarily of monthly charges for access to internet or voice and data services, are recognised as the service is provided. One-off services such as calls outside of plan and excess data usage are recognised when the service is used. Equipment and other services Provision of equipment and other services, including mobile phone handsets and hardware such as set- top boxes and broadband routers provided as part of customer contracts. Performance obligations are satisfied at the point in time that control passes to the customer. For other services, performance obligations are identified based on the distinct goods and services we have committed to provide. Revenue from equipment sales is recognised at the point in time that control passes to the customer. Where payment is not received in full at the time of the sale, such as with equipment provided as part of mobile and fixed access subscriptions, contract assets are recognised for the amount due from the customer that will be recovered over the contract period. Revenue to be recognised is calculated by reference to the relative standalone selling price of the equipment. For other services, revenue is recognised when the related performance obligations are satisfied, which could be over time, in line with contract milestones, or at a point in time depending on the nature of the service. We recognise revenue based on the relative standalone selling price of each performance obligation. Determining the standalone selling price often requires judgement and may be derived from regulated prices, list prices, a cost-plus derived price or the price of similar products when sold on a standalone basis by BT or a competitor. In some cases it may be appropriate to use the contract price when this represents a bespoke price that would be the same for a similar customer in a similar circumstance. The fixed access and mobile subscription arrangements sold by our Consumer business are typically payable in advance, with any variable or one-off charges billed in arrears. Contracts are largely inflation-linked with price increases recognised when effective. Payment is received immediately for direct sales of equipment to customers. Where equipment is provided to customers under mobile and fixed access subscription arrangements, payment for the equipment is received over the course of the contract term. For sales by our enterprise businesses, invoices are issued in line with contractual terms. Payments received in advance are recognised as contract liabilities; amounts billed in arrears are recognised as contract assets. We are applying the practical expedient to recognise revenue \u201cas-invoiced\u201d for certain fixed access and mobile subscription services revenues. Where we have a right to invoice at an amount that directly corresponds with performance to date, we recognise revenue at that amount. We have also adopted the practical expedient not to calculate the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for these contracts. We do not have any material obligations in respect of returns, refunds or warranties. Where we act as an agent in a transaction, such as insurance services offered, we recognise commission net of directly attributable costs. Where the actual and estimated costs to completion of the contract exceed the estimated revenue, a loss is recognised immediately. We exercise judgement in assessing whether the initial set-up, transition and transformation phases of long-term contracts are distinct from the other services to be delivered under the contract and therefore represent distinct performance obligations. This determines whether revenue is recognised in the early stages of the contract, or deferred until delivery of the other services promised in the contract begins. We recognise immediately the entire estimated loss for a contract when we have evidence that the contract is unprofitable. If these estimates indicate that any contract will be less profitable than previously forecast, contract assets may have to be written down to the extent they are no longer considered to be fully recoverable. We perform ongoing profitability reviews of our contracts in order to determine whether the latest estimates are appropriate. Key factors reviewed include: \u2013 Transaction volumes or other inputs affecting future revenues which can vary depending on customer requirements, plans, market position and other factors such as general economic conditions. \u2013 Our ability to achieve key contract milestones connected with the transition, development, transformation and deployment phases for customer contracts. \u2013 The status of commercial relations with customers and the implications for future revenue and cost projections. \u2013 Our estimates of future staff and third party costs and the degree to which cost savings and efficiencies are deliverable. Revenue from lease arrangements in scope of IFRS 16 Some consumer broadband and TV products and arrangements to provide external communications providers with exclusive use of Openreach\u2019s fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16. At inception of a contract, we determine whether the contract is, or contains, a lease following the accounting policy set out in note 15. Arrangements meeting the definition of a lease in which we act as lessor are classified as operating or finance leases at lease inception based on an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case then the lease is a finance lease; if not, it is an operating lease. For sub-leases, we make this assessment by reference to the characteristics of the right-of-use asset associated with the head lease rather than the underlying leased asset. Income from arrangements classified as operating leases is presented as revenue where it relates to our core operating activities, for example leases of fixed-line telecommunications infrastructure to external communications providers and leases of devices to consumer customers as part of fixed access subscription products. Operating lease income from other arrangements is presented within other operating income (note 6). We recognise operating lease payments as income on a straight-line basis over the lease term. Any upfront payments received, such as connection fees, are deferred over the lease term. Determining the lease term is subject to the significant judgements set out in note 15. Where the contract contains both lease and non-lease components, the transaction price is allocated between the components on the basis of relative standalone selling price. Where an arrangement is assessed as a finance lease we derecognise the underlying asset and recognise a receivable equivalent to the net investment in the lease. Finance lease receivables are presented in note 17. The receivable is measured based on future payments to be received discounted using the interest rate implicit in the lease, adjusted for any direct costs. Any difference between the derecognised asset and the finance lease receivable is recognised in the income statement. Where the nature of services delivered relates to our core operating activities it is presented as revenue. Where it relates to non-core activities it is presented within other operating income (note 6). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-515": { "value": "Significant accounting policies that apply to contract assets and liabilities We recognise contract assets for goods and services for which control has transferred to the customer before we have the right to bill. These assets mainly relate to mobile handsets provided upfront but paid for over the course of a contract. Contract assets are reclassified as receivables when the right to payment becomes unconditional and we have billed the customer. Contract liabilities are recognised when we have received advance payment for goods and services that we have not transferred to the customer. These primarily relate to fees received for connection and installation services that are not distinct performance obligations. Where the initial set-up, transition or transformation phase of a long-term contract is considered to be a distinct performance obligation we recognise a contract asset for any work performed but not billed. Conversely a contract liability is recognised where these activities are not distinct performance obligations and we receive upfront consideration. In this case eligible costs associated with delivering these services are capitalised as fulfilment costs, see note 17. We provide for expected lifetime losses on contract assets following the policy set out in note 17. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForContractAssetsAndLiabilities", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-545": { "value": "6. Operating costs Year ended 31 March Notes 2023 \u00a3m 2022 \u00a3m (re-presented) a Operating costs by nature Staff costs: Wages and salaries 3,858 3,746 Social security costs 424 400 Other pension costs 20 590 591 Share-based payment expense 22 80 108 Total staff costs 4,952 4,845 Own work capitalised a (1,364) (1,105) Net staff costs 3,588 3,740 Net indirect labour costs a,b 381 470 Net labour costs 3,969 4,210 Product costs 3,368 3,166 Sales commissions 589 628 Payments to telecommunications operators 1,354 1,346 Property and energy costs 1,242 1,028 Network operating and IT costs 913 904 TV programme rights charges c 354 879 Provision and installation 591 678 Marketing and sales 363 312 Net impairment losses on trade receivables and contract assets d 138 102 Other operating costs 103 256 Other operating income (243) (241) Depreciation and amortisation, including impairment charges 4,753 4,405 Total operating costs before specific items 17, 494 17,673 Specific items 9 568 292 Total operating costs 18,062 17, 965 Operating costs before specific items include the following: Leaver costs e 11 15 Research and development expenditure f 683 604 Foreign currency (gains)/losses (9) 3 Inventories recognised as an expense 2,311 2,297 a FY22 comparatives have been re-presented to reclassify \u00a3116m capitalised labour from net indirect labour costs to own work capitalised. This change results from a recent system change and improved analysis which affords better visibility of the nature of capitalised labour costs. b Net of capitalised indirect labour costs of \u00a3824m (FY22: \u00a3755m (re-presented, see footnote a)). c TV programme rights charges relate to programme rights assets which were transferred to the sports joint venture in August 2022, see note 23. d Consists of net impairment losses on trade receivables and contract assets in Consumer of \u00a394m (FY22: \u00a386m), in Enterprise of \u00a330m (FY22: \u00a35m), in Global of \u00a32m (FY22: \u00a37m), in Openreach of \u00a35m (FY22: \u00a33m) and in Other of \u00a31m (FY22: \u00a31m). e Leaver costs are included within wages and salaries, except for leaver costs of \u00a3129m (FY22: \u00a3170m) associated with restructuring costs, which have been recorded as specific items. f Research and development expenditure includes amortisation of \u00a3632m (FY22: \u00a3543m) in respect of capitalised development costs and operating expenses of \u00a351m (FY22: \u00a361m). In addition, the group capitalised software development costs of \u00a3503m (FY22: \u00a3601m). Depreciation and amortisation, which includes impairment charges, is analysed as follows: Year ended 31 March Notes 2023 \u00a3m 2022 \u00a3m Depreciation and amortisation before impairment charges Intangible assets 13 1,165 1,035 Property, plant and equipment 14 2,878 2,658 Right-of-use assets 15 689 676 Impairment charges Intangible assets 13 \u2013 13 Property, plant and equipment 14 11 11 Right-of-use assets 15 10 12 Total depreciation and amortisation before specific items 4,753 4,405 Impairment charges classified as specific items 9 Intangible assets \u2013 \u2013 Property, plant and equipment \u2013 \u2013 Right-of-use assets 65 \u2013 Total depreciation and amortisation 4,818 4,405 Who are our key management personnel and how are they compensated? Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is shown in the table below: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 23.0 17.7 Post employment benefits a 0.7 0.7 Share-based payments 6.7 6.7 30.4 25.1 a Post employment benefits include cash pension allowances paid to the Chief Executive and Chief Financial Officer. The group does not contribute to defined contribution or defined benefit pension schemes on behalf of key management personnel. Key management personnel are compensated solely in the form of cash and share-based payments. During the current and prior years, key management personnel made no gains from exercise of share options. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-573": { "value": "Who are our key management personnel and how are they compensated? Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is shown in the table below: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 23.0 17.7 Post employment benefits a 0.7 0.7 Share-based payments 6.7 6.7 30.4 25.1 a Post employment benefits include cash pension allowances paid to the Chief Executive and Chief Financial Officer. The group does not contribute to defined contribution or defined benefit pension schemes on behalf of key management personnel. Key management personnel are compensated solely in the form of cash and share-based payments. During the current and prior years, key management personnel made no gains from exercise of share options. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-546": { "value": "7. Employees 2023 2022 Number of employees in the group a Year end '000 Average '000 Year end '000 Average '000 UK 77.6 79.7 79.9 80.2 Non-UK 19.5 19.1 18.5 18.8 Total employees 97.1 98.8 98.4 99.0 Consumer 16.4 16.5 16.6 17. 2 Enterprise 11.4 11.6 11. 5 11. 4 Global 12.6 13.0 13.2 13.8 Openreach 36.6 37.6 37.3 36.4 Other 20.1 20.1 19.8 20.2 Total employees 97.1 98.8 98.4 99.0 a These reflect the full-time equivalent of full- and part-time employees", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-516": { "value": "9. Specific items Significant accounting policies that apply to specific items Our income statement and segmental analysis separately identify trading results on an adjusted basis, being before specific items. The directors believe that presentation of the group\u2019s results in this way is relevant to an understanding of the group\u2019s financial performance as specific items are those that in management\u2019s judgement need to be disclosed by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing an additional analysis of our reporting trading results. Specific items may not be comparable to similarly titled measures used by other companies. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors. Examples of charges or credits meeting the above definition and which have been presented as specific items in the current and/or prior years include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that items meet the criteria, which are applied consistently from year to year, they are treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. In FY20 we included the impacts of Covid-19 on various balance sheet items as at 31 March 2020 as specific. Any releases to this provision have been released through specific items in subsequent periods. Current and future movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment, will be classified as specific as they are deemed to be related to the divestment of BT Sport operations and linked to the overall fair value of the transaction. Refer to note 25 for further detail. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForSpecificItems", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00" } }, "fact-547": { "value": "9. Specific items Significant accounting policies that apply to specific items Our income statement and segmental analysis separately identify trading results on an adjusted basis, being before specific items. The directors believe that presentation of the group\u2019s results in this way is relevant to an understanding of the group\u2019s financial performance as specific items are those that in management\u2019s judgement need to be disclosed by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing an additional analysis of our reporting trading results. Specific items may not be comparable to similarly titled measures used by other companies. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors. Examples of charges or credits meeting the above definition and which have been presented as specific items in the current and/or prior years include significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event that items meet the criteria, which are applied consistently from year to year, they are treated as specific items. Any releases to provisions originally booked as a specific item are also classified as specific. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year. In FY20 we included the impacts of Covid-19 on various balance sheet items as at 31 March 2020 as specific. Any releases to this provision have been released through specific items in subsequent periods. Current and future movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment, will be classified as specific as they are deemed to be related to the divestment of BT Sport operations and linked to the overall fair value of the transaction. Refer to note 25 for further detail. Year ended 31 March 2023 \u00a3m 2022 \u00a3m Revenue Retrospective regulatory matters (12) (5) Specific revenue (12) (5) Operating costs Restructuring charges 300 347 BT Sport disposal 155 \u2013 Sports JV \u2013 subsequent movements 34 \u2013 Retrospective regulatory matters 12 \u2013 Other divestment-related items 2 (36) Covid-19 \u2013 (19) Specific operating costs before depreciation and amortisation 503 292 Impairment charges due to property rationalisation 65 \u2013 Specific operating costs 568 292 Specific operating loss 556 287 Net finance expense Finance expense relating to BT Sport disposal (13) 8 Interest expense on retirement benefit obligation 18 93 Specific net finance expense 5 101 Net specific items charge before tax 561 388 Taxation Tax credit on specific items above (308) (80) Tax charge on re-measurement of deferred tax \u2013 420 (308) 340 Net specific items charge after tax 253 728 Retrospective regulatory matters We recognised net nil impact in relation to historic regulatory matters, with \u00a312m credits recognised in revenue offset by \u00a312m charges recognised within operating costs (FY22: net credit of \u00a35m). These items represent movements in provisions relating to various matters. Restructuring charges We have incurred charges of \u00a3300m (FY22: \u00a3347m) relating to projects associated with our group-wide cost transformation and modernisation programme. Costs primarily relate to leaver costs, consultancy costs, and staff costs associated with colleagues working exclusively on programme activity. The net cash cost of restructuring activity during the year was \u00a3326m (FY22: \u00a3370m). The programme was first announced in May 2020 and runs until the end of FY25. In response to cost inflation, during the year we revised the gross annualised savings target to \u00a33.0bn (previously \u00a32.5bn), with a cost to achieve of \u00a31.6bn (previously \u00a31.3bn). Since embarking on the programme we have achieved gross annualised savings of \u00a32.1bn and incurred costs of \u00a31.1bn. BT Sport disposal During FY23 we completed the disposal of BT Sport operations. We recognised a profit on disposal of \u00a328m in specific items, made up of \u00a3155m charges recognised within operating costs net of \u00a3183m tax credits. We also recognised a \u00a313m credit within finance costs as specific (FY22: \u00a38m charge), relating to a foreign exchange hedging arrangement with the Sports JV, see note 31. Further details on the BT Sport disposal can be found in note 23. Sports JV subsequent movements Subsequent to the disposal, we have recorded a net fair value movement of \u00a334m on the A and C preference shares in the Sports JV (see note 25). Other divestment-related items We recognised a \u00a32m charge (FY22: \u00a336m credit) relating to ongoing divestment projects. Covid-19 In FY20 we recognised one-off charges of \u00a395m relating to the impact of Covid-19 on various balance sheet items. Any releases of this provision have also been booked as a specific item. At 31 March 2023 these provisions had been fully released or utilised. Impairment charges due to property rationalisation During FY23, we recognised a \u00a365m impairment charge as specific (FY22: \u00a3nil), in relation to an ongoing property rationalisation programme. Interest expense on retirement benefit obligation During the year we incurred \u00a318m (FY22: \u00a393m) of interest costs in relation to our defined benefit pension obligations. Tax on specific items A tax credit of \u00a3308m (FY22: \u00a380m) was recognised in relation to specific items. Of this, \u00a3183m relates to the BT Sport disposal. Further details can be found in note 25. Remeasurement of deferred tax balances In FY22 we remeasured our deferred tax balances following the enactment of the new UK corporation tax rate of 25% from April 2023. The corresponding adjustment comprised a net tax charge of \u00a3420m in the income statement and a non-recurring tax credit of \u00a3298m in the statement of comprehensive income. This was classified as a specific item due to its size and the out-of-period nature of this charge. ", "dimensions": { "concept": "btgroupplc:DisclosureOfSpecificItems", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00" } }, "fact-548": { "value": "8. Audit, audit related and other non-audit services The following fees were paid or are payable to the company\u2019s auditors, KPMG LLP and other firms in the KPMG network. Year ended 31 March 2023 \u00a3000 2022 \u00a3000 Fees payable to the company\u2019s auditors and its associates for: Audit services a The audit of the parent company and the consolidated financial statements 13,558 11,40 0 The audit of the company\u2019s subsidiaries 6,274 6,009 19,832 17, 40 9 Audit related assurance services b 2,553 3,169 Other non-audit services All other assurance services 55 127 Total services 22,440 20,705 a Services in relation to the audit of the parent company and the consolidated financial statements. This also includes fees payable for the statutory audits of the financial statements of subsidiary companies. b Includes services that are required by law or regulation to be carried out by an appointed auditor and services that support us to fulfil obligations required by law or regulation. This includes fees for the review of interim results and the accrued fee for the audit of the group\u2019s regulatory financial statements. In FY23 this included fees of \u00a31,000,000 to support divestment transactions (FY22: \u00a3789,000). Fees payable to auditors other than KPMG for audits of certain overseas subsidiaries were \u00a3171,000 (FY22: \u00a3163,000). The BT Pension Scheme is an associated pension fund as defined in the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011. In FY23 KPMG LLP received total fees from the BT Pension Scheme of \u00a31.6m (FY22: \u00a31.6m) in respect of the following services: Year ended 31 March 2023 \u00a3000 2022 \u00a3000 Audit of financial statements of associates 1,622 1,602 Audit-related assurance services 14 16 Total services 1,636 1,618 ", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-549": { "value": "10. Taxation S ignificant accounting policies that apply to taxation Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group\u2019s subsidiaries, associates and joint ventures operate and generate taxable income. We evaluate positions taken in tax returns where tax regulation is subject to interpretation, and establish provisions if appropriate based on the amounts likely to be paid to tax authorities. Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of our assets and liabilities and their tax base. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred and current income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it is probable that there will be suitable taxable profits against which the deductible temporary difference can be utilised. Deferred tax balances for which there is a right of offset within the same jurisdiction are presented net on the face of the group balance sheet as permitted by IAS 12, with the exception of deferred tax related to our pension schemes which is disclosed within deferred tax assets. Key accounting estimates and significant judgements made in accounting for taxation We seek to pay tax in accordance with the laws of the countries where we do business. However, in some areas these laws are unclear, and it can take many years to agree an outcome with a tax authority or through litigation. We estimate our tax on country-by-country and issue-by-issue bases. Our key uncertainties are whether our intra-group trading model will be accepted by a particular tax authority; whether intra-group payments are subject to withholding taxes and the deductibility of certain compensation payments made in prior years. We provide for the predicted outcome where an outflow is probable, but the agreed amount can differ materially from our estimates. Approximately 75% by value of the provisions are under active tax authority examination and are therefore likely to be re-estimated or resolved in the coming 12 months. \u00a3104m (FY22: \u00a3194m) is included in current tax liabilities or offset against current tax assets where netting is appropriate. Under a downside case an additional amount of \u00a3174m could be required to be paid. This amount is not provided as we don\u2019t consider this outcome to be probable. Deciding whether to recognise deferred tax assets is judgemental. We only recognise them when we consider it is probable that they can be recovered. In making this judgement we consider evidence such as historical financial performance, future financial plans and trends, the duration of existing customer contracts and whether our intra-group pricing model has been agreed by the relevant tax authority. The value of the group\u2019s income tax assets and liabilities is disclosed on the group balance sheet. The value of the group\u2019s deferred tax assets and liabilities is disclosed below. Analysis of our taxation expense for the year Year ended 31 March 2023 \u00a3m 2022 \u00a3m United Kingdom Corporation tax at 19% (FY22: 19%) \u2013 \u2013 Adjustments in respect of earlier years a 63 223 Non-UK taxation Current (67) (78) Adjustments in respect of earlier years 9 7 Total current taxation (expense) 5 152 Deferred taxation Origination and reversal of temporary differences 102 (102) Adjustments in respect of earlier years a 56 (190) Impact of change in UK corporation tax rate to 25% (FY22: 19%) \u2013 (420) Remeasurement of temporary differences 13 (129) Total deferred taxation credit (expense) 171 (841) Total taxation (expense) 176 (689) a In FY22, certain prior period tax issues were resolved at a net tax cost of \u00a369m, comprising a \u00a3263m deferred tax charge and a \u00a3194m current tax credit. Factors affecting our taxation expense for the year The taxation expense on the profit for the year differs from the amount computed by applying the UK corporation tax rate to the profit before taxation as a result of the following factors: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Profit before taxation 1,729 1,963 Expected taxation expense at UK rate of 19% (FY22: 19%) (328) (373) Effects of: (Higher)/lower taxes on non-UK profits \u2013 (4) Net permanent differences between tax and accounting a 352 179 Adjustments in respect of earlier years b 126 40 Prior year non-UK losses used against current year profits 5 20 Non-UK losses not recognised c 9 (2) Re-measurement of deferred tax balances 12 (549) Total taxation credit (expense) 176 (689) Exclude specific items (note 9) (308) 340 Total taxation expense before specific items (132) (349) a Includes income that is not taxable or UK income taxable at a different rate, and expenses for which no tax relief is received. In both FY22 and FY23 this included the benefit of the UK super-deduction. In FY23 it also includes the non-taxable profit on the disposal and revaluation of BT Sport. b Reflects the differences between initial accounting estimates and tax returns submitted to tax authorities, including the release and establishment of provisions for uncertain tax positions. c Reflects losses made in countries where it has not been considered appropriate to recognise a deferred tax asset, as future taxable profits are not probable. Tax components of other comprehensive income Year ended 31 March 2023 Tax credit (expense) \u00a3m 2022 Tax credit (expense) \u00a3m Taxation on items that will not be reclassified to the income statement Pension remeasurements 732 (399) Tax on items that have been or may be reclassified subsequently to the income statement Exchange differences on translation of foreign operations \u2013 \u2013 Fair value movements on cash flow hedges \u2013 net fair value gains or (losses) (90) (31) \u2013 recognised in income and expense \u2013 \u2013 Total tax recognised in other comprehensive income 642 (430) Current tax credit a 8 8 Deferred tax credit (expense) 634 (438) Total tax recognised in other comprehensive income 642 (430) a Includes \u00a3nil (FY22: \u00a3nil) relating to cash contributions made to reduce retirement benefit obligations. Tax (expense) credit recognised directly in equity Year ended 31 March 2023 \u00a3m 2022 \u00a3m Tax (expense) credit relating to share-based payments (9) 11 Deferred taxation Fixed asset temporary differences \u00a3m Retirement benefit obligations a \u00a3m Share- based payments \u00a3m Tax losses \u00a3m Other \u00a3m Jurisdictional offset \u00a3m Total \u00a3m At 1 April 2021 1,587 (926) (20) (66) (135) \u2013 440 Expense (credit) recognised in the income statement 1,326 (33) (5) (434) (13) \u2013 841 Expense (credit) recognised in other comprehensive income \u2013 764 \u2013 (354) 28 \u2013 438 Exchange differences \u2013 \u2013 (11) \u2013 \u2013 \u2013 (11) Acquisition of subsidiary \u2013 \u2013 \u2013 (3) \u2013 \u2013 (3) Transfer from current tax \u2013 \u2013 \u2013 \u2013 (34) \u2013 (34) At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Non-current Deferred tax asset \u2013 (195) (36) (857) (154) 953 (289) Deferred tax liability 2,913 \u2013 \u2013 \u2013 \u2013 (953) 1,960 At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Expense (credit) recognised in the income statement 886 (18) (13) (1,022) (4) \u2013 (171) Expense (credit) recognised in other comprehensive income \u2013 (413) \u2013 (311) 90 \u2013 (634) Expense (credit) recognised in equity \u2013 \u2013 9 \u2013 \u2013 \u2013 9 Exchange differences \u2013 \u2013 \u2013 (4) (3) (7) Transfer to held for sale \u2013 \u2013 \u2013 \u2013 2 \u2013 2 Transfer to current tax \u2013 \u2013 \u2013 \u2013 41 \u2013 41 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 Non-current Deferred tax asset \u2013 (626) (40) (2,194) (28) 2,179 (709) Deferred tax liability 3,799 \u2013 \u2013 \u2013 \u2013 (2,179) 1,620 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 a Includes a deferred tax asset of \u00a38m (FY22: \u00a35m) arising on contributions payable to defined contribution pension plans. The majority of the deferred tax assets and liabilities noted above are anticipated to be realised after more than 12 months. What factors affect our future tax charges? We expect a large proportion of our capital spend on fibre roll-out to be eligible for the Government\u2019s super-deduction regime, which allows for enhanced and accelerated tax relief for qualifying capital expenditure. These enhanced deductions are available for FY22 and FY23, driving a projected UK tax loss and no UK tax payments for these periods. Together with trading losses and pension deficit contribution deductions, these result in c. \u00a38bn of tax losses expected to be carried forward from FY23 to be utilised against UK taxable profit from FY24 onwards. These are represented by a net c. \u00a32.0bn deferred tax asset which is disclosed within the \u00a32,194m deferred tax asset relating to tax losses in the table above. What are our unrecognised tax losses and other temporary differences? At 31 March 2023 we had operating losses and other temporary differences carried forward in respect of which no deferred tax assets were recognised amounting to \u00a33.7bn (FY22: \u00a33.8bn). Our other temporary differences have no expiry date restrictions. The expiry date of operating losses carried forward is dependent upon the tax law of the various territories in which the losses arose. A summary of expiry dates for losses in respect of which restrictions apply is set out below: At 31 March 2023 \u00a3m Expiry Restricted losses Europe \u2013 2024 \u2013 2027 Americas 365 2024 \u2013 2045 Other 3 2024 \u2013 2030 Total restricted losses 368 Unrestricted operating losses 3,073 No expiry Other temporary differences 266 No expiry Total 3,707 At 31 March 2023 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting to \u00a316.8bn (FY22: \u00a316.8bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these losses to be remote. At 31 March 2023 the undistributed earnings of non-UK subsidiaries were \u00a32.5bn (FY22: \u00a31.9bn). No deferred tax liabilities have been recognised in respect of these unremitted earnings because the group is in a position to control the timing of any dividends from subsidiaries and hence any tax consequences that may arise. Under current tax rules, tax of \u00a341m (FY22: \u00a335m) would arise if these earnings were to be repatriated to the UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-517": { "value": " S ignificant accounting policies that apply to taxation Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group\u2019s subsidiaries, associates and joint ventures operate and generate taxable income. We evaluate positions taken in tax returns where tax regulation is subject to interpretation, and establish provisions if appropriate based on the amounts likely to be paid to tax authorities. Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of our assets and liabilities and their tax base. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred and current income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it is probable that there will be suitable taxable profits against which the deductible temporary difference can be utilised. Deferred tax balances for which there is a right of offset within the same jurisdiction are presented net on the face of the group balance sheet as permitted by IAS 12, with the exception of deferred tax related to our pension schemes which is disclosed within deferred tax assets.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-574": { "value": "Deferred taxation Fixed asset temporary differences \u00a3m Retirement benefit obligations a \u00a3m Share- based payments \u00a3m Tax losses \u00a3m Other \u00a3m Jurisdictional offset \u00a3m Total \u00a3m At 1 April 2021 1,587 (926) (20) (66) (135) \u2013 440 Expense (credit) recognised in the income statement 1,326 (33) (5) (434) (13) \u2013 841 Expense (credit) recognised in other comprehensive income \u2013 764 \u2013 (354) 28 \u2013 438 Exchange differences \u2013 \u2013 (11) \u2013 \u2013 \u2013 (11) Acquisition of subsidiary \u2013 \u2013 \u2013 (3) \u2013 \u2013 (3) Transfer from current tax \u2013 \u2013 \u2013 \u2013 (34) \u2013 (34) At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Non-current Deferred tax asset \u2013 (195) (36) (857) (154) 953 (289) Deferred tax liability 2,913 \u2013 \u2013 \u2013 \u2013 (953) 1,960 At 31 March 2022 2,913 (195) (36) (857) (15 4) \u2013 1,671 Expense (credit) recognised in the income statement 886 (18) (13) (1,022) (4) \u2013 (171) Expense (credit) recognised in other comprehensive income \u2013 (413) \u2013 (311) 90 \u2013 (634) Expense (credit) recognised in equity \u2013 \u2013 9 \u2013 \u2013 \u2013 9 Exchange differences \u2013 \u2013 \u2013 (4) (3) (7) Transfer to held for sale \u2013 \u2013 \u2013 \u2013 2 \u2013 2 Transfer to current tax \u2013 \u2013 \u2013 \u2013 41 \u2013 41 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 Non-current Deferred tax asset \u2013 (626) (40) (2,194) (28) 2,179 (709) Deferred tax liability 3,799 \u2013 \u2013 \u2013 \u2013 (2,179) 1,620 At 31 March 2023 3,799 (626) (40) (2,194) (28) \u2013 911 a Includes a deferred tax asset of \u00a38m (FY22: \u00a35m) arising on contributions payable to defined contribution pension plans. The majority of the deferred tax assets and liabilities noted above are anticipated to be realised after more than 12 months. What factors affect our future tax charges? We expect a large proportion of our capital spend on fibre roll-out to be eligible for the Government\u2019s super-deduction regime, which allows for enhanced and accelerated tax relief for qualifying capital expenditure. These enhanced deductions are available for FY22 and FY23, driving a projected UK tax loss and no UK tax payments for these periods. Together with trading losses and pension deficit contribution deductions, these result in c. \u00a38bn of tax losses expected to be carried forward from FY23 to be utilised against UK taxable profit from FY24 onwards. These are represented by a net c. \u00a32.0bn deferred tax asset which is disclosed within the \u00a32,194m deferred tax asset relating to tax losses in the table above. What are our unrecognised tax losses and other temporary differences? At 31 March 2023 we had operating losses and other temporary differences carried forward in respect of which no deferred tax assets were recognised amounting to \u00a33.7bn (FY22: \u00a33.8bn). Our other temporary differences have no expiry date restrictions. The expiry date of operating losses carried forward is dependent upon the tax law of the various territories in which the losses arose. A summary of expiry dates for losses in respect of which restrictions apply is set out below: At 31 March 2023 \u00a3m Expiry Restricted losses Europe \u2013 2024 \u2013 2027 Americas 365 2024 \u2013 2045 Other 3 2024 \u2013 2030 Total restricted losses 368 Unrestricted operating losses 3,073 No expiry Other temporary differences 266 No expiry Total 3,707 At 31 March 2023 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting to \u00a316.8bn (FY22: \u00a316.8bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these losses to be remote. At 31 March 2023 the undistributed earnings of non-UK subsidiaries were \u00a32.5bn (FY22: \u00a31.9bn). No deferred tax liabilities have been recognised in respect of these unremitted earnings because the group is in a position to control the timing of any dividends from subsidiaries and hence any tax consequences that may arise. Under current tax rules, tax of \u00a341m (FY22: \u00a335m) would arise if these earnings were to be repatriated to the UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-550": { "value": "11. Earnings per share How is earnings per share calculated? Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders by the weighted average number of shares in issue after deducting the own shares held by employee share ownership trusts and treasury shares. In calculating the diluted earnings per share, share options outstanding and other potential shares have been taken into account where the impact of these is dilutive. Year ended 31 March 2023 2022 Basic weighted average number of shares (millions) 9,803 9,866 Dilutive shares from share options (millions) 83 105 Dilutive shares from share awards (millions) 171 165 Diluted weighted average number of shares (millions) 10,057 10,136 Basic earnings per share 19.4p 12.9p Diluted earnings per share 18.9p 12.5p The earnings per share calculations are based on profit after tax attributable to equity shareholders of the parent company which excludes non-controlling interests. Profit after tax was \u00a31,905m (FY22: \u00a31,274m) and profit after tax attributable to non-controlling interests was \u00a34m (FY22: \u00a32m). Profit attributable to non-controlling interests is not presented separately in the financial statements as it is not material. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-518": { "value": "How is earnings per share calculated? Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders by the weighted average number of shares in issue after deducting the own shares held by employee share ownership trusts and treasury shares. In calculating the diluted earnings per share, share options outstanding and other potential shares have been taken into account where the impact of these is dilutive. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-551": { "value": "12. Dividends What is the group\u2019s dividend policy? We have a progressive dividend policy to maintain or grow the dividend each year whilst taking into consideration a number of factors including underlying medium-term earnings expectations and levels of business reinvestment. What dividends have been paid? A final dividend of 5.39p per share amounting to approximately \u00a3534m is proposed in respect of the year ended 31 March 2023 (FY22: final dividend of 5.39p per share amounting to \u00a3527m paid in respect of the year ended 31 March 2022). An interim dividend of 2.31p per share amounting to \u00a3226m was paid on 6 February 2023 (FY22: interim dividend of 2.31p per share amounting to \u00a3227m paid). This value may differ from the amount shown for equity dividends paid in the group cash flow statement, which represents the actual cash paid in relation to dividend cheques that have been presented over the course of the financial year. 2023 2022 Year ended 31 March pence per share \u00a3m pence per share \u00a3m Final dividend in respect of the prior year 5.39 527 \u2013 \u2013 Interim dividend in respect of the current year 2.31 226 2.31 227 7.70 753 2.31 227 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-519": { "value": "What is the group\u2019s dividend policy? We have a progressive dividend policy to maintain or grow the dividend each year whilst taking into consideration a number of factors including underlying medium-term earnings expectations and levels of business reinvestment. What dividends have been paid? A final dividend of 5.39p per share amounting to approximately \u00a3534m is proposed in respect of the year ended 31 March 2023 (FY22: final dividend of 5.39p per share amounting to \u00a3527m paid in respect of the year ended 31 March 2022). An interim dividend of 2.31p per share amounting to \u00a3226m was paid on 6 February 2023 (FY22: interim dividend of 2.31p per share amounting to \u00a3227m paid). This value may differ from the amount shown for equity dividends paid in the group cash flow statement, which represents the actual cash paid in relation to dividend cheques that have been presented over the course of the financial year. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-579": { "value": "13. Intangible assets Significant accounting policies that apply to intangible assets We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method is used. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets (including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note. Acquired intangible assets \u2013 customer relationships and brands Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them. Telecommunications licences Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date. Computer software Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, where it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet these criteria and research costs are expensed as incurred. Our development costs which give rise to internally developed software include upgrading the network architecture or functionality and developing service platforms aimed at offering new services to our customers. Other Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a straight-line basis over their useful economic life or the term of the contract. Estimated useful economic lives The estimated useful economic lives assigned to the principal categories of intangible assets are as follows: \u2013 Computer software 2 to 10 years \u2013 Telecommunications licences 2 to 20 years \u2013 Customer relationships and brands 1 to 15 years Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. Goodwill \u00a3m Customer relationships and brands a \u00a3m Telecoms licences and other b \u00a3m Internally developed software c \u00a3m Purchased software c \u00a3m Total \u00a3m Cost At 1 April 2021 7, 838 3,383 3,013 4,753 1,135 20,122 Additions d \u2013 \u2013 479 793 151 1,423 Acquisitions 94 \u2013 \u2013 \u2013 2 96 Disposals and adjustments f (7) \u2013 (3) (239) (272) (521) Transfers \u2013 \u2013 1 45 (44) 2 Exchange differences 43 \u2013 \u2013 1 (1) 43 Transfers to assets held for sale e (51) \u2013 \u2013 (7) \u2013 (58) At 31 March 2022 7,917 3,383 3,490 5,346 971 21,107 Additions \u2013 \u2013 \u2013 815 203 1,018 Acquisitions \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f (21) \u2013 \u2013 (466) 151 (336) Transfers \u2013 \u2013 \u2013 30 (38) (8) Exchange differences 72 \u2013 1 2 7 82 Transfer to assets held for sale e (13) \u2013 \u2013 \u2013 \u2013 (13) At 31 March 2023 7,955 3,383 3,491 5,727 1,294 21,850 Accumulated amortisation At 1 April 2021 \u2013 2,238 734 3,299 494 6,765 Amortisation charge for the year g \u2013 231 179 529 96 1,035 Impairment g \u2013 \u2013 \u2013 \u2013 13 13 Disposals and adjustments f \u2013 \u2013 (5) (229) (278) (512) Transfers \u2013 \u2013 \u2013 (2) 2 \u2013 Exchange differences \u2013 \u2013 \u2013 1 (1) \u2013 Transfers to assets held for sale e \u2013 \u2013 \u2013 (3) \u2013 (3) At 31 March 2022 \u2013 2,469 908 3,595 326 7,298 Amortisation charge for the year g \u2013 231 185 596 153 1,165 Impairment g \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f \u2013 \u2013 1 (389) 79 (309) Transfers \u2013 \u2013 \u2013 (56) 56 \u2013 Exchange differences \u2013 \u2013 1 1 7 9 At 31 March 2023 \u2013 2,700 1,095 3,747 621 8,163 Carrying amount At 31 March 2022 7,917 914 2,582 1,751 645 13,809 At 31 March 2023 7,955 683 2,396 1,980 673 13,687 a The remaining unamortised balance of customer relationships and brands relates to customer relationships recognised on acquisition of EE. b Telecoms licences and other primarily represents spectrum licences. These include 2100 MHz licence with book value of \u00a3643m (FY22: \u00a3693m), 1800 MHz with book value of \u00a3590m (FY22: \u00a3636m), 700Mhz with book value of \u00a3281m (FY22: \u00a3297m), 3400 MHz with book value of \u00a3242m (FY22: \u00a3258m) and 2600 MHz with book value of \u00a3206m (FY22: \u00a3227m). Spectrum licences are being amortised over a period between 11 and 19 years. c Includes a carrying amount of \u00a31,125m (FY22: \u00a31,046m) in respect of assets under construction, which are not yet amortised. d Additions to telecoms licences and other assets in FY22 include \u00a3479m recognised in relation to spectrum which represents the amount paid to Ofcom to secure the spectrum bands together with the related interference mitigation provision. e For a breakdown of assets held for sale see note 23. f Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully amortised assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated amortisation following review of fixed asset registers. These adjustments do not impact the net carrying amount of any asset class. g In previous years impairment charges were included within the amortisation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Impairment of goodwill Significant accounting policies that apply to impairment of goodwill We perform an annual goodwill impairment review. Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Our CGUs are deemed to be Consumer, Enterprise and Global. We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes. The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year have been extrapolated using perpetuity growth rates. Significant judgements and key accounting estimates made in reviewing goodwill for impairment Determining our CGUs The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these generate independent revenue streams. Our determination of CGUs is unchanged from FY22. From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs into a combined \u2018Consumer\u2019 CGU. Estimating value in use Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have not been adjusted. We tested our goodwill for impairment as at 31 March 2023. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment and sensitivities are disclosed below. Cost Consumer \u00a3m Legacy BT Consumer \u00a3m Legacy EE \u00a3m Enterprise \u00a3m Global \u00a3m Total \u00a3m At 1 April 2021 \u2013 1,183 2,768 3,475 412 7, 838 Acquisitions and disposals \u2013 \u2013 \u2013 94 (7) 87 Transfer 3,951 (1,183) (2,768) \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 39 43 Transfer to assets held for sale a (51) \u2013 \u2013 \u2013 \u2013 (51) At 31 March 2022 3,900 \u2013 \u2013 3,573 444 7,917 Acquisitions and disposals (26) \u2013 \u2013 4 1 (21) Transfer \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 68 72 Transfer to assets held for sale \u2013 \u2013 \u2013 (4) (9) (13) At 31 March 2023 3,874 \u2013 \u2013 3,577 504 7,955 a Assets transferred to held for sale during FY22 relate to the sale of our BT Sport operations. See note 23. What discount rate have we used? The pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. The assumptions used in the calculation of the group\u2019s weighted average cost of capital are benchmarked to externally available data. The pre-tax discount rate used in performing the value in use calculation in FY23 was 9.4% (FY22: 7.6%). We have used the same discount rate for all CGUs except Global where we have used 9.7% (FY22: 7.9%) reflecting higher risk in some of the countries in which Global operates. In FY23 we changed the calculation methodology of the group\u2019s weighted average cost of capital. The most significant change relates to the nominal interest rate for debt which we previously benchmarked to a 5-year historic average. We now use a spot rate to better reflect the recent significant increases in interest rates by the Bank of England, and the increase in our discount rate is largely attributable to this. The pre-tax discount rate calculated under the previous methodology would have been 7.8%. What growth rates have we used? The perpetuity growth rates are determined based on the forecast market growth rates of the regions in which the CGU operates, and reflect an assessment of the long-term growth prospects of that market. The growth rates have been benchmarked against external data for the relevant markets. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors. We used a perpetuity growth rate of 2.4% (FY22: 2.3%) for Global and 2.0% (FY22: 2.0%) for Enterprise and Consumer. What sensitivities have we applied? There is significant headroom in our Enterprise and Consumer CGUs. For Global, the value in use exceeds the carrying value of the CGU by approximately \u00a30.7bn (FY22: \u00a33.9bn) due mainly to market conditions and the increased weighted average cost of capital. Any of the following changes in assumptions in isolation would cause the recoverable amount for the CGU to equal its carrying amount: \u2013 A reduction in the perpetuity growth rate from our 2.4% assumption to a revised assumption of a perpetuity decline rate of 3.9%; \u2013 An increase in the discount rate from our 9.7% assumption to a revised assumption of 14.4%; or \u2013 Shortfalls in trading performance against forecast resulting in operating cash flows decreasing by 41% each year and in perpetuity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-575": { "value": "13. Intangible assets Significant accounting policies that apply to intangible assets We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method is used. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets (including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note. Acquired intangible assets \u2013 customer relationships and brands Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them. Telecommunications licences Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date. Computer software Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, where it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet these criteria and research costs are expensed as incurred. Our development costs which give rise to internally developed software include upgrading the network architecture or functionality and developing service platforms aimed at offering new services to our customers. Other Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a straight-line basis over their useful economic life or the term of the contract. Estimated useful economic lives The estimated useful economic lives assigned to the principal categories of intangible assets are as follows: \u2013 Computer software 2 to 10 years \u2013 Telecommunications licences 2 to 20 years \u2013 Customer relationships and brands 1 to 15 years Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. Goodwill \u00a3m Customer relationships and brands a \u00a3m Telecoms licences and other b \u00a3m Internally developed software c \u00a3m Purchased software c \u00a3m Total \u00a3m Cost At 1 April 2021 7, 838 3,383 3,013 4,753 1,135 20,122 Additions d \u2013 \u2013 479 793 151 1,423 Acquisitions 94 \u2013 \u2013 \u2013 2 96 Disposals and adjustments f (7) \u2013 (3) (239) (272) (521) Transfers \u2013 \u2013 1 45 (44) 2 Exchange differences 43 \u2013 \u2013 1 (1) 43 Transfers to assets held for sale e (51) \u2013 \u2013 (7) \u2013 (58) At 31 March 2022 7,917 3,383 3,490 5,346 971 21,107 Additions \u2013 \u2013 \u2013 815 203 1,018 Acquisitions \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f (21) \u2013 \u2013 (466) 151 (336) Transfers \u2013 \u2013 \u2013 30 (38) (8) Exchange differences 72 \u2013 1 2 7 82 Transfer to assets held for sale e (13) \u2013 \u2013 \u2013 \u2013 (13) At 31 March 2023 7,955 3,383 3,491 5,727 1,294 21,850 Accumulated amortisation At 1 April 2021 \u2013 2,238 734 3,299 494 6,765 Amortisation charge for the year g \u2013 231 179 529 96 1,035 Impairment g \u2013 \u2013 \u2013 \u2013 13 13 Disposals and adjustments f \u2013 \u2013 (5) (229) (278) (512) Transfers \u2013 \u2013 \u2013 (2) 2 \u2013 Exchange differences \u2013 \u2013 \u2013 1 (1) \u2013 Transfers to assets held for sale e \u2013 \u2013 \u2013 (3) \u2013 (3) At 31 March 2022 \u2013 2,469 908 3,595 326 7,298 Amortisation charge for the year g \u2013 231 185 596 153 1,165 Impairment g \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f \u2013 \u2013 1 (389) 79 (309) Transfers \u2013 \u2013 \u2013 (56) 56 \u2013 Exchange differences \u2013 \u2013 1 1 7 9 At 31 March 2023 \u2013 2,700 1,095 3,747 621 8,163 Carrying amount At 31 March 2022 7,917 914 2,582 1,751 645 13,809 At 31 March 2023 7,955 683 2,396 1,980 673 13,687 a The remaining unamortised balance of customer relationships and brands relates to customer relationships recognised on acquisition of EE. b Telecoms licences and other primarily represents spectrum licences. These include 2100 MHz licence with book value of \u00a3643m (FY22: \u00a3693m), 1800 MHz with book value of \u00a3590m (FY22: \u00a3636m), 700Mhz with book value of \u00a3281m (FY22: \u00a3297m), 3400 MHz with book value of \u00a3242m (FY22: \u00a3258m) and 2600 MHz with book value of \u00a3206m (FY22: \u00a3227m). Spectrum licences are being amortised over a period between 11 and 19 years. c Includes a carrying amount of \u00a31,125m (FY22: \u00a31,046m) in respect of assets under construction, which are not yet amortised. d Additions to telecoms licences and other assets in FY22 include \u00a3479m recognised in relation to spectrum which represents the amount paid to Ofcom to secure the spectrum bands together with the related interference mitigation provision. e For a breakdown of assets held for sale see note 23. f Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully amortised assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated amortisation following review of fixed asset registers. These adjustments do not impact the net carrying amount of any asset class. g In previous years impairment charges were included within the amortisation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Impairment of goodwill Significant accounting policies that apply to impairment of goodwill We perform an annual goodwill impairment review. Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Our CGUs are deemed to be Consumer, Enterprise and Global. We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes. The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year have been extrapolated using perpetuity growth rates. Significant judgements and key accounting estimates made in reviewing goodwill for impairment Determining our CGUs The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these generate independent revenue streams. Our determination of CGUs is unchanged from FY22. From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs into a combined \u2018Consumer\u2019 CGU. Estimating value in use Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have not been adjusted. We tested our goodwill for impairment as at 31 March 2023. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment and sensitivities are disclosed below. Cost Consumer \u00a3m Legacy BT Consumer \u00a3m Legacy EE \u00a3m Enterprise \u00a3m Global \u00a3m Total \u00a3m At 1 April 2021 \u2013 1,183 2,768 3,475 412 7, 838 Acquisitions and disposals \u2013 \u2013 \u2013 94 (7) 87 Transfer 3,951 (1,183) (2,768) \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 39 43 Transfer to assets held for sale a (51) \u2013 \u2013 \u2013 \u2013 (51) At 31 March 2022 3,900 \u2013 \u2013 3,573 444 7,917 Acquisitions and disposals (26) \u2013 \u2013 4 1 (21) Transfer \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 68 72 Transfer to assets held for sale \u2013 \u2013 \u2013 (4) (9) (13) At 31 March 2023 3,874 \u2013 \u2013 3,577 504 7,955 a Assets transferred to held for sale during FY22 relate to the sale of our BT Sport operations. See note 23. What discount rate have we used? The pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. The assumptions used in the calculation of the group\u2019s weighted average cost of capital are benchmarked to externally available data. The pre-tax discount rate used in performing the value in use calculation in FY23 was 9.4% (FY22: 7.6%). We have used the same discount rate for all CGUs except Global where we have used 9.7% (FY22: 7.9%) reflecting higher risk in some of the countries in which Global operates. In FY23 we changed the calculation methodology of the group\u2019s weighted average cost of capital. The most significant change relates to the nominal interest rate for debt which we previously benchmarked to a 5-year historic average. We now use a spot rate to better reflect the recent significant increases in interest rates by the Bank of England, and the increase in our discount rate is largely attributable to this. The pre-tax discount rate calculated under the previous methodology would have been 7.8%. What growth rates have we used? The perpetuity growth rates are determined based on the forecast market growth rates of the regions in which the CGU operates, and reflect an assessment of the long-term growth prospects of that market. The growth rates have been benchmarked against external data for the relevant markets. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors. We used a perpetuity growth rate of 2.4% (FY22: 2.3%) for Global and 2.0% (FY22: 2.0%) for Enterprise and Consumer. What sensitivities have we applied? There is significant headroom in our Enterprise and Consumer CGUs. For Global, the value in use exceeds the carrying value of the CGU by approximately \u00a30.7bn (FY22: \u00a33.9bn) due mainly to market conditions and the increased weighted average cost of capital. Any of the following changes in assumptions in isolation would cause the recoverable amount for the CGU to equal its carrying amount: \u2013 A reduction in the perpetuity growth rate from our 2.4% assumption to a revised assumption of a perpetuity decline rate of 3.9%; \u2013 An increase in the discount rate from our 9.7% assumption to a revised assumption of 14.4%; or \u2013 Shortfalls in trading performance against forecast resulting in operating cash flows decreasing by 41% each year and in perpetuity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-552": { "value": "13. Intangible assets Significant accounting policies that apply to intangible assets We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method is used. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets (including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note. Acquired intangible assets \u2013 customer relationships and brands Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them. Telecommunications licences Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date. Computer software Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, where it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet these criteria and research costs are expensed as incurred. Our development costs which give rise to internally developed software include upgrading the network architecture or functionality and developing service platforms aimed at offering new services to our customers. Other Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a straight-line basis over their useful economic life or the term of the contract. Estimated useful economic lives The estimated useful economic lives assigned to the principal categories of intangible assets are as follows: \u2013 Computer software 2 to 10 years \u2013 Telecommunications licences 2 to 20 years \u2013 Customer relationships and brands 1 to 15 years Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. Goodwill \u00a3m Customer relationships and brands a \u00a3m Telecoms licences and other b \u00a3m Internally developed software c \u00a3m Purchased software c \u00a3m Total \u00a3m Cost At 1 April 2021 7, 838 3,383 3,013 4,753 1,135 20,122 Additions d \u2013 \u2013 479 793 151 1,423 Acquisitions 94 \u2013 \u2013 \u2013 2 96 Disposals and adjustments f (7) \u2013 (3) (239) (272) (521) Transfers \u2013 \u2013 1 45 (44) 2 Exchange differences 43 \u2013 \u2013 1 (1) 43 Transfers to assets held for sale e (51) \u2013 \u2013 (7) \u2013 (58) At 31 March 2022 7,917 3,383 3,490 5,346 971 21,107 Additions \u2013 \u2013 \u2013 815 203 1,018 Acquisitions \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f (21) \u2013 \u2013 (466) 151 (336) Transfers \u2013 \u2013 \u2013 30 (38) (8) Exchange differences 72 \u2013 1 2 7 82 Transfer to assets held for sale e (13) \u2013 \u2013 \u2013 \u2013 (13) At 31 March 2023 7,955 3,383 3,491 5,727 1,294 21,850 Accumulated amortisation At 1 April 2021 \u2013 2,238 734 3,299 494 6,765 Amortisation charge for the year g \u2013 231 179 529 96 1,035 Impairment g \u2013 \u2013 \u2013 \u2013 13 13 Disposals and adjustments f \u2013 \u2013 (5) (229) (278) (512) Transfers \u2013 \u2013 \u2013 (2) 2 \u2013 Exchange differences \u2013 \u2013 \u2013 1 (1) \u2013 Transfers to assets held for sale e \u2013 \u2013 \u2013 (3) \u2013 (3) At 31 March 2022 \u2013 2,469 908 3,595 326 7,298 Amortisation charge for the year g \u2013 231 185 596 153 1,165 Impairment g \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Disposals and adjustments f \u2013 \u2013 1 (389) 79 (309) Transfers \u2013 \u2013 \u2013 (56) 56 \u2013 Exchange differences \u2013 \u2013 1 1 7 9 At 31 March 2023 \u2013 2,700 1,095 3,747 621 8,163 Carrying amount At 31 March 2022 7,917 914 2,582 1,751 645 13,809 At 31 March 2023 7,955 683 2,396 1,980 673 13,687 a The remaining unamortised balance of customer relationships and brands relates to customer relationships recognised on acquisition of EE. b Telecoms licences and other primarily represents spectrum licences. These include 2100 MHz licence with book value of \u00a3643m (FY22: \u00a3693m), 1800 MHz with book value of \u00a3590m (FY22: \u00a3636m), 700Mhz with book value of \u00a3281m (FY22: \u00a3297m), 3400 MHz with book value of \u00a3242m (FY22: \u00a3258m) and 2600 MHz with book value of \u00a3206m (FY22: \u00a3227m). Spectrum licences are being amortised over a period between 11 and 19 years. c Includes a carrying amount of \u00a31,125m (FY22: \u00a31,046m) in respect of assets under construction, which are not yet amortised. d Additions to telecoms licences and other assets in FY22 include \u00a3479m recognised in relation to spectrum which represents the amount paid to Ofcom to secure the spectrum bands together with the related interference mitigation provision. e For a breakdown of assets held for sale see note 23. f Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully amortised assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated amortisation following review of fixed asset registers. These adjustments do not impact the net carrying amount of any asset class. g In previous years impairment charges were included within the amortisation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Impairment of goodwill Significant accounting policies that apply to impairment of goodwill We perform an annual goodwill impairment review. Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Our CGUs are deemed to be Consumer, Enterprise and Global. We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes. The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year have been extrapolated using perpetuity growth rates. Significant judgements and key accounting estimates made in reviewing goodwill for impairment Determining our CGUs The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and whether these generate independent revenue streams. Our determination of CGUs is unchanged from FY22. From 1 April 2023 the existing Enterprise and Global units will be managed and reported as a single unit, Business, and we will review the impact this has on our determination of CGUs in FY24. In FY22 we brought together the Legacy BT Consumer and Legacy EE CGUs into a combined \u2018Consumer\u2019 CGU. Estimating value in use Our value in use calculations require estimates in relation to uncertain items, including management\u2019s expectations of future revenue growth, operating costs, profit margins, operating cash flows and the discount rate for each CGU. Future cash flows used in the value in use calculations are on a nominal basis and based on our latest Board-approved five-year financial plans, representing management\u2019s best estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash flow estimates have not been adjusted. We tested our goodwill for impairment as at 31 March 2023. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment and sensitivities are disclosed below. Cost Consumer \u00a3m Legacy BT Consumer \u00a3m Legacy EE \u00a3m Enterprise \u00a3m Global \u00a3m Total \u00a3m At 1 April 2021 \u2013 1,183 2,768 3,475 412 7, 838 Acquisitions and disposals \u2013 \u2013 \u2013 94 (7) 87 Transfer 3,951 (1,183) (2,768) \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 39 43 Transfer to assets held for sale a (51) \u2013 \u2013 \u2013 \u2013 (51) At 31 March 2022 3,900 \u2013 \u2013 3,573 444 7,917 Acquisitions and disposals (26) \u2013 \u2013 4 1 (21) Transfer \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Exchange differences \u2013 \u2013 \u2013 4 68 72 Transfer to assets held for sale \u2013 \u2013 \u2013 (4) (9) (13) At 31 March 2023 3,874 \u2013 \u2013 3,577 504 7,955 a Assets transferred to held for sale during FY22 relate to the sale of our BT Sport operations. See note 23. What discount rate have we used? The pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. The assumptions used in the calculation of the group\u2019s weighted average cost of capital are benchmarked to externally available data. The pre-tax discount rate used in performing the value in use calculation in FY23 was 9.4% (FY22: 7.6%). We have used the same discount rate for all CGUs except Global where we have used 9.7% (FY22: 7.9%) reflecting higher risk in some of the countries in which Global operates. In FY23 we changed the calculation methodology of the group\u2019s weighted average cost of capital. The most significant change relates to the nominal interest rate for debt which we previously benchmarked to a 5-year historic average. We now use a spot rate to better reflect the recent significant increases in interest rates by the Bank of England, and the increase in our discount rate is largely attributable to this. The pre-tax discount rate calculated under the previous methodology would have been 7.8%. What growth rates have we used? The perpetuity growth rates are determined based on the forecast market growth rates of the regions in which the CGU operates, and reflect an assessment of the long-term growth prospects of that market. The growth rates have been benchmarked against external data for the relevant markets. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors. We used a perpetuity growth rate of 2.4% (FY22: 2.3%) for Global and 2.0% (FY22: 2.0%) for Enterprise and Consumer. What sensitivities have we applied? There is significant headroom in our Enterprise and Consumer CGUs. For Global, the value in use exceeds the carrying value of the CGU by approximately \u00a30.7bn (FY22: \u00a33.9bn) due mainly to market conditions and the increased weighted average cost of capital. Any of the following changes in assumptions in isolation would cause the recoverable amount for the CGU to equal its carrying amount: \u2013 A reduction in the perpetuity growth rate from our 2.4% assumption to a revised assumption of a perpetuity decline rate of 3.9%; \u2013 An increase in the discount rate from our 9.7% assumption to a revised assumption of 14.4%; or \u2013 Shortfalls in trading performance against forecast resulting in operating cash flows decreasing by 41% each year and in perpetuity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-520": { "value": "Significant accounting policies that apply to intangible assets We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method is used. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group\u2019s share of the identifiable net assets (including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note. Acquired intangible assets \u2013 customer relationships and brands Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these relationships or brands and include management\u2019s estimates of revenue and profits to be generated by them. Telecommunications licences Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically 20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and subsequently carried at amortised cost. The fair value is based on management\u2019s assumption of future cash flows using market expectations at acquisition date. Computer software Computer software comprises computer software licences purchased from third parties, and also the cost of internally developed software. Computer software licences purchased from third parties are initially recorded at cost. We only capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, where it is probable that the software will generate future economic benefits, the cost of the asset can be reliably measured and technical feasibility can be demonstrated, in which case it is capitalised as an intangible asset on the balance sheet. Costs which do not meet these criteria and research costs are expensed as incurred. Our development costs which give rise to internally developed software include upgrading the network architecture or functionality and developing service platforms aimed at offering new services to our customers. Other Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a straight-line basis over their useful economic life or the term of the contract. Estimated useful economic lives The estimated useful economic lives assigned to the principal categories of intangible assets are as follows: \u2013 Computer software 2 to 10 years \u2013 Telecommunications licences 2 to 20 years \u2013 Customer relationships and brands 1 to 15 years Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-585": { "value": "Impairment of intangible assets Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose. Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-521": { "value": "Impairment of goodwill Significant accounting policies that apply to impairment of goodwill We perform an annual goodwill impairment review. Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Our CGUs are deemed to be Consumer, Enterprise and Global. We allocate goodwill to each of the CGUs that we expect to benefit from the business combination. Each CGU to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes. The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management\u2019s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the fifth year have been extrapolated using perpetuity growth rates. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForImpairmentOfGoodwill", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2021-04-01T00:00:00/2022-04-01T00:00:00" } }, "fact-553": { "value": "14. Property, plant and equipment Significant accounting policies that apply to property, plant and equipment Our property, plant and equipment is included at historical cost, net of accumulated depreciation, government grants and any impairment charges. Property, plant and equipment acquired through business combinations is initially recorded at fair value and subsequently accounted for on the same basis as our existing assets. We derecognise items of property, plant and equipment on disposal or when no future economic benefits are expected to arise from the continued use of the asset. The difference between the sale proceeds and the net book value at the date of disposal is recognised in operating costs in the income statement. Included within the cost of network infrastructure and equipment are direct and indirect labour costs, materials and directly attributable overheads. We depreciate property, plant and equipment on a straight-line basis from the time the asset is available for use, to write off the asset\u2019s cost over the estimated useful life taking into account any expected residual value. Freehold land is not depreciated. Estimated useful economic lives The estimated useful lives assigned to principal categories of assets are as follows: Land and buildings \u2013 Freehold buildings 14 to 50 years \u2013 Short-term leasehold improvements Shorter of 10 years or lease term \u2013 Leasehold land and buildings Shorter of unexpired portion of lease or 40 years Network infrastructure Transmission equipment \u2013 Duct 40 years \u2013 Cable 3 to 25 years \u2013 Fibre 5 to 20 years Exchange equipment 2 to 13 years Other network equipment 2 to 20 years Other assets \u2013 Motor vehicles 2 to 10 years \u2013 Computers and office equipment 3 to 7 years Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively. Network share assets Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE was recognised at fair value within tangible assets, and depreciated in line with policy. Subsequent additions are recorded at cost. Impairment of property, plant and equipment We test property, plant and equipment for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, we assess the recoverable amount by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant asset and the fair value less costs to dispose. If it is not possible to determine the recoverable amount for the individual asset then we assess impairment by reference to the relevant cash generating unit as described in note 13. Building Digital UK (BDUK) government grants We receive government grants in relation to BDUK and other rural superfast broadband contracts. Where we have achieved certain service levels, or delivered the network more efficiently than anticipated, we have an obligation to either re-invest or repay grant funding. Where this is the case, we recognise deferred income in respect of the funding that will be re-invested or repaid, and make a corresponding adjustment to the carrying amount of the related property, plant and equipment. Assessing the timing of whether and when we change the estimated take-up assumption is judgemental as it involves considering information which is not always observable. Our consideration on whether and when to change the base case assumption is dependent on our expectation of the long-term take-up trend. Our assessment of how much grant income to defer includes consideration of the difference between the take-up percentage agreed with the local authority and the likelihood of actual take-up. The value of the government grants deferred is disclosed in note 18. Land and buildings \u00a3m Network infrastructure Other a \u00a3m Assets under construction \u00a3m Total \u00a3m Held by Openreach \u00a3m Held by other units \u00a3m Cost At 1 April 2021 946 29,108 25,488 1,520 990 58,052 Additions b 87 \u2013 111 89 3,548 3,835 Transfers 18 2,128 813 156 (3 ,117) (2) Disposals and adjustments c (28) 40 (1,974) (271) 29 (2,204) Transfer to assets held for sale d \u2013 \u2013 \u2013 (50) (4) (54) Exchange differences (1) \u2013 1 \u2013 \u2013 \u2013 At 31 March 2022 1,022 31,276 24,439 1,444 1,446 59,627 Additions b 7 \u2013 129 7 3,947 4,090 Transfers e 89 2,617 913 211 (3,822) 8 Disposals and adjustments c 31 (118) (183) (33) (70) (373) Transfer to assets held for sale d \u2013 \u2013 (108) (13) \u2013 (121) Exchange differences 16 \u2013 99 6 1 122 At 31 March 2023 1,165 33,775 25,289 1,622 1,502 63,353 Accumulated depreciation At 1 April 2021 612 16,076 20,946 1,137 \u2013 38,771 Depreciation charge for the year f 37 1,372 1,092 157 \u2013 2,658 Impairment f \u2013 \u2013 \u2013 11 \u2013 11 Transfers \u2013 \u2013 (1) 1 \u2013 \u2013 Disposals and adjustments c (28) 28 (1,985) (240) \u2013 (2,225) Transfer to assets held for sale d \u2013 \u2013 \u2013 (41) \u2013 (41) Exchange differences \u2013 \u2013 (2) \u2013 \u2013 (2) At 31 March 2022 621 17,476 20,050 1,025 \u2013 39,172 Depreciation charge for the year f 50 1,466 1,144 218 \u2013 2,878 Impairment f \u2013 \u2013 \u2013 11 \u2013 11 Transfers e \u2013 195 (192) (4) \u2013 (1) Disposals and adjustments c 32 (139) (133) (36) \u2013 (276) Transfer to assets held for sale d \u2013 \u2013 (106) (11) \u2013 (117) Exchange differences 13 \u2013 91 7 \u2013 111 At 31 March 2023 716 18,998 20,854 1,210 \u2013 41,778 Carrying amount At 31 March 2022 401 13,800 4,389 419 1,446 20,455 Engineering stores \u2013 \u2013 \u2013 \u2013 144 144 Total at 31 March 2022 401 13,800 4,389 419 1,590 20,599 At 31 March 2023 449 14,777 4,435 412 1,502 21,575 Engineering stores \u2013 \u2013 \u2013 \u2013 92 92 Total at 31 March 2023 449 14,777 4,435 412 1,594 21,667 a Other mainly comprises motor vehicles, computers and fixtures and fittings. b Net of government grants of \u00a3150m (FY22: \u00a378m). c Disposals and adjustments include the removal of assets from the group\u2019s fixed asset registers following disposals and the identification of fully depreciated assets (including through operation of the group\u2019s annual asset verification exercise). They also include adjustments between gross cost and accumulated depreciation following review of fixed asset registers, and adjustments resulting from changes in assumptions used in calculating lease-end obligations where the corresponding asset is capitalised. d Transfers to assets held for sale are detailed in note 23. e Following review of fixed asset registers during the year we transferred \u00a3195m accumulated depreciation relating to Openreach network infrastructure that was historically recorded against other units. Prior year comparatives have not been restated as the impact is not qualitatively material. There is no impact on the segmentation of the profit and loss depreciation charge as disclosed in note 4. f In previous years impairment charges were included within the depreciation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Included within the above disclosure are assets used in arrangements which represent core business activities for the group and which meet the definition of operating leases: \u2013 \u00a314,777m (FY22: \u00a313,800m) of the carrying amount of the network infrastructure asset class represents Openreach\u2019s network infrastructure. The majority of the associated assets are used to deliver fixed-line telecommunications services that have been assessed as containing operating leases, to both internal and external communications providers. Network infrastructure held by Openreach is presented separately in the table above; however it is not practicable to separate out infrastructure not used in operating lease arrangements. \u2013 Other assets includes devices with a carrying amount of \u00a3163m (FY22: \u00a3169m) that are made available to retail customers under arrangements that contain operating leases. These are not presented separately in the table above as they are not material relative to the group\u2019s overall asset base. The carrying amount of land and buildings, including leasehold improvements, comprised: At 31 March 2023 \u00a3m 2022 \u00a3m Freehold 80 92 Leasehold 369 309 Total land and buildings 449 401 Network infrastructure Some of our network assets are jointly controlled by EE Limited with Hutchison 3G UK Limited. These relate to shared 3G network and certain elements of network for 4G rural sites. The net book value of the group\u2019s share of assets controlled by its joint operation MBNL is \u00a3721m (FY22: \u00a3562m) and is recorded within network infrastructure. Included within this is \u00a366m (FY22: \u00a373m), being the group\u2019s share of assets owned by its joint operation MBNL. Within network infrastructure are assets with a net book value of \u00a310.9bn (FY22: \u00a310.3bn) which have useful economic lives of more than 18 years. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-522": { "value": "Significant accounting policies that apply to property, plant and equipment Our property, plant and equipment is included at historical cost, net of accumulated depreciation, government grants and any impairment charges. Property, plant and equipment acquired through business combinations is initially recorded at fair value and subsequently accounted for on the same basis as our existing assets. We derecognise items of property, plant and equipment on disposal or when no future economic benefits are expected to arise from the continued use of the asset. The difference between the sale proceeds and the net book value at the date of disposal is recognised in operating costs in the income statement. Included within the cost of network infrastructure and equipment are direct and indirect labour costs, materials and directly attributable overheads. We depreciate property, plant and equipment on a straight-line basis from the time the asset is available for use, to write off the asset\u2019s cost over the estimated useful life taking into account any expected residual value. Freehold land is not depreciated. Estimated useful economic lives The estimated useful lives assigned to principal categories of assets are as follows: Land and buildings \u2013 Freehold buildings 14 to 50 years \u2013 Short-term leasehold improvements Shorter of 10 years or lease term \u2013 Leasehold land and buildings Shorter of unexpired portion of lease or 40 years Network infrastructure Transmission equipment \u2013 Duct 40 years \u2013 Cable 3 to 25 years \u2013 Fibre 5 to 20 years Exchange equipment 2 to 13 years Other network equipment 2 to 20 years Other assets \u2013 Motor vehicles 2 to 10 years \u2013 Computers and office equipment 3 to 7 years Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively. Network share assets Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE was recognised at fair value within tangible assets, and depreciated in line with policy. Subsequent additions are recorded at cost. Impairment of property, plant and equipment We test property, plant and equipment for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, we assess the recoverable amount by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant asset and the fair value less costs to dispose. If it is not possible to determine the recoverable amount for the individual asset then we assess impairment by reference to the relevant cash generating unit as described in note 13. Building Digital UK (BDUK) government grants We receive government grants in relation to BDUK and other rural superfast broadband contracts. Where we have achieved certain service levels, or delivered the network more efficiently than anticipated, we have an obligation to either re-invest or repay grant funding. Where this is the case, we recognise deferred income in respect of the funding that will be re-invested or repaid, and make a corresponding adjustment to the carrying amount of the related property, plant and equipment. Assessing the timing of whether and when we change the estimated take-up assumption is judgemental as it involves considering information which is not always observable. Our consideration on whether and when to change the base case assumption is dependent on our expectation of the long-term take-up trend. Our assessment of how much grant income to defer includes consideration of the difference between the take-up percentage agreed with the local authority and the likelihood of actual take-up. The value of the government grants deferred is disclosed in note 18. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-554": { "value": "179Financial statements 15. Leases Significant accounting policies that apply to leases Identifying whether a lease exists At inception of a contract, we determine whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration. In making this assessment, we consider whether: \u2013 The contract involves the use of an identified asset, either explicitly or implicitly. The asset must be physically distinct or represent substantially all the capacity of a physically distinct asset. Assets that a supplier has a substantive right to substitute are not considered distinct. \u2013 The lessee (either the group, or the group\u2019s customers) has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and \u2013 The lessee has the right to direct the use of the asset, in other words, has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. Where practicable, and by class of underlying asset, we have elected to account for leases containing a lease component and one or more non-lease components as a single lease component. Where this election has been taken, it has been applied to the entire asset. Lessee accounting We recognise a lease liability and right-of-use asset at the commencement of the lease. Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using the group\u2019s incremental borrowing rate. The lease term is the non-cancellable period of the lease adjusted for the impact of any extension options that we are reasonably certain that the lessee will exercise, or termination options that we are reasonably certain that the lessee will not exercise. The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to obtain an asset of similar value. Lease payments include: \u2013 fixed payments \u2013 variable lease payments that depend on an index or rate \u2013 amounts expected to be paid under residual value guarantees \u2013 the exercise price of any purchase options that we are reasonably certain to exercise \u2013 payments due over optional renewal periods where we are reasonably certain to renew \u2013 penalties for early termination of the lease where we are reasonably certain to terminate early Lease liabilities are subsequently measured at amortised cost using the effective interest method. They are remeasured if there is a change in future lease payments, including changes in the index or rate used to determine those payments, or the amount we expect to be payable under a residual value guarantee. We also remeasure lease liabilities where the lease term changes. This occurs when the non-cancellable period of the lease changes, or on occurrence of a significant event or change in circumstances within the control of the lessee and which changes our initial assessment in regard to whether the lessee is reasonably certain to exercise extension options or not to exercise termination options. Where the lease term changes we remeasure the lease liability using the group\u2019s incremental borrowing rate at the date of reassessment. Where a significant event or change in circumstances does not occur, the lease term remains unchanged and the carrying amounts of the lease liability and associated right-of-use asset will decline over time. Right-of-use assets are initially measured at the initial amount of the corresponding lease liabilities, adjusted for any prepaid lease payments, plus any initial direct costs incurred and an estimate of any decommissioning costs that have been recognised as provisions, less any lease incentives received. They are subsequently depreciated using the straight-line method to the earlier of the end of the useful life of the asset or the end of the lease term. Right-of-use assets are tested for impairment following the policy set out in note 14 and are adjusted for any remeasurement of lease liabilities. We have elected not to recognise lease liabilities and right-of-use assets for short-term leases that have a lease term of 12 months or less, and leases of low-value assets with a purchase price under \u00a35,000. We recognise payments for these items as an expense on a straight-line basis over the lease term. Any variable lease payments that do not depend on an index or rate, such as usage-based payments, are recognised as an expense in the period to which the variability relates. Lessor accounting At inception or on modification of a contract that contains a lease component, we allocate the consideration in the contract to each lease component on the basis of their relative standalone prices. When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, we make an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, we consider certain indicators such as whether the lease is for the major part of the economic life of the asset. When we are an intermediate lessor, we account for our interests in the headlease and the sublease separately. We assess the lease classification of a sublease with reference to the right-of-use asset arising from the headlease, not with reference to the underlying asset. If a headlease is a short-term lease to which we apply the exemption described above, then we classify the sublease as an operating lease. If an arrangement contains lease and non-lease components, then we apply IFRS 15 to allocate the consideration in the contract. We apply the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. We further regularly review estimated unguaranteed residual values used in calculating the gross investment in the lease. We recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of \u2018other revenue\u2019. Significant judgements made in accounting for leases The lease term is a key determinant of the size of the lease liability and right-of-use asset recognised where the group acts as lessee; and the deferral period for any upfront connection charges where the group acts as lessor. Determining the lease term requires judgement to evaluate whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options. Key facts and circumstances that create an incentive to exercise those options are considered; these include: \u2013 Our anticipated operational, retail and office property requirements in the mid and long term. \u2013 The availability of suitable alternative sites. \u2013 Costs or penalties associated with exiting lease arrangements relative to the benefits to be gained, including costs of removing leasehold improvements or relocating, and indirect costs such as disruption to business. \u2013 Significant investments in leased sites, in particular those with useful lives beyond the lease term. \u2013 Costs associated with extending lease arrangements including rent increases during secondary lease periods. Our definition of \u2018reasonable certainty\u2019, and therefore the lease term, will often align with the judgements made in our medium-term plan, in particular for leases of non-specialised property and equipment on rolling (or \u2018evergreen\u2019) arrangements that continue until terminated and which can be exited without significant penalty. Following initial determination of the lease term, we exercise judgement in evaluating whether events or changes in circumstances are sufficiently significant to change the initial assessment of whether we are reasonably certain the lessee will exercise extension options or will not exercise termination options; and in the subsequent reassessment of the lease term. Key judgements exercised in setting the lease term The quantum of the lease liability and right-of-use asset currently recognised on our balance sheet is most significantly affected by the judgement exercised in setting the lease term for the arrangement under which the bulk of our operational UK property estate is held. Setting the lease term for our leased cell sites has also involved the use of judgement, albeit to a lesser degree. UK operational property portfolio Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we may either vacate some or all properties or purchase the entire estate. If neither option is taken the lease continues to the next unilaterally available break point in 2041. The lease liability recognised for the arrangement reflects a lease end date of 2031. On initial recognition we concluded that, although the majority of these properties are expected to be needed on a long-term basis, we couldn\u2019t be reasonably certain that we wouldn\u2019t exercise the termination option or that we would exercise the purchase option. In coming to this conclusion, we had due regard to material sub-lease arrangements relating to the estate. As time progresses our assessment may change; if this happens, we will remeasure the lease liability and right-of-use asset to reflect either the rentals due for any properties we will continue to occupy, or the cost of purchasing the estate, using an updated discount rate. There would be no overall impact on net assets. If the assessment were to change at the balance sheet date 31 March 2023: \u2013 Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a33bn and \u00a35bn \u2013 Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the lease liability and right-of-use asset of between \u00a31bn and \u00a32bn Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects the significant uncertainty around key variables used to determine cash outflows, especially future inflation and which properties the group will be able to exit prior to or in 2031. Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated from the disposal, repurposing or subleasing of properties retained post-2031. We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were not reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these options. Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion. We exercise similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not exercise termination options associated with other leased properties. In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions to exit a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a termination option until implementation of the associated business plan has progressed to a stage that we are committed to exiting the property. At that point we reassess the lease term by reference to the time we expect to remain in occupation of the property and any notice period associated with exercise of the option. Cell sites Most of the liability recognised in respect of leased cell sites relates to multi-site arrangements with commercial providers. The fixed- term nature of these arrangements means it has not been necessary to exercise significant judgement when determining the lease term. Where the arrangements offer extension options we have been required to conclude whether the options are reasonably certain to be exercised. Although the balance sheet could be materially affected by the conclusion reached in regard to these options, we have not been required to exercise a significant degree of judgement in arriving at the lease term having regard to the period of time covered by the options, the difficulty in predicting the group\u2019s long-term network requirements, and the relatively high threshold that \u2018reasonably certain\u2019 represents. A smaller proportion of the cell site liability relates to arrangements with individual landlords which are either rolling or can be exited with notice. When setting the initial lease term for these arrangements we exercised significant judgement in establishing the period that we are reasonably certain to require use of the site. We broadly aligned lease terms with our medium-term planning horizon after assessing the relative strengths of the following factors: \u2013 Long-term economic incentives to remain on sites including existing capital improvements; \u2013 A need to maintain flexibility in our ability to develop and manage our network infrastructure to react quickly to technological developments and evolving capacity requirements; and \u2013 Incentives to renegotiate arrangements in the medium term to gain more security over sites to support future capital investment. Although significant judgement has been exercised in determining the lease term, reaching an alternative conclusion would not have a material impact on the balance sheet having regard to the most feasible alternative lease terms. Subsequently, we consider key events that trigger reassessment of lease terms to be developments which resolve uncertainty around our economic incentive to remain on individual sites in the long term. These are primarily lease renegotiations and significant capital investments, for example that associated with our 5G rollout and other capital refresh programmes. Right-of-use assets Most of our right-of-use assets are associated with our leased property portfolio, specifically our office, retail and exchange estate. We also lease a significant proportion of our network infrastructure, including mobile cell and switch sites. Land and buildings \u00a3m Network infrastructure \u00a3m Motor vehicles \u00a3m Other \u00a3m Total \u00a3m At 1 April 2021 4,332 145 375 11 4,863 Additions a 249 13 110 1 373 Depreciation charge for the year (526) (31) (115) (4) (676) Impairment b (6) (6) \u2013 \u2013 (12) Transfer to assets held for sale (2) \u2013 \u2013 \u2013 (2) Other movements c (106) (11) (1) 1 (117) At 31 March 2022 3,941 110 369 9 4,429 Additions a 203 16 150 2 371 Depreciation charge for the year (521) (32) (131) (5) (689) Impairment b (75) \u2013 \u2013 \u2013 (75) Transfer to assets held for sale (3) \u2013 \u2013 \u2013 (3) Other movements c (49) 1 (3) (1) (52) At 31 March 2023 3,496 95 385 5 3,981 a Additions comprise increases to right-of-use assets as a result of entering into new leases, and upwards remeasurement of existing leases arising from lease extensions or reassessments and increases to lease payments. b In previous years impairment charges were included within the depreciation charge for the year but are now presented separately. FY22 comparatives have been re-presented for comparability. Impairment charge in FY23 relates primarily to the early exit of leases as a result of ongoing property rationalisation activity. c Other movements primarily relate to terminated leases and downwards remeasurements of right-of-use assets arising from reductions or reassessments of lease terms and decreases in lease payments. Lease liabilities Lease liabilities recognised are as follows: Year ended 31 March 2023 \u00a3m 2022 \u00a3m Current 800 795 Non-current 4,559 4,965 5,359 5,760 The following amounts relating to the group\u2019s obligations under lease arrangements were recognised in the income statement in the year: \u2013 Interest expense of \u00a3133m (FY22: \u00a3133m) accrued on lease liabilities. \u2013 Variable lease payments of \u00a338m (FY22: \u00a324m) which are not dependent on an index or rate and which have not been included in the measurement of lease liabilities. Expenses relating to leases of low-value assets and short-term leases for which no right-of-use asset or lease liability has been recognised were not material. The total cash outflow for leases in the year was \u00a3860m (FY22: \u00a3792m). Our cash flow statement and normalised free cash flow reconciliation present \u00a3727m (FY22: \u00a3659m) of the cash outflow as relating to the principal element of lease liability payments, with the remaining balance of \u00a3133m (FY22: \u00a3133m) presented within interest paid. Note 29 presents a maturity analysis of the payments due over the remaining lease term for lease liabilities currently recognised on the balance sheet. This analysis only includes payments to be made over the reasonably certain lease term. Cash outflows are likely to exceed these amounts as payments will be made on optional periods that we do not currently consider to be reasonably certain, and in respect of leases entered into in future periods. Other information relating to leases At 31 March 2023 the group was committed to future minimum lease payments of \u00a3145m in respect of leases which have not yet commenced and for which no lease liability has been recognised (31 March 2022: \u00a339m). The following table analyses cash payments to be received across the remaining term of operating lease arrangements where BT is lessor: At 31 March 2023 To be recognised as revenue (note 5) \u00a3m To be recognised as other operating income (note 6) \u00a3m Total \u00a3m Less than one year 416 19 435 One to two years 131 15 146 Two to three years 46 15 61 Three to four years 13 14 27 Four to five years 10 13 23 More than five years \u2013 20 20 Total undiscounted lease payments 616 96 712 At 31 March 2022 Less than one year 446 20 466 One to two years 148 13 161 Two to three years 40 12 52 Three to four years 3 12 15 Four to five years 3 12 15 More than five years \u2013 24 24 Total undiscounted lease payments 640 93 733 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-523": { "value": "Significant accounting policies that apply to leases Identifying whether a lease exists At inception of a contract, we determine whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration. In making this assessment, we consider whether: \u2013 The contract involves the use of an identified asset, either explicitly or implicitly. The asset must be physically distinct or represent substantially all the capacity of a physically distinct asset. Assets that a supplier has a substantive right to substitute are not considered distinct. \u2013 The lessee (either the group, or the group\u2019s customers) has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and \u2013 The lessee has the right to direct the use of the asset, in other words, has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. Where practicable, and by class of underlying asset, we have elected to account for leases containing a lease component and one or more non-lease components as a single lease component. Where this election has been taken, it has been applied to the entire asset. Lessee accounting We recognise a lease liability and right-of-use asset at the commencement of the lease. Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using the group\u2019s incremental borrowing rate. The lease term is the non-cancellable period of the lease adjusted for the impact of any extension options that we are reasonably certain that the lessee will exercise, or termination options that we are reasonably certain that the lessee will not exercise. The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to obtain an asset of similar value. Lease payments include: \u2013 fixed payments \u2013 variable lease payments that depend on an index or rate \u2013 amounts expected to be paid under residual value guarantees \u2013 the exercise price of any purchase options that we are reasonably certain to exercise \u2013 payments due over optional renewal periods where we are reasonably certain to renew \u2013 penalties for early termination of the lease where we are reasonably certain to terminate early Lease liabilities are subsequently measured at amortised cost using the effective interest method. They are remeasured if there is a change in future lease payments, including changes in the index or rate used to determine those payments, or the amount we expect to be payable under a residual value guarantee. We also remeasure lease liabilities where the lease term changes. This occurs when the non-cancellable period of the lease changes, or on occurrence of a significant event or change in circumstances within the control of the lessee and which changes our initial assessment in regard to whether the lessee is reasonably certain to exercise extension options or not to exercise termination options. Where the lease term changes we remeasure the lease liability using the group\u2019s incremental borrowing rate at the date of reassessment. Where a significant event or change in circumstances does not occur, the lease term remains unchanged and the carrying amounts of the lease liability and associated right-of-use asset will decline over time. Right-of-use assets are initially measured at the initial amount of the corresponding lease liabilities, adjusted for any prepaid lease payments, plus any initial direct costs incurred and an estimate of any decommissioning costs that have been recognised as provisions, less any lease incentives received. They are subsequently depreciated using the straight-line method to the earlier of the end of the useful life of the asset or the end of the lease term. Right-of-use assets are tested for impairment following the policy set out in note 14 and are adjusted for any remeasurement of lease liabilities. We have elected not to recognise lease liabilities and right-of-use assets for short-term leases that have a lease term of 12 months or less, and leases of low-value assets with a purchase price under \u00a35,000. We recognise payments for these items as an expense on a straight-line basis over the lease term. Any variable lease payments that do not depend on an index or rate, such as usage-based payments, are recognised as an expense in the period to which the variability relates. Lessor accounting At inception or on modification of a contract that contains a lease component, we allocate the consideration in the contract to each lease component on the basis of their relative standalone prices. When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, we make an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, we consider certain indicators such as whether the lease is for the major part of the economic life of the asset. When we are an intermediate lessor, we account for our interests in the headlease and the sublease separately. We assess the lease classification of a sublease with reference to the right-of-use asset arising from the headlease, not with reference to the underlying asset. If a headlease is a short-term lease to which we apply the exemption described above, then we classify the sublease as an operating lease. If an arrangement contains lease and non-lease components, then we apply IFRS 15 to allocate the consideration in the contract. We apply the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. We further regularly review estimated unguaranteed residual values used in calculating the gross investment in the lease. We recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of \u2018other revenue\u2019. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-555": { "value": "16. Programme rights Significant accounting policies that apply to programme rights Programme rights are recognised on the balance sheet from the point at which the legally enforceable licence period begins. They are accounted for as inventory and held at the lower of cost and net realisable value. They are initially recognised at cost and are consumed from the point at which they are available for use, on a straight-line basis over the programming period, or the remaining licence term, as appropriate, which is generally 12 months. Additions reflect TV programme rights for which the legally enforceable licence period has started during the year. Rights for which the licence period has not started are disclosed as contractual commitments in note 32. Payments made to receive commissioned or acquired programming in advance of the legal right to broadcast the programmes are classified as prepayments (see note 17). No contractual commitments or prepayments exist in respect of programme rights at 31 March 2023 following the BT Sport divestment during the year. Programme rights were disposed in year as part of the BT Sport divestment, see note 23 for further details. Total \u00a3m At 1 April 2021 328 Additions 861 Release (879) At 1 April 2022 310 Additions 676 Release (354) Disposal (632) At 31 March 2023 \u2013 ", "dimensions": { "concept": "btgroupplc:DisclosureOfProgrammeRights", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-524": { "value": "Significant accounting policies that apply to programme rights Programme rights are recognised on the balance sheet from the point at which the legally enforceable licence period begins. They are accounted for as inventory and held at the lower of cost and net realisable value. They are initially recognised at cost and are consumed from the point at which they are available for use, on a straight-line basis over the programming period, or the remaining licence term, as appropriate, which is generally 12 months. Additions reflect TV programme rights for which the legally enforceable licence period has started during the year. Rights for which the licence period has not started are disclosed as contractual commitments in note 32. Payments made to receive commissioned or acquired programming in advance of the legal right to broadcast the programmes are classified as prepayments (see note 17). No contractual commitments or prepayments exist in respect of programme rights at 31 March 2023 following the BT Sport divestment during the year. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForProgrammeRights", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-556": { "value": "17. Trade and other receivables Significant accounting policies that apply to trade and other receivables Trade receivables are recognised where the right to receive payment from customers is conditional only on the passage of time. We initially recognise trade and other receivables at fair value, which is usually the original invoiced amount. They are subsequently carried at amortised cost using the effective interest method. The carrying amount of these balances approximates to fair value due to the short maturity of amounts receivable. We provide services to consumer and business customers, mainly on credit terms. We know that certain debts due to us will not be paid through the default of a small number of our customers. Because of this, we recognise an allowance for doubtful debts on initial recognition of receivables, which is deducted from the gross carrying amount of the receivable. The allowance is calculated by reference to credit losses expected to be incurred over the lifetime of the receivable. In estimating a loss allowance we consider historical experience and informed credit assessment alongside other factors such as the current state of the economy and particular industry issues. We consider reasonable and supportable information that is relevant and available without undue cost or effort. Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss experiences for the relevant aged category as well as forward-looking information and general economic conditions. Allowances are calculated by individual CFUs in order to reflect the specific nature of the customers relevant to that CFU. The group utilises factoring arrangements for selected trade receivables. Trade receivables that are subject to debt factoring arrangements are derecognised if they meet the conditions for derecognition detailed in IFRS 9 \u2018Financial instruments\u2019. Contingent assets such as any insurance recoveries which we expect to recoup, have not been recognised in the financial statements as these are only recognised within trade and other receivables when their receipt is virtually certain. At 31 March 2023 \u00a3m 2022 \u00a3m Current Trade receivables 1,395 1,339 Prepayments 545 523 Accrued income 158 150 Deferred contract costs 369 336 Finance lease receivables a 29 3 Amounts due from joint ventures 268 \u2013 Other assets a,b 296 273 3,060 2,624 Non-current Deferred contract costs 211 226 Finance lease receivables a 98 90 Other assets a,b 194 21 503 337 a In previous years finance lease receivables were included within other receivables but are now presented separately. FY22 comparatives have been re-presented for comparability. b Other assets comprise prepayments and \u00a370m (FY22: \u00a3nil) of deferred cash consideration relating to the disposal of BT Sport, see note 23. Amounts due from joint ventures relates to a sterling Revolving Credit Facility (RCF) provided to the Sports JV formed during the year, see note 23. The RCF is in place to provide short-term liquidity required by the Sports JV to fund working capital and commitments to sports rights holders, up to a maximum of \u00a3300m (expected to decrease to \u00a3200m during FY24). Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with group\u2019s external short-term borrowings, and is held as a financial asset at amortised cost. The expected loss provision is immaterial. Trade receivables are stated after deducting allowances for doubtful debts, as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 223 378 Expense 84 35 Utilised (142) (189) Exchange differences 3 (1) At 31 March 168 223 Included within the movements above are certain items which have been classified as a specific item (see note 9). In FY23, \u00a3nil of expected credit loss provisions recognised as a specific item were released (FY22: \u00a319m release) reflecting lower than expected credit losses. The expected credit loss allowance for trade receivables was determined as follows: Past due and not specifically impaired At 31 March Not past due \u00a3m Trade receivables specifically impaired net of provision \u00a3m Between 0 and 3 months \u00a3m Between 3 and 6 months \u00a3m Between 6 and 12 months \u00a3m Over 12 months \u00a3m Total \u00a3m 2023 Expected loss rate % 1% 75% 10% 46% 41% 52% 11% Gross carrying amount 1,030 20 265 48 59 141 1,563 Loss allowance (8) (15) (26) (22) (24) (73) (168) Net carrying amount 1,022 5 239 26 35 68 1,395 2022 Expected loss rate % 1% 84% 12% 24% 33% 69% 14% Gross carrying amount 946 20 280 63 70 183 1,562 Loss allowance (8) (17) (34) (15) (23) (126) (223) Net carrying amount 938 3 246 48 47 57 1,339 Trade receivables not past due and accrued income are analysed below by CFU. Trade receivables not past due Accrued income At 31 March 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Consumer 309 324 82 76 Enterprise 180 168 2 \u2013 Global 533 446 \u2013 \u2013 Openreach \u2013 \u2013 70 71 Other \u2013 \u2013 4 3 Total 1,022 938 158 150 Given the broad and varied nature of our customer base, the analysis of trade receivables not past due and accrued income by CFU is considered the most appropriate disclosure of credit concentrations. Deferred contract costs Significant accounting policies that apply to deferred contract costs We capitalise certain costs associated with the acquisition and fulfilment of contracts with customers and amortise them over the period that we transfer the associated services. Connection costs are deferred as contract fulfilment costs because they allow satisfaction of the associated connection performance obligation and are considered recoverable. Sales commissions and other third party contract acquisition costs are capitalised as costs to acquire a contract unless the associated contract term is less than 12 months, in which case they are expensed as incurred. Capitalised costs are amortised over the minimum contract term. A portfolio approach is used to determine contract term. Where the initial set-up, transition and transformation phases of long-term contractual arrangements represent distinct performance obligations, costs in delivering these services are expensed as incurred. Where these services are not distinct performance obligations, we capitalise eligible costs as a cost of fulfilling the related service. Capitalised costs are amortised on a straight-line basis over the remaining contract term, unless the pattern of service delivery indicates a more appropriate profile. To be eligible for capitalisation, costs must be directly attributable to specific contracts, relate to future activity, and generate future economic benefits. Capitalised costs are regularly assessed for recoverability. The following table shows the movement on deferred costs: Deferred connection costs \u00a3m Deferred contract acquisition costs \u2013 commissions \u00a3m Deferred contract acquisition costs \u2013 dealer incentives \u00a3m Transition and transformation \u00a3m Total \u00a3m At 1 April 2021 32 94 348 85 559 Additions 17 98 291 50 456 Amortisation (14) (78) (308) (33) (433) Impairment (1) (5) (10) (11) (27) Other (10) 15 3 (1) 7 At 31 March 2022 24 124 324 90 562 Additions 15 100 285 70 470 Amortisation (15) (94) (276) (67) (452) Impairment \u2013 (1) (1) \u2013 (2) Other (2) 2 (2) 4 2 At 31 March 2023 22 131 330 97 580 ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-525": { "value": "Significant accounting policies that apply to trade and other receivables Trade receivables are recognised where the right to receive payment from customers is conditional only on the passage of time. We initially recognise trade and other receivables at fair value, which is usually the original invoiced amount. They are subsequently carried at amortised cost using the effective interest method. The carrying amount of these balances approximates to fair value due to the short maturity of amounts receivable. We provide services to consumer and business customers, mainly on credit terms. We know that certain debts due to us will not be paid through the default of a small number of our customers. Because of this, we recognise an allowance for doubtful debts on initial recognition of receivables, which is deducted from the gross carrying amount of the receivable. The allowance is calculated by reference to credit losses expected to be incurred over the lifetime of the receivable. In estimating a loss allowance we consider historical experience and informed credit assessment alongside other factors such as the current state of the economy and particular industry issues. We consider reasonable and supportable information that is relevant and available without undue cost or effort. Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss experiences for the relevant aged category as well as forward-looking information and general economic conditions. Allowances are calculated by individual CFUs in order to reflect the specific nature of the customers relevant to that CFU. The group utilises factoring arrangements for selected trade receivables. Trade receivables that are subject to debt factoring arrangements are derecognised if they meet the conditions for derecognition detailed in IFRS 9 \u2018Financial instruments\u2019. Contingent assets such as any insurance recoveries which we expect to recoup, have not been recognised in the financial statements as these are only recognised within trade and other receivables when their receipt is virtually certain. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-526": { "value": "Significant accounting policies that apply to deferred contract costs We capitalise certain costs associated with the acquisition and fulfilment of contracts with customers and amortise them over the period that we transfer the associated services. Connection costs are deferred as contract fulfilment costs because they allow satisfaction of the associated connection performance obligation and are considered recoverable. Sales commissions and other third party contract acquisition costs are capitalised as costs to acquire a contract unless the associated contract term is less than 12 months, in which case they are expensed as incurred. Capitalised costs are amortised over the minimum contract term. A portfolio approach is used to determine contract term. Where the initial set-up, transition and transformation phases of long-term contractual arrangements represent distinct performance obligations, costs in delivering these services are expensed as incurred. Where these services are not distinct performance obligations, we capitalise eligible costs as a cost of fulfilling the related service. Capitalised costs are amortised on a straight-line basis over the remaining contract term, unless the pattern of service delivery indicates a more appropriate profile. To be eligible for capitalisation, costs must be directly attributable to specific contracts, relate to future activity, and generate future economic benefits. Capitalised costs are regularly assessed for recoverability. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForDeferredContractCosts", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-557": { "value": "18. Trade and other payables Significant accounting policies that apply to trade and other payables We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently carry them at amortised cost using the effective interest method. We use a supply chain financing programme to extend payment terms with a limited number of suppliers to a more typical payment term. We also use a separate supply chain financing programme to allow suppliers to receive funding earlier than the invoice due date. We assess these arrangements against indicators to assess if debts which vendors have sold to the funder under the supplier financing schemes continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2023 the payables met the criteria of trade payables. Cash flows are presented in cash flows from operating activities. At 31 March 2023 \u00a3m 2022 \u00a3m Current Trade payables 4,196 4,143 Other taxation and social security 581 573 Minimum guarantee from BT Sport disposal a 195 \u2013 Accrued expenses 458 549 Deferred income b 532 345 Other payables c 602 532 6,564 6,142 Non-current Minimum guarantee from BT Sport disposal a 465 \u2013 Deferred income b 403 594 Other payables c 52 30 920 624 a See note 23. b Deferred income includes \u00a3258m (FY22: \u00a396m) current and \u00a3169m (FY22: \u00a3392m) non-current liabilities relating to Building Digital UK, for which grants received by the group may be subject to re-investment or repayment depending on the level of take-up. c During FY23 we reclassified \u00a3132m payables to provisions (note 19) following reassessment of the level of certainty over the timing and amount of any outflow of resources. Current trade and other payables at 31 March 2023 include: \u2013 \u00a3348m (31 March 2022: \u00a389m) of trade payables that have been factored by suppliers in a supply chain financing programme. These programmes are used with a limited number of suppliers with short payment terms to extend them to a more typical payment term. \u2013 \u00a3169m (31 March 2022: \u00a393m) of trade payables in a separate supply chain financing programme that allows suppliers the opportunity to receive funding earlier than the invoice due date. Financial institutions are used to support this programme but we continue to recognise the underlying payables as we continue to cash settle the supplier invoices in accordance with their terms. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-527": { "value": "18. Trade and other payables Significant accounting policies that apply to trade and other payables We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently carry them at amortised cost using the effective interest method. We use a supply chain financing programme to extend payment terms with a limited number of suppliers to a more typical payment term. We also use a separate supply chain financing programme to allow suppliers to receive funding earlier than the invoice due date. We assess these arrangements against indicators to assess if debts which vendors have sold to the funder under the supplier financing schemes continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2023 the payables met the criteria of trade payables. Cash flows are presented in cash flows from operating activities. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-576": { "value": "19. Provisions & contingent liabilities Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset retirement obligations, network assets, third party claims, litigation and regulatory risks. Contingent liabilities primarily arise from litigation and regulatory matters that are not sufficiently certain to meet the criteria for recognition as provisions. Significant accounting policies that apply to provisions & contingent liabilities We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an outflow that is not probable or which cannot be reliably estimated. Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate. Key accounting estimates and significant judgements made in accounting for provisions & contingent liabilities We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are not recognised as liabilities on our balance sheet. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes where this can be reasonably determined. In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution. Key accounting estimates applied in accounting for provisions and contingent liabilities Other provisions may involve the use of key (but not critical) estimates as explained below. When measuring provisions we reflect the impact of inflation as appropriate particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows. Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made estimates of the costs associated with the restoration of properties by reference to any relevant guidance such as rate cards. Cash outflows occur as and when properties are vacated and the obligations are settled. Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the site. The provision represents the group\u2019s best estimate of the costs to dismantle equipment and restore the sites. Obligations are settled as and when sites are vacated and the timing is largely influenced by the group\u2019s network strategy. Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical regulatory matters. The charge/credit for the year represents the outcome of management\u2019s re-assessment of the estimates and regulatory risks across a range of issues, including price and service issues. The prices at which certain services are charged are regulated and may be subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk we make key judgements, including in regard to interpreting Ofcom regulations and past and current claims. The precise outcome of each matter depends on whether it becomes an active issue, and the extent to which negotiation or regulatory and compliance decisions will result in financial settlement. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against the group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice received. Provisions recognised are inherently judgemental and could change over time as matters progress. Establishing contingent liabilities associated with litigation brought against the group may involve the use of key estimates and assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further information in relation to specific matters in the \u2018contingent liabilities\u2019 section below. Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties, with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle accident claims, and our in-house insurance teams review our exposure to other risks. Other provisions do not include any individually material provisions. For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual outcome of any settlement. Property a \u00a3m Network ARO a \u00a3m Regulatory \u00a3m Litigation \u00a3m Third party claims b \u00a3m Other c,d \u00a3m Total \u00a3m At 1 April 2021 138 158 96 109 91 123 715 Additions 17 25 14 7 6 22 91 Unwind of discount \u2013 1 \u2013 \u2013 \u2013 \u2013 1 Utilised (9) (3) (26) \u2013 (5) (11) (54) Released (2) \u2013 (18) (31) \u2013 (38) (89) Transfers (2) \u2013 (1) \u2013 \u2013 \u2013 (3) Exchange differences \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 At 31 March 2022 142 181 65 85 92 96 661 IAS 37 opening balance adjustment e \u2013 \u2013 \u2013 \u2013 \u2013 12 12 At 1 April 2022 142 181 65 85 92 108 673 Additions 43 \u2013 16 6 35 15 115 Unwind of discount 1 3 \u2013 \u2013 \u2013 \u2013 4 Utilised (8) (4) (1) (41) (30) (7) (91) Released (37) (87) (16) (9) (43) (42) (234) Transfers f \u2013 \u2013 4 \u2013 132 (11) 125 Exchange differences 1 \u2013 \u2013 3 1 1 6 At 31 March 2023 142 93 68 44 187 64 598 a Timing of expected cash flows associated with property and network ARO provisions varies depending on the exit dates of individual properties and sites. Provision releases during FY23 primarily relate to the remeasurement of provisions using increased discount rates that reflect an increase in risk-free rates. b Third party claims described as insurance in prior periods, relabelled to better reflect the nature of the underlying exposures. Within this balance \u00a377m held in respect of our gross exposure to latent disease claims from former colleagues and \u00a330m for motor vehicle claims, with no individually material items in the remaining balance. c Network share provisions were previously presented separately but are now presented within Other provisions due to their relative immateriality. FY22 comparatives have been restated for comparability. Network share provisions were \u00a35m at 31 March 2022 and \u00a35m at 31 March 2023. d Other provisions include contract loss provisions of \u00a38m (FY22: \u00a31m) relating to the anticipated total losses in respect of certain contracts. e Opening balance adjustment arising on adoption of the amendments to IAS 37, see note 1. f Transfers into third party claims in FY23 relate to the reclassification of balances previously presented in other payables (note 18) following reassessment of the level of certainty over the timing and amount of any outflow of resources. At 31 March 2023 \u00a3m 2022 \u00a3m Analysed as: Current 229 222 Non-current 369 439 598 661 Contingent liabilities and legal proceedings In the ordinary course of business, we are periodically notified of actual or threatened litigation, and regulatory and compliance matters and investigations. We have disclosed below a number of such matters including any matters where we believe a material adverse impact on the operations or financial condition of the group is possible and the likelihood of a material outflow of resources is more than remote. Where the outflow of resources is considered probable, and a reasonable estimate can be made of the amount of that obligation, a provision is recognised for these amounts and reflected in the table above. Where an outflow is not probable but is possible, or a reasonable estimate of the obligation cannot be made, a contingent liability exists. In respect of each of the claims below, the nature and progression of such proceedings and investigations can make it difficult to predict the impact they will have on the group. There are many reasons why we cannot make these assessments with certainty, including, among others, that they are in early stages, no damages or remedies have been specified, and/or the often slow pace of litigation. Class action claim In January 2021, law firm Mishcon de Reya applied to the Competition Appeal Tribunal to bring a proposed class action claim for damages they estimated at \u00a3608m (inclusive of compound interest) or \u00a3589m (inclusive of simple interest) on behalf of our landline customers alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline services. Ofcom considered this topic more than five years ago. At that time, Ofcom\u2019s final statement made no finding of excessive pricing or breach of competition law more generally. The claim seeks to hold against us the fact that we implemented a voluntary commitment to reduce prices for customers that have a BT landline only and not to increase those prices beyond inflation (CPI). At the reporting date we are not aware of any evidence to indicate that a present obligation exists such that any amount should be provided for. In September 2021 the Competition Appeal Tribunal certified the claim to proceed to a substantive trial on an opt-out basis (class members are automatically included in the claim unless they choose to opt-out). We appealed the opt-out nature of that decision and in May 2022 the Court of Appeal determined that the claim should proceed on an opt-out basis. A hearing window has been set for January \u2013 April 2024. BT intends to defend itself vigorously. Italian business Milan Public Prosecutor prosecutions: in February 2019 the Milan Public Prosecutor served BT Italia S.P.A. (BT Italia) with a notice (which named BT Italia, as well as various individuals) to record the Prosecutor\u2019s view that there is a basis for proceeding with its case against BT Italia for certain potential offences, namely the charge of having adopted, from 2011 to 2016, an inadequate management and control organisation model for the purposes of Articles 5 and 25 of Legislative Decree 231/2001. BT Italia disputes this and maintains in a defence brief filed in April 2019 that: (a) BT Italia did not gain any interest or benefit from the conduct in question; and (b) in any event, it had a sufficient organisational, management and audit model that was circumvented/overridden by individuals acting in their own self-interest. However, following a series of committal hearings in Autumn 2020, on 10 November 2020, the Italian court agreed (as is the normal process unless there are limitation or other fundamental issues with the claim) that BT Italia, and all but one of the individuals, should be committed to a full trial. The trial commenced on 26 January 2021 and is ongoing. On 23 April 2021, the Italian court allowed some parties to be joined to the criminal proceedings as civil parties (\u2018parte civile\u2019) \u2013 a procedural feature of the Italian criminal law system. These claims are directed at certain individual defendants (which include former BT/ BT Italia employees). Those parties have now successfully joined BT Italia as a respondent to their civil claims (\u2018responsabile civile\u2019) on the basis that it is vicariously responsible for the individuals\u2019 wrongdoing. If successful, the quantum of those claims is not anticipated to be material. Accounting misstatement claims: a law firm acting on behalf of a group of investors has made claims under s.90A of the Financial Services & Markets Act 2000, alleging that untrue or misleading statements were made in relation to the historical irregular accounting practices in BT\u2019s Italian business (which have been the subject of previous disclosures). No value is stated and the matter is in the very early stages. As mentioned in our earlier reports, the accounting issues in Italy have previously been the subject of class actions in the US that were dismissed by the US courts. Phones 4U Since 2015 the administrators of Phones 4U Limited have made allegations that EE and other mobile network operators colluded to procure Phones 4U\u2019s insolvency. Legal proceedings for an unquantified amount were issued in December 2018 by the administrators. The trial on the question of liability/breach ran from May to July 2022. The parties are now awaiting judgment, and the court has not yet indicated when it will be delivered. A second trial on quantum would be required in the event of a finding for the claimant. We continue to dispute these allegations vigorously. UK Competition and Markets Authority (CMA) investigation On 12 July 2022 the CMA opened a competition law investigation into BT and other companies involved in the purchase of freelance services for the production and broadcasting of sports content in the UK. The investigation is focused on BT Sport. In February 2023, the CMA extended its investigation to include suspected breaches of competition law in relation to the employment of staff supporting the production and broadcasting of sports content in the UK. The CMA has said no assumption should be made at this stage that competition law has been infringed. BT is cooperating with the investigation. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-558": { "value": "19. Provisions & contingent liabilities Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset retirement obligations, network assets, third party claims, litigation and regulatory risks. Contingent liabilities primarily arise from litigation and regulatory matters that are not sufficiently certain to meet the criteria for recognition as provisions. Significant accounting policies that apply to provisions & contingent liabilities We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an outflow that is not probable or which cannot be reliably estimated. Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate. Key accounting estimates and significant judgements made in accounting for provisions & contingent liabilities We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are not recognised as liabilities on our balance sheet. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes where this can be reasonably determined. In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution. Key accounting estimates applied in accounting for provisions and contingent liabilities Other provisions may involve the use of key (but not critical) estimates as explained below. When measuring provisions we reflect the impact of inflation as appropriate particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows. Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made estimates of the costs associated with the restoration of properties by reference to any relevant guidance such as rate cards. Cash outflows occur as and when properties are vacated and the obligations are settled. Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the site. The provision represents the group\u2019s best estimate of the costs to dismantle equipment and restore the sites. Obligations are settled as and when sites are vacated and the timing is largely influenced by the group\u2019s network strategy. Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical regulatory matters. The charge/credit for the year represents the outcome of management\u2019s re-assessment of the estimates and regulatory risks across a range of issues, including price and service issues. The prices at which certain services are charged are regulated and may be subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk we make key judgements, including in regard to interpreting Ofcom regulations and past and current claims. The precise outcome of each matter depends on whether it becomes an active issue, and the extent to which negotiation or regulatory and compliance decisions will result in financial settlement. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against the group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice received. Provisions recognised are inherently judgemental and could change over time as matters progress. Establishing contingent liabilities associated with litigation brought against the group may involve the use of key estimates and assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further information in relation to specific matters in the \u2018contingent liabilities\u2019 section below. Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties, with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle accident claims, and our in-house insurance teams review our exposure to other risks. Other provisions do not include any individually material provisions. For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual outcome of any settlement. Property a \u00a3m Network ARO a \u00a3m Regulatory \u00a3m Litigation \u00a3m Third party claims b \u00a3m Other c,d \u00a3m Total \u00a3m At 1 April 2021 138 158 96 109 91 123 715 Additions 17 25 14 7 6 22 91 Unwind of discount \u2013 1 \u2013 \u2013 \u2013 \u2013 1 Utilised (9) (3) (26) \u2013 (5) (11) (54) Released (2) \u2013 (18) (31) \u2013 (38) (89) Transfers (2) \u2013 (1) \u2013 \u2013 \u2013 (3) Exchange differences \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 At 31 March 2022 142 181 65 85 92 96 661 IAS 37 opening balance adjustment e \u2013 \u2013 \u2013 \u2013 \u2013 12 12 At 1 April 2022 142 181 65 85 92 108 673 Additions 43 \u2013 16 6 35 15 115 Unwind of discount 1 3 \u2013 \u2013 \u2013 \u2013 4 Utilised (8) (4) (1) (41) (30) (7) (91) Released (37) (87) (16) (9) (43) (42) (234) Transfers f \u2013 \u2013 4 \u2013 132 (11) 125 Exchange differences 1 \u2013 \u2013 3 1 1 6 At 31 March 2023 142 93 68 44 187 64 598 a Timing of expected cash flows associated with property and network ARO provisions varies depending on the exit dates of individual properties and sites. Provision releases during FY23 primarily relate to the remeasurement of provisions using increased discount rates that reflect an increase in risk-free rates. b Third party claims described as insurance in prior periods, relabelled to better reflect the nature of the underlying exposures. Within this balance \u00a377m held in respect of our gross exposure to latent disease claims from former colleagues and \u00a330m for motor vehicle claims, with no individually material items in the remaining balance. c Network share provisions were previously presented separately but are now presented within Other provisions due to their relative immateriality. FY22 comparatives have been restated for comparability. Network share provisions were \u00a35m at 31 March 2022 and \u00a35m at 31 March 2023. d Other provisions include contract loss provisions of \u00a38m (FY22: \u00a31m) relating to the anticipated total losses in respect of certain contracts. e Opening balance adjustment arising on adoption of the amendments to IAS 37, see note 1. f Transfers into third party claims in FY23 relate to the reclassification of balances previously presented in other payables (note 18) following reassessment of the level of certainty over the timing and amount of any outflow of resources. At 31 March 2023 \u00a3m 2022 \u00a3m Analysed as: Current 229 222 Non-current 369 439 598 661
Contingent liabilities and legal proceedings
In the ordinary course of business, we are periodically notified of actual or threatened litigation, and regulatory and compliance matters
and investigations. We have disclosed below a number of such matters including any matters where we believe a material adverse impact
on the operations or financial condition of the group is possible and the likelihood of a material outflow of resources is more than remote.
Where the outflow of resources is considered probable, and a reasonable estimate can be made of the amount of that obligation,
a provision is recognised for these amounts and reflected in the table above. Where an outflow is not probable but is possible, or a
reasonable estimate of the obligation cannot be made, a contingent liability exists.
In respect of each of the claims below, the nature and progression of such proceedings and investigations can make it difficult to predict
the impact they will have on the group. There are many reasons why we cannot make these assessments with certainty, including, among
others, that they are in early stages, no damages or remedies have been specified, and/or the often slow pace of litigation.
Class action claim
In January 2021, law firm Mishcon de Reya applied to the Competition Appeal Tribunal to bring a proposed class action claim for damages
they estimated at \u00a3608m (inclusive of compound interest) or \u00a3589m (inclusive of simple interest) on behalf of our landline customers
alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline services. Ofcom
considered this topic more than five years ago. At that time, Ofcom\u2019s final statement made no finding of excessive pricing or breach of
competition law more generally. The claim seeks to hold against us the fact that we implemented a voluntary commitment to reduce
prices for customers that have a BT landline only and not to increase those prices beyond inflation (CPI). At the reporting date we are not
aware of any evidence to indicate that a present obligation exists such that any amount should be provided for. In September 2021 the
Competition Appeal Tribunal certified the claim to proceed to a substantive trial on an opt-out basis (class members are automatically
included in the claim unless they choose to opt-out). We appealed the opt-out nature of that decision and in May 2022 the Court of Appeal
determined that the claim should proceed on an opt-out basis. A hearing window has been set for January \u2013 April 2024. BT intends to
defend itself vigorously.
Italian business
Milan Public Prosecutor prosecutions: in February 2019 the Milan Public Prosecutor served BT Italia S.P.A. (BT Italia) with a notice (which
named BT Italia, as well as various individuals) to record the Prosecutor\u2019s view that there is a basis for proceeding with its case against
BT Italia for certain potential offences, namely the charge of having adopted, from 2011 to 2016, an inadequate management and control
organisation model for the purposes of Articles 5 and 25 of Legislative Decree 231/2001. BT Italia disputes this and maintains in a defence
brief filed in April 2019 that: (a) BT Italia did not gain any interest or benefit from the conduct in question; and (b) in any event, it had a
sufficient organisational, management and audit model that was circumvented/overridden by individuals acting in their own self-interest.
However, following a series of committal hearings in Autumn 2020, on 10 November 2020, the Italian court agreed (as is the normal
process unless there are limitation or other fundamental issues with the claim) that BT Italia, and all but one of the individuals, should be
committed to a full trial. The trial commenced on 26 January 2021 and is ongoing. On 23 April 2021, the Italian court allowed some parties
to be joined to the criminal proceedings as civil parties (\u2018parte civile\u2019) \u2013 a procedural feature of the Italian criminal law system. These
claims are directed at certain individual defendants (which include former BT/ BT Italia employees). Those parties have now successfully
joined BT Italia as a respondent to their civil claims (\u2018responsabile civile\u2019) on the basis that it is vicariously responsible for the individuals\u2019
wrongdoing. If successful, the quantum of those claims is not anticipated to be material.
Accounting misstatement claims: a law firm acting on behalf of a group of investors has made claims under s.90A of the Financial Services
& Markets Act 2000, alleging that untrue or misleading statements were made in relation to the historical irregular accounting practices
in BT\u2019s Italian business (which have been the subject of previous disclosures). No value is stated and the matter is in the very early stages.
As mentioned in our earlier reports, the accounting issues in Italy have previously been the subject of class actions in the US that were
dismissed by the US courts.
Phones 4U
Since 2015 the administrators of Phones 4U Limited have made allegations that EE and other mobile network operators colluded to
procure Phones 4U\u2019s insolvency. Legal proceedings for an unquantified amount were issued in December 2018 by the administrators.
The trial on the question of liability/breach ran from May to July 2022. The parties are now awaiting judgment, and the court has not yet
indicated when it will be delivered. A second trial on quantum would be required in the event of a finding for the claimant. We continue
to dispute these allegations vigorously.
UK Competition and Markets Authority (CMA) investigation
On 12 July 2022 the CMA opened a competition law investigation into BT and other companies involved in the purchase of freelance
services for the production and broadcasting of sports content in the UK. The investigation is focused on BT Sport. In February 2023, the
CMA extended its investigation to include suspected breaches of competition law in relation to the employment of staff supporting the
production and broadcasting of sports content in the UK. The CMA has said no assumption should be made at this stage that competition
law has been infringed. BT is cooperating with the investigation.
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Significant accounting policies that apply to provisions & contingent liabilities
We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation
with an outflow that is not probable or which cannot be reliably estimated.
Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where
appropriate.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-580": { "value": "Significant accounting policies that apply to provisions & contingent liabilities We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an outflow that is not probable or which cannot be reliably estimated. Provisions are determined by discounting the expected future cash flows at a nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-559": { "value": "
20. Retirement benefit plans
Background to BT\u2019s pension plans
The group has both Defined Benefit and Defined Contribution retirement benefit plans. The group\u2019s main plans are in the UK:
\u2013 The BT Pension Scheme (BTPS) is the largest UK Defined Benefit plan. It was closed to future benefit accrual in 2018 for the majority
of members, and has 62,000 deferred members and 208,000 pensioners. All BTPS members receive pensions benefits at retirement
based on salary and years of service, and some members also receive a lump sum payment at retirement. Increases for the majority of
benefits are linked to either the Retail Price Index (RPI) or the Consumer Price Index (CPI). The scenarios on page 196 illustrate how
sensitive the BTPS liabilities are to inflation expectations. The BTPS constitutes 97% of BT Group\u2019s IAS 19 liability.
\u2013 The EE Pension Scheme (EEPS) has a Defined Benefit section that was closed to future benefit accrual in 2014 and a Defined
Contribution section. The Defined Benefit section constitutes 2% of BT Group\u2019s IAS 19 liability.
\u2013 The BT Retirement Saving Scheme (BTRSS) is a Defined Contribution, contract-based, plan operated by Standard Life which new
UK employees join. There are around 65,000 employees building benefits in the BTRSS.
The group also has retirement arrangements around the world in line with local markets and culture.
Types of retirement benefit plans
Defined benefit (\u201cDB\u201d) plans
DB plan benefits are determined by the plan rules, typically dependent on factors such as age, years of service and pensionable
pay, but not on the value of actual contributions made by the company and members. The group is exposed to investment and other
experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from regular
contributions, expected investment income and assets held.
The net defined benefit liability, or deficit, is the present value of all expected future benefit cash flows to be paid by each plan,
calculated using the projected unit credit method by professionally qualified actuaries (also known as the Defined Benefit Obligation
(DBO) or liabilities) less the fair value of the plan assets.
Defined contribution (\u201cDC\u201d) plans
DC plan benefits are linked to the value of each member\u2019s fund, which is based on contributions paid and the performance of each
individual\u2019s chosen investments. The group has no exposure to investment and other experience risks.
Amounts in the financial statements
Group income statement
The expense arising from the group\u2019s retirement benefit arrangements recognised in the group income statement is shown below.
Year ended 31 March
2023
\u00a3m
2022
\u00a3m
Recognised in the income statement before specific items (note 6)
\u2013 Service cost:
\u2013 DB plans 17 20
\u2013 DC plans 537 525
\u2013 Past service cost/(credit) (2) (1)
\u2013 Administration expenses and PPF levy 38 47
Subtotal 590 591
Recognised in the income statement as specific items (note 9)
\u2013 Costs to close BTPS and provide transition payments
a
for affected employees 13 14
\u2013 Interest on pensions deficit 18 93
Subtotal 31 107
Total recognised in the income statement 621 698
a All employees impacted by the closure of the BTPS were eligible for transition payments from the date of closure into their BTRSS pot for a period linked to the employee\u2019s age.
Group balance sheet
The net defined benefit liability in respect of defined benefit plans reported in the group balance sheet are set out below. EEPS is in a surplus
position in FY23 (FY22: deficit position) so assets and liabilities are presented within non-current assets (FY22: non-current liabilities).
2023 2022
At 31 March
Assets
\u00a3m
Liabilities
\u00a3m
Deficit
a
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Deficit
a
\u00a3m
Recognised in non-current liabilities
BTPS 38,673 (41,575) (2,902) 53,465 (54,309) (844)
EEPS n/a n/a n/a 1,004 (1,017) (13)
Unfunded plans \u2013 (92) (92) \u2013 (115) (115)
Other funded plans 65 (210) (145) 468 (639) (171)
Asset ceiling
a
\u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Total 38,738 (41,877) (3,139) 54,937 (56,080) (1,143)
Recognised in non-current assets
EEPS 749 (713) 36 \u2013 \u2013 \u2013
Funded plans 321 (305) 16 \u2013 \u2013 \u2013
Asset ceiling
a
\u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Total 1,070 (1, 018) 52 \u2013 \u2013 \u2013
a In the context of IFRIC 14, BT is not required to limit any pension surplus or recognise additional pensions liabilities in individual plans as economic benefits are available in the
form of either future refunds or reductions to future contributions. In particular, a refund of surplus is available following the gradual settlement of the liabilities over time when
there are no members remaining in the BTPS or EEPS.
The table below shows the group\u2019s defined benefit liability net of tax.
At 31 March
2023
\u00a3m
2022
\u00a3m
Balance sheet position (net of tax)
Surplus/(deficit) (3,087) (1,143)
Deferred tax asset (note 10) 618 190
Total (net of tax) (2,469) (953)
Movements in defined benefit plan assets and liabilities
The table below shows the movements in the defined benefit plan assets and liabilities and shows where they are reflected in the
financial statements.
Assets
\u00a3m
Liabilities
\u00a3m
Deficit
\u00a3m
At 31 March 2021 54,612 (59,708) (5,096)
Service cost (including administration expenses and PPF levy) (47) (20) (67)
Past service credit \u2013 1 1
Interest on net pension deficit 1,095 (1,188) (93)
Included in the group income statement (159)
Return on plan assets above the amount included in the group income statement 780 \u2013 780
Actuarial gain arising from changes in financial assumptions \u2013 2,932 2,932
Actuarial gain arising from changes in demographic assumptions \u2013 804 804
Actuarial (loss) arising from experience adjustments
a
\u2013 (1,651) (1,651)
Included in the group statement of comprehensive income 2,865
Regular contributions by employer 114 \u2013 114
Deficit contributions by employer 1,121 \u2013 1,121
Included in the group cash flow statement 1,235
Contributions by employees 1 (1) \u2013
Benefits paid (2,748) 2,748 \u2013
Other (e.g. foreign exchange) 9 3 12
Other movements 12
At 31 March 2022 54,937 (56,080) (1,14 3)
Service cost (including administration expenses and PPF levy) (38) (17) (55)
Past service credit \u2013 2 2
Interest on net pension deficit 1,480 (1,498) (18)
Included in the group income statement (71)
Return on plan assets below the amount included in the group income statement (14, 911) \u2013 (14 , 911)
Actuarial gain arising from changes in financial assumptions \u2013 12,279 12,279
Actuarial gain arising from changes in demographic assumptions \u2013 891 891
Actuarial (loss) arising from experience adjustments
a
\u2013 (1,135) (1,135)
Included in the group statement of comprehensive income (2,876)
Regular contributions by employer 22 \u2013 22
Deficit contributions by employer 994 \u2013 994
Included in the group cash flow statement 1,016
Contributions by employees 1 (1) \u2013
Benefits paid (2,686) 2,686 \u2013
Other (e.g. foreign exchange) 9 (22) (13)
Other movements (13)
At 31 March 2023 39,808 (42 ,895) (3,087)
a Primarily reflects the impact on the liabilities of actual inflation being higher than assumed at the prior reporting date. There has been a broadly equivalent benefit to inflation-
linked assets from higher inflation.
How is the BTPS governed and managed?
BT Pension Scheme Trustees Limited (the Trustee) has been appointed by BT as an independent trustee to administer and manage the
BTPS on behalf of the members in accordance with the terms of the BTPS Trust Deed and Rules and relevant legislation (principally the
pensions acts of 1993, 1995, 2004 and 2021). The Trustee\u2019s key powers include setting the investment strategy of BTPS (after consultation
with BT) and agreeing with BT the actuarial assumptions to be used when assessing the BTPS funding position and the resulting
contributions that will be paid.
There are nine Trustee directors, all of whom are appointed by BT, as illustrated below. Trustee directors are usually appointed for a three-
year term but are then eligible for re-appointment.
Chairman of the Trustee directors
Appointed by BT after consultation
with, and with the agreement of,
the relevant trade unions.
Employer nominated Trustee directors
Appointed by BT. Two normally hold
senior positions within the group and
two normally hold (or have held) senior
positions in commerce or industry.
Member nominated Trustee directors
Appointed by BT based on
nominations by trade unions.
BTPS IAS 19 assets Critical accounting estimates and significant judgements made when valuing the BTPS assets Under IAS 19, plan assets are measured at fair value at the balance sheet date and include quoted and unquoted investments. Valuation of main quoted investments \u2013 Equities listed on recognised stock exchanges are valued at closing bid prices. \u2013 Bonds that are regularly traded are valued using broker quotes. \u2013 Exchange traded derivative contracts are valued based on closing bid prices Valuation of main unquoted investments A portion of unquoted investments are valued based on inputs that are not directly observable, which require more judgement. The assumptions used in valuing unquoted investments are affected by market conditions. \u2013 Equities are valued using the International Private Equity and Venture Capital (IPEVC) guidelines where the most significant assumptions are the discount rate and earnings assumptions. \u2013 Property investments are valued on the basis of open market value by an independent valuer using RICS guidelines. The significant assumptions used in the valuation are rental yields and occupancy rates. \u2013 Bonds, including those issued by BT, that are not regularly traded are valued by an independent valuer using pricing models making assumptions for credit risk, market risk and market yield curves. \u2013 Holdings in investment funds are typically valued at the Net Asset Value provided by the fund administrator or investment manager. The significant assumption used in the valuation is the Net Asset Value. \u2013 Infrastructure investments are valued by an independent valuer using a model-based valuation such as a discounted cash flow approach, or at the price of recent market transactions if they represent fair value. Where a discounted cash flow model is used, the significant assumptions used in the valuation are the discount rate and the expected cash flows. \u2013 Over the counter derivatives are valued by an independent valuer using cash flows discounted at market rates. The significant assumptions used in the valuation are the yield curves and cost of carry. \u2013 The longevity insurance contract is measured by discounting the projected cash flows payable under the contract (projected by an actuary, consistent with the terms of the contract). The significant assumptions used to value the asset are the discount rate (including adjustments to the risk free rate) and the mortality assumptions. \u00a36.4bn of unquoted investments that are formally valued periodically by the investment manager have a latest valuation that precedes the balance sheet date. These assets consist of: \u00a33.7bn non-core credit; \u00a31.2bn mature infrastructure; \u00a31.1bn private equity; \u00a30.2bn secure income; and \u00a30.2bn overseas property. These valuations have been adjusted for cash movements between the previous valuation date and 31 March 2023. The valuation approach and inputs for these investments would only be approximately updated where there were indications of significant movements, for example implied by market indicators. No such adjustment was required at 31 March 2023. Asset-backed funding arrangement The asset-backed funding arrangement, issued to the BTPS in May 2021, has a fair value of \u00a31.3bn at 31 March 2023 (2022: \u00a31.4bn) calculated as the present value of the future stream of payments, allowing for the probability of the BTPS becoming fully funded and therefore the payments to the BTPS ending early. It is not recognised as a pension asset when measuring the group\u2019s IAS 19 net defined benefit liability as it is a non-transferable financial instrument issued by the group. How are the BTPS assets invested? The Trustee regularly reviews the allocation of assets between different investment classes, taking into account current market conditions and trends. The allocations reflect the Trustee\u2019s views on a range of areas, including: i) the balance between seeking returns and incurring risk; ii) the extent to which the assets should be allocated to match movements in the liabilities due to changes in interest rates, inflation and/or longevity (i.e. liability-driven investments, or LDI); iii) the extent to which the assets should provide cash flows to meet expected payments to beneficiaries; and iv) liquidity needed to meet benefit payments and collateral requirements for derivatives contracts. Financial derivatives (e.g. swaps) are used to reduce the mismatch between movements in the liabilities and the assets from changes in interest rates, inflation, and exchange rates. This provides greater stability in the funding position, and therefore the deficit contributions that may be required from BT. The sensitivity chart on page 198 shows how the use of some of these derivatives adjusts outcomes for the BTPS. While the use of derivatives reduces funding risk, it increases the Scheme\u2019s liquidity requirements which is factored into the overall investment strategy. Following the impact of the September 2022 mini-budget on derivatives, the Bank of England and the Pensions Regulator issued guidance on the minimum level of collateral pension schemes should hold. At 31 March 2023, the BTPS held more collateral than these minimum levels. The table below analyses the fair value of the BTPS assets by asset category, subdivided by valuations based on a quoted market price in an active market, and those that are not (such as investment funds). 2023 2022 At 31 March Total assets a \u00a3bn of which quoted \u00a3bn Total assets a \u00a3bn of which quoted \u00a3bn Growth Equities UK 0.1 \u2013 0.3 0.2 Overseas developed 1.7 0.6 6.5 5.6 Emerging markets \u2013 \u2013 1.0 0.9 Private Equity 1.1 \u2013 1.2 \u2013 Property UK 2.6 \u2013 3.4 \u2013 Overseas 0.8 \u2013 0.8 \u2013 Other growth assets Absolute Return b 0.9 \u2013 1.0 \u2013 Non Core Credit c 4.2 0.4 4.7 1.4 Mature Infrastructure 1.2 \u2013 1.4 \u2013 Liability matching Government bonds d UK 13.2 13.1 15.1 15.1 Investment grade credit Global 10.4 8.2 13.9 11.7 Secure income assets e 3.7 \u2013 2.6 \u2013 Cash, derivatives and other Cash balances 3.0 \u2013 2.9 \u2013 Financial derivative contracts (4.2) \u2013 0.6 \u2013 Longevity insurance contract f (0.8) \u2013 (1.0) \u2013 Other g 0.8 \u2013 (0.9) \u2013 Total 38.7 22.3 53.5 34.9 a At 31 March 2023, the BTPS held nil (FY22: nil) equity issued by the group and \u00a31,550m (FY22: \u00a31,930m) of bonds issued by the group. b This allocation seeks to generate a positive return in all market conditions. c This allocation includes a range of credit investments, including emerging market, sub-investment grade and unrated credit. The allocation seeks to exploit investment opportunities within credit markets using the expertise of a range of specialist investment managers. d Around 72% (2022: 83%) of these are index-linked gilts with the remainder in conventional gilts. e This allocation includes property, infrastructure and credit investments and provides the BTPS contractual income and expected return in excess of corporate bonds. f The value reflects experience to date on the contract from higher than expected deaths; This partly offset a corresponding reduction in BTPS\u2019s liabilities over the same period. g Other balances comprise net amounts receivable / (payable) by the BTPS, including investment balances due to and from brokers. BTPS IAS 19 Liabilities Critical accounting estimates and significant judgements made when valuing our pension liabilities The measurement of the service cost and the liabilities involves judgement about uncertain events including the life expectancy of members, price inflation and the discount rate used to calculate the net present value of the future pension payments. We use estimates for all of these uncertain events. Our assumptions reflect historical experience, market expectations (where relevant), actuarial advice and our judgement regarding future expectations at the balance sheet date. What are the forecast benefits payable from the BTPS? There are c 270,000 members, and their dependents, who will be receiving benefits from the BTPS for the remainder of their lives. Members currently receiving pension benefits make up around 69% of the liability and 77% of the membership. Forecasting the benefit payments involves judgement about uncertain events. While assumptions are made for these events, actual benefit payments in a given year may be higher or lower than the assumption, for example if members retire sooner or later than assumed. The liabilities are the present value of the future expected benefit payments. The chart below illustrates how the forecast benefits payable from the BTPS, and IAS 19 liabilities, projected using the IAS 19 assumptions evolve over time. While benefit payments are expected to increase in the early years, as non-pensioners retire, the value of the liabilities is expected to reduce. Forecast benefits payable by BTPS at 31 March 2023 (unaudited) 3.0 45 2.5 2.0 30 1.5 1.0 15 0.5 0 0 2023 2043 2063 2083 Forecast benefit payments (left axis) IAS 19 Defined Benefit Obligations (right axis) The estimated duration of the BTPS liabilities, which is an indicator of the weighted average term of the discounted future payments, is 12 years (2022: 14 years) using the IAS 19 assumptions. The duration is sensitive to the assumptions and has reduced following the increase in bond yields, and therefore discount rate, over the year. What are the most significant assumptions, and how have they been set? The most significant financial assumptions used to calculate the IAS 19 liabilities for the BTPS are the discount rate and inflation. The most significant demographic assumption used is how life expectancy will evolve over time which is illustrated as forecast life expectancies for members aged 60 in the table below. At 31 March 2023 2022 Discount rate 4.85% 2.75% Inflation \u2013 average increase in RPI 3.35% 3.70% Inflation \u2013 average increase in CPI 2.85% 3.25% Life expectancy \u2013 male in lower pension bracket 24.7 years 25.2 years Life expectancy \u2013 male in higher pension bracket 26.9 years 27.3 years Life expectancy \u2013 female 27.5 years 27.8 years Average additional life expectancy for a male member retiring at age 60 in 10 years\u2019 time 0.4 years 0.4 years While the financial assumptions are typically scheme specific, the average financial assumptions weighted by liabilities across all schemes Benefit payments are within 0.05% of the figures shown in the table above. The table below summarises how these assumptions have been set, including key changes over the year. Detail Discount The discount rate assumption is calculated by applying the projected BTPS benefit cash flows to a corporate bond yield rate curve constructed by our external actuary based on the yield on AA-rated \u00a3-denominated corporate bonds at the balance sheet date. In setting the yield curve, judgement is required on the selection of appropriate bonds to be included in the universe and the approach used to then derive the yield curve. The increase in the discount rate over the year reflects changes in the market yield of corporate bonds. RPI and CPI RPI inflation expectations are calculated by applying the projected BTPS benefit cash flows to an inflation curve derived inflation from market yields on UK government bonds, and making a deduction for an inflation risk premium (to reflect the extra premium paid by investors for inflation linked assets) of 0.2% pa before 2030 and 0.3% pa thereafter. CPI inflation expectations are set with reference to the RPI inflation assumption taking into account market data and independent estimates of the expected difference. Before 2030, CPI inflation is assumed to be 1.0% lower than RPI inflation (2022: 1.0%). RPI will be aligned with CPIH from 2030, and we assume a nil gap between CPI and CPIH inflation as historically these measures have been broadly comparable. Pension Benefits are assumed to increase in line with the RPI or CPI inflation assumptions. Under the BTPS rules, benefit increases increases prior to retirement are primarily linked to CPI capped at 5%, and the majority of benefits increase after retirement linked to either CPI for Sections A and B or RPI with a 5% cap for Section C. Longevity The longevity assumption takes into account: \u2013 the actual mortality experience of the BTPS pensioners, based on a formal review carried out for the 2020 triennial funding valuation \u2013 future improvements in longevity based on the CMI\u2019s 2021 Mortality Projections model published by the UK actuarial profession There is significant uncertainty as to the impact of the Covid-19 pandemic on future life expectancy. We continue to assume that following the pandemic there is a short-term increase in deaths compared to the assumptions adopted prior to the pandemic and we have fully allowed for population mortality data from 2022, but not data from 2020 and 2021. Allowing for the 2022 data reduced the BTPS liabilities by \u00a30.7bn. We continue to assume mortality will improve in the long term by 1% per year. IA
Risks underlying the BTPS deficit
Background
A large increase in our pension scheme obligations could stop us from being able to fund our business cash flows or meet our payment
commitments. Things like future low investment returns, high inflation, longer life expectancy and regulatory changes may all mean the
BTPS becomes more of a financial burden to BT.
Changes in external factors, such as bond yields, can have an impact on the IAS 19 and funding assumptions, impacting the measurement
of BTPS liabilities. These factors can also impact the BTPS assets. A summary is set out in the table below:
Change in Impact
Government
bond yields
A fall in government bond yields will:
\u2013 increase the IAS 19 liabilities, driven by the fall in the discount rate.
\u2013 increase the assets, driven by an increase in the value of government bonds, corporate bonds and interest rate
derivatives held by the BTPS.
Credit
spreads
A fall in credit spreads will lead to a fall in corporate bond yields, and therefore an increase in the IAS 19 liabilities and
a corresponding but smaller increase in both asset values and funding liabilities.
Inflation
expectations
A significant proportion of the benefits paid to members are currently increased in line with RPI or CPI inflation.
Changes in average inflation expectations over the lifetime of the plan
An increase in average inflation expectations will:
\u2013 increase the IAS 19 liabilities
\u2013 increase the value of index-linked bonds, other inflation linked assets and inflation derivatives held by the BTPS
Changes in inflation over the next year
If inflation over the next year is lower or higher than assumed, it would lead to a fall or increase in the IAS 19 liabilities. We
estimate the change in asset values will broadly offset the movement in both the IAS 19 liabilities and funding liabilities.
If inflation is higher than the caps that apply to benefits, the assets will increase by more than the liabilities. Similarly, in a
deflationary environment, the asset values are expected to fall by more than the IAS 19 liabilities and funding liabilities
since the payments on index-linked gilts would be reduced but pensions paid by the BTPS would not.
Growth
assets
A significant proportion of the BTPS assets are invested in growth assets, such as equities and property. Although the BTPS
has temporary hedges in place to partly offset the impact of a fall in equity markets, and adopts a diverse portfolio, a fall in
these growth assets will increase the IAS 19 and funding deficit.
Life
expectancy
An increase in the life expectancy of members will result in benefits being paid out for longer, leading to an increase in the
IAS 19 liabilities and funding liabilities.
The BTPS holds a longevity insurance contract which covers around 20% of the BTPS\u2019s total exposure to improvements
in longevity, providing long-term protection and income to the BTPS in the event that members live longer than currently
expected.
Other risks include: changes in legislation or regulation which impact the value of the liabilities or assets; and member take-up of options
before and at retirement to reshape their benefits. The scale of the BTPS means that investment changes and any future de-risking
actions need to be planned and executed carefully, potentially over an extended timeframe or multiple transactions.
Scenario analysis
The potential negative impact of these risks is illustrated by the following five scenarios. These have been assessed by BT\u2019s independent
actuary as scenarios that might occur no more than once in every 20 years. The scenarios have been updated to reflect market experience
over the last year.
1-in-20 events
Scenario 2023 2022
1. Fall in bond yields
a
1.2% 0.8%
2. Increase in credit spreads
b
0.9% 0.7%
3. Increase to average inflation expectations over the lifetime of the plan
c
1.1% 0.6%
4. Fall in growth assets
d
20.0% 20.0%
5. Increase to life expectancy 1.30 years 1.00 years
a Scenario assumes a fall in the yields on both government and corporate bonds.
b Scenario assumes an increase in the yield on corporate bonds, with no change to yield on government bonds.
c Scenario assumes average RPI and CPI inflation expectations over the lifetime of the plan increase by the same amount.
d Impact includes the potential impact of temporary equity hedges held by the BTPS. Scenario considers combinations of changes to the key inputs used to value the growth assets,
leading to a 20% fall in the aggregate value of the growth assets prior to temporary hedges held by the BTPS.
The impact shown under each scenario looks at each event in isolation. In practice a combination of events could arise, and the effects are
not additive nor are they linear (e.g. doubling the change in bond yields assumed will not exactly double the impact).
Impact of illustrative scenarios which might occur no more than once in every 20 years
6.1
\u00a3bn
10
8
6
2
4
0
(2)
(4)
(6)
2.3
5.0
(3.7) (0.8) 4.2 2.0
2.8
0.0 0.3
(2.5)
1.9 0.4
1.2 percentage point
fall in bond yields
0.9 percentage point
increase in credit spreads
1.1 percentage point
increase to inflation rate
20% fall in
growth assets
1.30 year
increase in life
expectancy
Increase/(decrease) in liabilities
Increase/(decrease) in assets \u2013 Physical assets
Increase/(decrease) in assets \u2013 Derivatives / synthetic assets
Scenario analysis \u2013 IAS 19 position at 31 March 2023
The sensitivities have been prepared using the same approach as FY22 which involves calculating the liabilities and assets allowing for
the change in market conditions assumed under the scenario. The change in impact from FY22 is due to a combination of: changes in the
scenarios, the significant fall in asset and liability values over the year, and changes in the scheme\u2019s investment strategy in line with the
agreed de-risking plan.
BTPS funding
Triennial funding valuation
A funding valuation is carried out for the Trustee by a professionally qualified independent actuary at least every three years. The funding
valuation assesses the ongoing financial health of the Scheme. If there are insufficient assets to meet the estimated future benefit
payments to members (i.e. a funding deficit), BT and the Trustee agree the amount and timing of additional cash contributions. It is
prepared using the principles set out in UK Pension legislation, such as the 2004 and 2021 pensions acts, and uses a prudent approach
overall when setting the actuarial assumptions. Some of the key differences compared to the IAS 19 deficit are set out in the table below.
IAS 19 Funding
Purpose Balance sheet in BT plc accounts Assessing the ongoing financial health and setting cash payments
Regulation IFRS 2004 and 2021 pensions acts
Frequency Semi-annually At least every three years
Key assumptions
Determined by BT BT and BTPS agreement
Discount rate Yield curve based on AA corporate bonds Yield curve reflecting prudent return expected from BTPS assets
Other assumptions Best estimate Prudent overall approach
The different purpose and principles lead to different assumptions being used, and therefore a different estimate for the liabilities and deficit.
The next funding valuation is scheduled to take place as at 30 June 2023. The latest funding valuation was performed as at 30 June 2020 and
the results are shown below.
30 June 2020
\u00a3bn
Funding liabilities (65.3)
Assets 57.3
BTPS Funding deficit (8.0)
Percentage of accrued benefits covered by the BTPS assets at valuation date 88%
Key assumptions at valuation date:
Discount rate
a
1.4%
Inflation \u2013 average increase in RPI 3.2%
Inflation \u2013 average increase in CPI 2.4%
Life expectancy \u2013 60 year old male in lower pension bracket 25.8 years
Life expectancy \u2013 60 year old male in higher pension bracket 28.0 years
Life expectancy \u2013 60 year old female 28.5 years
Average additional life expectancy for a male member retiring at age 60 in 10 years\u2019 time 0.9 years
a The discount rate at 30 June 2020 was derived from prudent return expectations that reflect the investment strategy over time, allowing for the BTPS to de-risk to a portfolio
consisting predominantly of bond and bond-like investments by 2034.
Interim updates of the funding position (unaudited) The Scheme Actuary carried out an interim assessment as at 30 June 2022, estimating the BTPS\u2019s funding position to have improved from a deficit of \u00a38.0bn to \u00a34.4bn, predominantly reflecting \u00a33.5bn of contributions from BT. BT and the Trustee will agree cash contributions in the usual way at the next full triennial funding valuation, scheduled to take place as at 30 June 2023. The impact of changes in market conditions on the funding liabilities differs to the impact on the IAS 19 liabilities. For example, the funding liabilities use a discount rate linked to a risk-free rate and a fixed margin which is reviewed at each triennial valuation, whereas the IAS 19 liabilities use a discount rate based on corporate bond yields (and so are affected by changes in credit spreads). The chart below illustrates the impact of the scenarios set on page 196 on the 30 June 2022 interim assessment of the funding position. \u00a3bn 10 8 6 2 4 0 (2) (4) (6) 1.2 percentage point fall in bond yields 0.9 percentage point increase in credit spreads 1.1 percentage point increase to inflation rate 20% fall in growth assets 1.30 year increase in life expectancy Increase/(decrease) in liabilities Increase/(decrease) in assets \u2013 Physical assets Increase/(decrease) in assets \u2013 Derivatives / synthetic assets Scenario analysis \u2013 Funding position at 30 June 2022 9.6 3.8 5.2 0.0 (1.0) 7.6 2.7 3.0 0.0 0.7 (3.9) 2.3 0.5 The figures shown in the table apply to the BTPS assets and funding liabilities as at 30 June 2022; an increase in the assets or funding liabilities will increase the impact of the scenarios shown. Deficit payments from the Group The 2020 funding valuation showed a deficit of \u00a38.0bn, which was agreed to be met as follows: \u2013 \u00a32bn of the deficit met through an Asset Backed Funding arrangement (ABF), providing cash payments of \u00a3180m pa which are secured on EE Limited. The BTPS is entitled to the full value of these future payments in the unlikely event that BT becomes insolvent. If the BTPS reaches full funding at any 30 June, the payments to the BTPS will cease. \u2013 Annual cash contributions until June 2023 paid directly to the BTPS \u2013 Annual cash contributions from July 2023 to June 2030 paid either to the BTPS directly, or to a co-investment vehicle where they will be invested as if part of the overall BTPS investment strategy. These payments are summarised in the table below: Year to 31 March 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Payments from BT plc 610a 600 b 600 b 600b 600b 600b 600 b 500 b \u2013 \u2013 \u2013 Payments from ABF 180 180 180 180 180 180 180 180 180 180 180 Total 790 780 780 780 780 780 780 680 180 180 180 a \u00a3500m due by 30 June. b \u00a3490m of each payment due by 30 June. \u00a310m is directly payable to the BTPS, and BT has the option to pay remaining amounts into the co-investment vehicle. ABF The future payments from the ABF have a present value of \u00a31.4bn at 31 March 2023. The fair value of the ABF is \u00a31.3bn at 31 March 2023 and allows for the probability of the BTPS becoming fully funded, and therefore the payments to the BTPS ending early. The fair value of the ABF is included in the assets of the BTPS when assessing the funding deficit. Payments from the ABF to BTPS are treated in the same way as coupon payments from bonds, and do not affect the funding deficit when they are paid. The fair value of the ABF is not included in the assets of the BTPS when assessing the IAS 19 deficit in the group consolidated accounts, as it is a non-transferable asset issued by the group. Payments from the ABF to BTPS are treated as deficit contributions, and reduce the IAS 19 deficit, when they are paid.
Co-investment vehicle
At 31 March 2023, the fair value of assets in the co-investment vehicle was less than \u00a31m (2022: less than \u00a31m). The fair value of assets
in the co-investment vehicle are included in the assets of the BTPS when assessing the IAS 19 and funding deficits.
The co-investment vehicle provides BT with some protection against the risk of overfunding by allowing money to be returned to BT if
not needed by the BTPS, enabling BT to provide upfront funding with greater confidence.
To the extent there is a funding deficit at 30 June 2034, the co-investment vehicle will pay funds to the BTPS. BT will receive tax relief on
funds paid at this point, rather than in the year when funds are paid from BT into the vehicle. Any remaining funds in the co-investment
vehicle will then be returned to BT in three annual payments in 2035, 2036 and 2037, unless the BTPS has subsequently moved into
funding deficit or the Trustee, acting prudently but reasonably, decides to defer or reduce these payments.
Protections for BTPS (going concern)
BT has agreed to provide the Trustee with certain protections. These will predominantly be in place until 2035, or until the Protections
Deficit (which is calculated in line with the funding liabilities but with an adjustment to the discount rate) has reduced below \u00a32bn. A \u00a32bn
deficit on this measure is currently broadly equivalent to a nil funding deficit. The protections include:
Feature Detail
Future funding
commitment
BT will provide additional contributions, of between \u00a3150m pa and \u00a3200m pa, should the funding deficit fall more
than \u00a31bn behind plan at any 30 June interim assessment.
The payments will stop once an interim assessment shows the funding deficit is back on plan, i.e. the recovery plan
agreed at the last triennial valuation is sufficient to meet the funding deficit.
The next annual test will be carried out as at 30 June 2023.
Shareholder
distributions
BT will provide additional payments to the BTPS by the amount that shareholder distributions exceed a threshold.
For the three years following the 2020 valuation, the threshold allows for 10% per year dividend per share growth
based on dividends restarting at 7.7p per share in FY22.
BT has agreed to implement a similar protection at each subsequent valuation, with the terms to be negotiated
at the time.
BT will consult with the Trustee if:
\u2013 it considers share buybacks for any purpose other than relating to employee share awards;
\u2013 it considers making any shareholder distributions in any of the next 3 years if annual normalised free cash flow
of the group is below \u00a31bn in the year and distributions within the year would be in excess of 120% of the above
threshold; or
\u2013 it considers making a special dividend.
Material corporate
events
In the event that BT generates net cash proceeds greater than a threshold from disposals (net of acquisitions) in any
financial year, BT will make additional contributions to the BTPS. The threshold is \u00a3750m until 30 June 2023, and
\u00a31bn thereafter (increased by CPI from 30 June 2020).
The amount payable is one third of the total net cash proceeds, or the amount by which the Protections Deficit
exceeds \u00a32bn if lower.
BT will consult with the Trustee if:
\u2013 it considers making acquisitions with a total cost of more than \u00a31.0bn in any 12-month period;
\u2013 it considers making any disposal of more than \u00a31.0bn;
\u2013 it considers making a Class 1 transaction which will have a material impact on the BTPS (acquisition or disposal);
\u2013 it is likely to be subject to a takeover offer; or
\u2013 there is any other corporate or third party events which may have a material detrimental impact on BT\u2019s covenant
to the BTPS, and BT will use best endeavours to agree appropriate mitigation
This obligation is ongoing until otherwise terminated.
Negative pledge A negative pledge that future creditors will not be granted superior security to the BTPS in excess of a \u00a30.5bn
threshold, to cover any member of the BT Group. Business as usual financing arrangements are not included
within the \u00a30.5bn threshold.
No additional contributions were triggered during FY23.
Protections for BTPS (insolvency) The Scheme Actuary assumes that in the highly unlikely event that the group were to become insolvent, the Trustee would continue to run the Scheme with a low-risk, closely-matched investment strategy including additional margins for risk. On this basis and assuming no further contribution from BT, it was estimated that at 30 June 2020 the assets of the Scheme would have met around 71% of the liabilities. Were this to occur, BTPS members would benefit from the following additional protections: Feature Detail Crown Guarantee The Crown Guarantee was granted by the Government when the group was privatised in 1984 and would only come into effect upon the insolvency of BT. In July 2014, the courts established that: \u2013 the Crown Guarantee covers BT\u2019s funding obligation in relation to the benefits of members of the BTPS who joined post-privatisation as well as those who joined pre-privatisation (subject to certain exceptions) \u2013 the funding obligation to which the Crown Guarantee relates is measured with reference to BT\u2019s obligation to pay deficit contributions under the rules of the BTPS. The Crown Guarantee is not taken into account for the purposes of the actuarial valuation of the BTPS and is an entirely separate matter, only being relevant in the highly unlikely event that BT became insolvent. Pension Protection Fund (PPF) Further protection is also provided by the PPF which is the fund responsible for paying compensation in schemes where the employer becomes insolvent. EEPS funding valuation The most recent triennial valuation of the defined benefit section was performed as at 31 December 2021 and agreed in March 2023. This showed a funding deficit of \u00a3218m. The group is scheduled to contribute \u00a31.7m each month until 31 July 2025 plus a one-off contribution of \u00a311.7m in April 2023. A further payment of up to \u00a380m is payable by 31 March 2026, subject to the results of the 2024 triennial valuation. \u00a313.3m (FY22: \u00a340.0m) of deficit contributions were paid by the group to the EEPS during the year. At the triennial valuation date, the EEPS had a diversified investment strategy, investing scheme assets in: global equities (25%), property & illiquid alternatives (20%), an absolute return portfolio (24%) and a liability-driven investment portfolio (31%). The asset allocation at 31 March 2023 was: global equities (1%), property & illiquid alternatives (36%), an absolute return portfolio (7%) and a liability-driven investment portfolio (56%). ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-529": { "value": "Defined benefit (\u201cDB\u201d) plans DB plan benefits are determined by the plan rules, typically dependent on factors such as age, years of service and pensionable pay, but not on the value of actual contributions made by the company and members. The group is exposed to investment and other experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from regular contributions, expected investment income and assets held. The net defined benefit liability, or deficit, is the present value of all expected future benefit cash flows to be paid by each plan, calculated using the projected unit credit method by professionally qualified actuaries (also known as the Defined Benefit Obligation (DBO) or liabilities) less the fair value of the plan assets. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForDefinedBenefitPlans", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-530": { "value": "Defined contribution (\u201cDC\u201d) plans DC plan benefits are linked to the value of each member\u2019s fund, which is based on contributions paid and the performance of each individual\u2019s chosen investments. The group has no exposure to investment and other experience risks. ", "dimensions": { "concept": "btgroupplc:DescriptionOfAccountingPolicyForDefinedContributionPlans", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-560": { "value": "21. Own shares Significant accounting policies that apply to own shares Own shares are recorded at cost and deducted from equity. When shares held for the beneficial ownership of employees vest unconditionally or are cancelled they are transferred from the own shares reserve to retained earnings at their weighted average cost. Treasury shares a Employee share ownership trust a Total millions \u00a3m millions \u00a3m millions \u00a3m At 1 April 2021 51 (132) 9 (11) 60 (14 3) Own shares purchased b \u2013 \u2013 114 (210) 114 (210) Yourshare issue (1) 2 (18) 34 (19) 36 Share options exercised b (9) 22 \u2013 \u2013 (9) 22 Share awards vested \u2013 \u2013 (11) 21 (11) 21 At 31 March 2022 41 (108) 94 (16 6) 135 (274) Own shares purchased b \u2013 \u2013 114 (187) 114 (187) Share options exercised b (5) 14 \u2013 \u2013 (5) 14 Share awards vested \u2013 \u2013 (14) 25 (14) 25 At 31 March 2023 36 (94) 194 (328) 230 (422) a At 31 March 2023, 36,190,551 shares (FY22: 41,429,938) with an aggregate nominal value of \u00a32m (FY22: \u00a32m) were held at cost as treasury shares and 193,798,578 shares (FY22: 94,120,883) with an aggregate nominal value of \u00a310m (FY22: \u00a35m) were held in the Trust. b See group cash flow statement. The cash paid for the repurchase of ordinary shares was \u00a3138m (FY22: \u00a3184m). 40m shares (FY22: 15m) were purchased via forward contracts. The cash received from proceeds on the issue of treasury shares was \u00a35m (FY22: \u00a313m). The treasury shares reserve represents BT Group plc shares purchased directly by the group. The BT Group Employee Share Ownership Trust (the Trust) also purchases BT Group plc shares. The treasury shares and the shares in the Trust are being used to satisfy our obligations under employee share plans, further details of which are provided in note 22. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-531": { "value": "Significant accounting policies that apply to own shares Own shares are recorded at cost and deducted from equity. When shares held for the beneficial ownership of employees vest unconditionally or are cancelled they are transferred from the own shares reserve to retained earnings at their weighted average cost. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-561": { "value": "22. Share-based payments Significant accounting policies that apply to share-based payments We operate a number of equity-settled share-based payment arrangements, under which we receive services from employees in consideration for equity instruments (share options and shares) of the group. Equity-settled share-based payments are measured at fair value at the date of grant. Market-based performance criteria and non-vesting conditions (for example, the requirement for employees to make contributions to the share purchase programme) are reflected in this measurement of fair value. The fair value determined at the grant date is recognised as an expense on a straight-line basis over the vesting period, based on the group\u2019s estimate of the options or shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations, whichever is more appropriate to the share-based payment arrangement. Service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions which are taken into account to determine the fair value of equity instruments granted. In the case that an award or option does not vest as a result of a failure to meet a non-vesting condition that is within the control of either counterparty, this is accounted for as a cancellation. Cancellations are treated as accelerated vesting and all remaining future charges are immediately recognised in the income statement. As the requirement to save under an employee saveshare arrangement is a non-vesting condition, employee cancellations, other than through a termination of service, are treated as an accelerated vesting. No adjustment is made to total equity for awards that lapse or are forfeited after the vesting date. Year ended 31 March 2023 \u00a3m 2022 \u00a3m Employee saveshare plans 21 29 Yourshare 12 28 Executive share plans: Incentive Share Plan (ISP) \u2013 14 Deferred Bonus Plan (DBP) 12 11 Retention and Restricted Share Plans (RSP) 35 26 80 108 What share incentive arrangements do we have? Our plans include savings-related share option plans for employees and those of participating subsidiaries and several share plans for executives. All share-based payment plans are equity-settled. Details of these plans are set out below. Employee Saveshare Plans Under HMRC-approved savings-related share option plans, employees save on a monthly basis, over a three- or five-year period, towards the purchase of shares at a fixed price determined when the option is granted. This price is set at a 20% discount to the market price for five-year plans and 10% for three-year plans. The options must be exercised within six months of maturity of the savings contract, otherwise they lapse. Similar plans operate for our overseas employees. The scheme did not operate in FY23 or FY22. Yourshare In FY22 and FY21, all eligible employees of the group were awarded \u00a3500 of BT shares. The shares are held in trust for a three-year vesting period after which they will be transferred to employees, providing they have been continuously employed during that time. A similar plan operates for overseas employees. Under the terms of Yourshare and the executive share plans, dividends are reinvested in shares that are added to the relevant share awards. Incentive Share Plan (ISP) Participants are entitled to shares under the ISP in full at the end of a three-year period only if the group has met the relevant pre- determined corporate performance measures and if the participants are still employed by the group. The last ISP award was granted in 2019 and vested in 2022. For this award, 40% of each award is linked to a total shareholder return (TSR) target for a comparator group of companies from the beginning of the relevant performance period; 40% is linked to a three-year cumulative normalised free cash flow measure; and 20% to growth in underlying revenue. Deferred Bonus Plan (DBP) Awards are granted annually to selected employees. Shares in the group are transferred to participants at the end of three years if they continue to be employed by the group throughout that period. Retention and Restricted Share Plans (RSP) Awards are granted to selected employees. Shares in the group are transferred to participants at the end of a specified retention or restricted period if they continue to be employed by the group throughout that period. Employee Saveshare Plans Movements in Employee Saveshare options are shown below. Number of share options Weighted average exercise price Year ended 31 March 2023 millions 2022 millions 2023 pence 2022 pence Outstanding at 1 April 342 414 113 121 Granted \u2013 \u2013 \u2013 \u2013 Forfeited (42) (41) 130 127 Exercised (5) (9) 96 152 Expired (26) (22) 208 229 Outstanding at 31 March 269 342 102 113 Exercisable at 31 March \u2013 \u2013 \u2013 \u2013 The weighted average share price for all options exercised during FY23 was 153p (FY22: 185p). The following table summarises information relating to options outstanding and exercisable under Employee Saveshare plans at 31 March 2023. Normal dates of vesting and exercise (based on calendar years) Exercise price per share Weighted average exercise price Number of outstanding options millions Weighted average remaining contractual life (months) 2023 82p \u2013 170p 107p 87 10 2024 164p 164p 37 22 2025 82p 82p 145 34 Total 102p 269 25 Executive share plans Movements in executive share plan awards are shown below: Number of shares (millions) ISP DBP RSP Total At 1 April 2021 66 20 47 133 Awards granted \u2013 7 23 30 Awards vested \u2013 (4) (7) (11) Awards lapsed (35) (1) (6) (42) Dividend shares reinvested \u2013 \u2013 1 1 At 31 March 2022 31 22 58 111 Awards granted \u2013 6 29 35 Awards vested (5) (5) (4) (14) Awards lapsed (26) (1) (7) (34) Dividend shares reinvested \u2013 2 4 6 At 31 March 2023 \u2013 24 80 104 Fair values There were no grants under Employee Saveshare or the ISP in FY22 or FY23. Employee Saveshare grants are valued using a Binomial options pricing model. Awards under the ISP were valued using Monte Carlo simulations. TSRs are generated for BT and the comparator group at the end of the three-year performance period, using each company\u2019s volatility and the cross correlation between pairs of stocks. Volatility has been determined by reference to BT\u2019s historical volatility which is expected to reflect the BT share price in the future. An expected life of six months after vesting date is assumed for Employee Saveshare options. For all other awards the expected life is equal to the vesting period. The risk-free interest rate is based on the UK gilt curve in effect at the time of the grant, for the expected life of the option or award. The fair values for the DBP and RSP were determined using the market price of the shares at the grant date. The weighted average share price for DBP awards granted in FY23 was 188p (FY22: 203p) and for RSP awards granted in FY23 was 183p (FY22: 201p). ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-532": { "value": " Significant accounting policies that apply to share-based payments We operate a number of equity-settled share-based payment arrangements, under which we receive services from employees in consideration for equity instruments (share options and shares) of the group. Equity-settled share-based payments are measured at fair value at the date of grant. Market-based performance criteria and non-vesting conditions (for example, the requirement for employees to make contributions to the share purchase programme) are reflected in this measurement of fair value. The fair value determined at the grant date is recognised as an expense on a straight-line basis over the vesting period, based on the group\u2019s estimate of the options or shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations, whichever is more appropriate to the share-based payment arrangement. Service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions which are taken into account to determine the fair value of equity instruments granted. In the case that an award or option does not vest as a result of a failure to meet a non-vesting condition that is within the control of either counterparty, this is accounted for as a cancellation. Cancellations are treated as accelerated vesting and all remaining future charges are immediately recognised in the income statement. As the requirement to save under an employee saveshare arrangement is a non-vesting condition, employee cancellations, other than through a termination of service, are treated as an accelerated vesting. No adjustment is made to total equity for awards that lapse or are forfeited after the vesting date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-562": { "value": "23. Divestments and assets & liabilities classified as held for sale Significant accounting policies that apply to divestments and assets & liabilities classified as held for sale We classify non-current assets or a group of assets and associated liabilities, together forming a disposal group, as \u2018held for sale\u2019 when their carrying amount will be recovered principally through disposal rather than continuing use and the sale is highly probable. Sale is considered to be highly probable when management are committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed divestment within one year from the date of classification. We measure non-current assets or disposal groups classified as held for sale at the lower of their carrying amount and fair value less costs of disposal. Intangible assets, property, plant and equipment and right-of-use assets classified as held for sale are not depreciated or amortised. Upon completion of a divestment, we recognise a profit or loss on disposal calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest less costs incurred in disposing of the asset or disposal group and (ii) the carrying amount of the asset or disposal group (including goodwill). The profit or loss on disposal is recognised as a specific item, see note 9. In the event that non-current assets or disposal groups held for sale form a separate and identifiable major line of business, the results for both the current and comparative periods are reclassified as \u2018discontinued operations\u2019. Divestments During the year, we completed the disposal of BT Sport operations through forming a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD). We recognised a profit on disposal after tax of \u00a328m, see below for further details. We disclosed a profit on disposal after tax of \u00a33m in our Q2 results which has subsequently been adjusted to \u00a328m for FY23. The difference is driven by a \u00a333m increase in the profit on disposal before tax, as a result of correcting certain errors in the provisional calculation of the minimum guarantee liability completed at Q2, offset by an \u00a38m decrease in the related deferred tax credit recorded on the same liability. The difference is not quantitatively material and does not impact qualitative disclosures of our KPIs. In FY22 we completed the disposals of Diamond IP, a non-core software business in America, and certain business units in Italy serving customers in the public administration and SME sectors, recording a combined net gain of \u00a335m. The disposals in the current or prior year have not been reclassified as discontinued operations as they do not meet our definition of a separate major line of business. The net consideration recognised on completion of these divestments was as follows: 2023 a \u00a3m 2022 \u00a3m Intangible assets (including goodwill) b 88 12 Property, plant and equipment 13 6 Right-of-use assets 1 1 Other assets c 760 27 Liabilities c (357) (15) Net assets of operations disposed 505 31 Recycling from translation reserve \u2013 (1) Net financial liabilities recognised d 534 \u2013 Net impact on the consolidated balance sheet 1,039 30 Profit on disposal, after tax e 28 41 Net consideration 1,067 71 Satisfied by Proceeds received in the year per the cash flow statement 29 76 Deferred cash consideration f 70 (2) Investment in A preference shares in Sports JV (note 25) 428 \u2013 Investment in C preference shares in Sports JV (note 25) g 161 \u2013 Ordinary equity interest in Sports JV (note 25) 414 \u2013 Transaction costs (35) (3) Net consideration 1,067 71 a Balances in FY23 only include the BT Sport disposal. b Includes allocated goodwill of \u00a383m (FY22: \u00a37m). c Other assets includes \u00a3632m of capitalised programme rights (note 16) and \u00a3104m prepayments relating to rights payments made for licence periods that had not yet started. Liabilities include \u00a3351m relating to outstanding trade payables to broadcast rights holders for the current licence period. d FY23 balance comprises the fair value of BT\u2019s obligation under the minimum revenue commitment of \u00a3712m, less tax credit of \u00a3178m. e Profit on disposal has been recognised as a specific item, refer to note 9. f FY23 deferred cash consideration balance relates to the discounted cash flows due to BT from fixed consideration payable by WBD in instalments over the next three years. g Expected to be sold to WBD at the end of BT\u2019s earn-out entitlement in consideration for any programme rights funded by BT and is therefore akin to deferred consideration for pre-funded programme rights contributed by BT in to the Sports JV at formation. BT Sport In August 2022 the group formed a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD) combining BT Sport and WBD\u2019s Eurosport UK business. As part of the transaction, the group\u2019s wholly owned subsidiary, British Telecommunications plc (BT plc or BT) and WBD has each contributed, sub-licensed or delivered the benefit of their respective sports rights and distribution businesses for the UK & Ireland to the Sports JV. Both parties each hold a 50% interest and equal voting rights in the Sports JV. BT Sport\u2019s distribution agreement with Virgin Media has transferred to the Sports JV, and the Sports JV has also entered into a new agreement with Sky extending beyond 2030 to provide for its distribution of the Sports JV\u2019s combined sports content. The production and operational assets of BT Sport have transferred to WBD who will manage and operate the production of the Sports JV\u2019s sport content. BT plc has entered into a distribution agreement with the Sports JV to procure the sport content required to continue to supply our broadband, TV and mobile customers. BT plc\u2019s agreement with the Sports JV will extend beyond 2030 and for the first four years includes a minimum revenue guarantee of approximately \u00a3500m per annum, after which the agreement will change to a fully variable arrangement. At completion of the transaction, BT no longer has control of the BT Sport operations based on the assessment of ownership and joint control over the key decisions of the Sports JV (50/50 with WBD) established through the Sports JV agreement. The group\u2019s retained ordinary equity interest in the combined business has been classified as a joint venture under IFRS 11. WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports JV (Call Option). The price payable under the Call Option will be 50% of the fair market value of the Sports JV to be determined at the time of the exercise, plus any unpaid fixed consideration and remaining earn-out as described below. If the Call Option is not exercised, BT plc will have the ability to exit its shareholding in the Sports JV either through a sale or IPO after the initial four-year period. Critical & key accounting estimates and significant judgements made in accounting for the BT Sport disposal Assessment of whether BT has joint control over the Sports JV See note 25 for assessment on control. Valuation of investment in A preference shares (akin to contingent consideration) BT will receive an earn-out from the Sports JV (subject to liquidity and usual UK company law requirements), which will end at the earliest of: \u2013 four years post completion of the transaction; \u2013 the exercise by WBD of the Call Option; and \u2013 if the earn-out reaches an agreed cap. The earn-out cash flows to BT are dependent on the cash profit generation of the Sports JV over the earn-out period and is therefore akin to contingent consideration, initially recorded at a fair value of \u00a3428m reflecting the present value of expected cash flows. The valuation of the earn-out consideration is supported by a jointly-agreed business plan and internal valuation model. The key assumptions within the jointly-agreed business plan and internal valuation model are: \u2013 approximately 50% of revenues and 80% of costs during the four years of the jointly-agreed business plan are contractually committed; \u2013 material contracts are renewed at an economic value no less than current terms; \u2013 the total premium sports subscriber base does not materially grow or decline over the earn-out period; and \u2013 revenue growth and production costs are driven by contractual terms. We have also assumed that the earn-out period ends at four years post completion of the transaction; however given the mechanics of the deal arrangements if there is an earlier exercise by WBD of their Call Option this would also not materially impact the amounts disclosed in the financial statements. Subsequent to the initial recognition, the group\u2019s carried forward investment in A preference shares will be remeasured to fair value at each reporting date in accordance with IFRS 9, see note 25. Valuation of the minimum revenue guarantee in BT\u2019s distribution agreement with the Sports JV BT plc\u2019s obligation under the minimum revenue guarantee of c. \u00a32bn over the first four years of the Sports JV represents both a trading arrangement on market terms and a financing arrangement for the off-market element of the revenue guarantee, which has been recorded as a financial liability within trade and other payables on the balance sheet. The liability will be held at amortised cost and will unwind through payments made to the Sports JV over the next four years on the minimum revenue guarantee. The valuation of this financial liability, and what a fair cost-per-subscriber would be, is sensitive to a number of assumptions on volumes and price, and there is a range of outcomes which we could have arrived at. Alternative scenarios considered, based on the different prices and terms used with other market participants, could have resulted in a liability ranging from \u00a3543m to \u00a3837m, and we initially recognised a financial liability of \u00a3712m. The key assumptions in calculating the financial liability are in estimating what is a market wholesale price at market volume commitment that is supported by the forecast volumes for the related revenue streams. The volumes used are consistent with those included in the jointly-agreed business plan as described above. We note that the bottom of the range disclosed above is based on the price that we will pay after four years when the minimum revenue guarantee has ended, however we do not believe that is an appropriate rate from the outset due to existing volume commitments. Valuation of BT\u2019s equity interest in the Sports JV WBD will have the option to acquire BT plc\u2019s 50% interest in the Sports JV at specified points during the first four years of the Sports JV. If the Call Option is not exercised, BT will have the ability to exit its shareholding in the JV either through a sale or IPO. The group has valued its interest in the Sports JV based on the estimated fair value at exit and using the following key assumptions: \u2013 BT expect to realise its interest in the Sports JV through exit rather than ongoing value in use; \u2013 BT expect WBD to exercise its option to acquire BT\u2019s 50% interest in the Sports JV at the end of the first four years of the Sports JV; and \u2013 An earnings multiple has been applied to the expected year 5 EBITDA per the jointly-agreed business plan \u2013 the multiple is at the lower end of a possible range identified from comparable peers and transactions in the premium sports subscription and broadcasting market. As the group\u2019s interest is recorded on a point in time valuation, based on forecast earnings and current market returns on similar investments, it carries both upside and downside risk from changes in micro- and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities on these risk factors: \u2013 EBITDA impact from revenue loss due to ongoing cost of living pressures or changes in the Sports JV\u2019s rights portfolio; \u2013 An increase or decrease in the valuation multiple achieved; and \u2013 An increase or decrease in the discount rate applied. None of these sensitivities individually resulted in a material change to the investment value. All downside or upside factors in combination could lead to a \u00a370m decrease or \u00a3200m increase in the fair value respectively. However, in our view, combining all downside factors is not a reasonable scenario given the financial and commercial levers available to both the JV and BT to mitigate the impact; and we have taken a prudent approach in not recognising a higher investment value upfront based on possible but uncertain changes in market conditions in the future. The investment will be subsequently accounted for using the equity method and will be subject to impairment testing at each reporting period, with any impairment losses recognised through specific items, see note 25. Discounting of cash flows All cash flows expected to be received or paid over time have been discounted at a rate applicable to the risks associated with the cash flows: \u2013 Deferred payments due to BT from WBD have been discounted at an appropriate post-tax cost of debt (3.3%); \u2013 BT\u2019s earn-out from the Sports JV has been discounted at the weighted average cost of capital for the Sports JV at completion date (6.7%); and \u2013 BT\u2019s commitments under the minimum guarantee have been discounted at the group\u2019s post-tax cost of debt (2.8%). We do not consider the net present value of the transaction would be materially affected by a reasonable change in the discount rate. Assets and liabilities held for sale Assets and liabilities held for sale at 31 March 2023 relate to certain city fibre networks and associated infrastructure assets in Germany and Pelipod Limited, a connected-locker business used in our UK supply chain operations. The Competition and Markets Authority (CMA) formally opened its investigation into the proposed disposal of Pelipod Limited on 29 March 2023 which we expect to conclude by 31 May 2023. We have classified the business as held for sale on the basis that the IFRS 5 criteria have been met at 31 March 2023. In FY22, the group had one disposal group held for sale, BT Sport. The assets of the disposal groups have been tested for impairment under existing relevant standards immediately prior to classification as held for sale with no impairment recognised. As the estimated fair value from the transactions, net of any costs incurred or liabilities recognised, is higher than the carrying value of the disposal group, no impairment has been recognised subsequent to classification as held for sale.
Where the group is disposing of 100% of underlying operations and assets, we used the selling price agreed with the prospective
purchaser as the fair value for the impairment test, which was classified as Level 3 on the fair value hierarchy. For the BT Sport transaction,
we used the discounted cash flows due to BT over the first four years of the Sports JV, plus a potential exit value from the sale of the
group\u2019s equity interest, as total gross consideration; BT\u2019s obligation under the minimum revenue guarantee in the distribution agreement
has been treated as a reduction to the fair value of the consideration in the impairment test. The inputs into the fair value calculation are
classified as Level 3 on the fair value hierarchy and supported by internal valuation models over which we have applied sensitivities on the
future cash flows from the Sports JV and the trading multiples for the exit valuation.
These operations have not been reclassified as a discontinued operation as it does not meet our definition of a separate major line of business.
The disposal groups held for sale comprised the following assets and liabilities:
At 31 March
2023
\u00a3m
2022
\u00a3m
Assets
Intangible assets
a
13 55
Property, plant and equipment 4 13
Right-of-use assets 3 2
Inventories \u2013 \u2013
Trade and other receivables 1 10
Assets held for sale
b
21 80
Liabilities
Trade and other payables 1 38
Lease liabilities 3 2
Liabilities held for sale 4 40
a Intangible assets includes goodwill of \u00a313m (FY22: \u00a351m) that has been allocated to the disposal group.
b \u00a3310m of programme rights relating to sports broadcasting rights acquired for the BT Sport operations were not reclassified to held for sale in FY22 as the carrying amount of
these assets were principally recovered through continuing use before completion of the transaction.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-533": { "value": "
Significant accounting policies that apply to divestments and assets & liabilities classified
as held for sale
We classify non-current assets or a group of assets and associated liabilities, together forming a disposal group, as \u2018held for sale\u2019 when
their carrying amount will be recovered principally through disposal rather than continuing use and the sale is highly probable. Sale is
considered to be highly probable when management are committed to a plan to sell the asset or disposal group and the sale should be
expected to qualify for recognition as a completed divestment within one year from the date of classification. We measure non-current
assets or disposal groups classified as held for sale at the lower of their carrying amount and fair value less costs of disposal. Intangible
assets, property, plant and equipment and right-of-use assets classified as held for sale are not depreciated or amortised.
Upon completion of a divestment, we recognise a profit or loss on disposal calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of any retained interest less costs incurred in disposing of the asset
or disposal group and (ii) the carrying amount of the asset or disposal group (including goodwill). The profit or loss on disposal is
recognised as a specific item, see note 9.
In the event that non-current assets or disposal groups held for sale form a separate and identifiable major line of business, the results
for both the current and comparative periods are reclassified as \u2018discontinued operations\u2019.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-534": { "value": "24. Investments Significant accounting policies that apply to investments Investments classified as amortised cost These investments are measured at amortised cost. The carrying amount of these balances approximates to fair value. Any gain or loss on derecognition is recognised in the income statement. Investments classified as fair value through profit and loss These investments are initially recognised at fair value plus direct transaction costs. They are re-measured at subsequent reporting dates to fair value and changes are recognised directly in the income statement. Equity instruments classified as fair value through other comprehensive income We have made an irrevocable election to present changes in the fair value of equity investments that are not held for trading in other comprehensive income. All gains or losses are recognised in other comprehensive income and are not reclassified to the income statement when the investments are disposed of, aside from dividends which are recognised in the income statement when our right to receive payment is established. Equity investments are recorded in non-current assets unless they are expected to be sold within one year. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-563": { "value": "24. Investments Significant accounting policies that apply to investments Investments classified as amortised cost These investments are measured at amortised cost. The carrying amount of these balances approximates to fair value. Any gain or loss on derecognition is recognised in the income statement. Investments classified as fair value through profit and loss These investments are initially recognised at fair value plus direct transaction costs. They are re-measured at subsequent reporting dates to fair value and changes are recognised directly in the income statement. Equity instruments classified as fair value through other comprehensive income We have made an irrevocable election to present changes in the fair value of equity investments that are not held for trading in other comprehensive income. All gains or losses are recognised in other comprehensive income and are not reclassified to the income statement when the investments are disposed of, aside from dividends which are recognised in the income statement when our right to receive payment is established. Equity investments are recorded in non-current assets unless they are expected to be sold within one year. At 31 March 2023 \u00a3m 2022 \u00a3m Non-current assets Fair value through other comprehensive income 23 34 Fair value through profit or loss 6 \u2013 Total non-current asset investments 29 34 Current assets Investments held at amortised cost 3,548 2,679 Current asset investments 3,548 2,679 Investments held at amortised cost relate to money market investments denominated in sterling of \u00a33,094m (FY22: \u00a32,225m), in euros of \u00a3446m (FY22: \u00a3436m) and in US dollars of \u00a38m (FY22: \u00a318m). Within these amounts are investments in liquidity funds of \u00a33,491m (FY22: \u00a31,912m), \u00a348m collateral paid on swaps (FY22: \u00a367m), Interest on investments of \u00a39m (FY22: \u00a3nil ) and repurchase agreements \u00a3nil (FY22: \u00a3700m). Fair value estimation Fair value hierarchy At 31 March 2023 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total held at fair value \u00a3m Non-current and current investments Fair value through other comprehensive income \u2013 \u2013 23 23 Fair value through profit or loss 6 \u2013 \u2013 6 Total 6 \u2013 23 29 At 31 March 2022 Non-current and current investments Fair value through other comprehensive income 4 \u2013 30 34 Total 4 \u2013 30 34 The three levels of valuation methodology used are: \u2013 Level 1 \u2013 uses quoted prices in active markets for identical assets or liabilities. \u2013 Level 2 \u2013 uses inputs for the asset or liability other than quoted prices that are observable either directly or indirectly. \u2013 Level 3 \u2013 uses inputs for the asset or liability that are not based on observable market data, such as internal models or other valuation methods. Level 3 balances consist of investments classified as fair value through other comprehensive income of \u00a323m (FY22: \u00a330m) which represent investments in a number of private companies. If specific market data is not available, these investments are held at cost, adjusted as necessary for impairments, which approximates to fair value. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-581": { "value": "25. Joint ventures and associates At 31 March 2023 \u00a3m 2022 \u00a3m Interest in joint ventures 354 2 Interest in associates 5 3 Total 359 5 The \u00a3352m movement in joint ventures relates to the disposal of BT Sport and creation of a new sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), see below. This is the only material equity-accounted investment held by the group. Sports JV with Warner Bros. Discovery In August 2022, we formed the Sports JV with WBD, combining BT Sport and WBD\u2019s Eurosport UK business. Further details on the BT Sport transaction are provided in note 23. Significant judgements made in accounting for the sports joint venture Assessment of whether BT has joint control over the Sports JV The Sports JV is classified as a joint venture and hence has been deconsolidated from the group based on an assessment under IFRS 10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD. Factors relevant to our assessment: \u2013 Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new or existing sports rights and distribution arrangements. \u2013 Unequal cash distribution during the first four years due to the earn-out mechanism and relative size of businesses contributed into the Sports JV. \u2013 Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and commitments to sports rights holders. \u2013 WBD\u2019s call option to acquire BT\u2019s 50% interest in the Sports JV is not exercisable before key decisions over material activities of the Sports JV are made such that joint control still applies at the outset. The assessment whether joint control remains in place is reviewed at each reporting period . Accounting policies adopted by the Sports JV The Sports JV has a financial year-end of 31 July and therefore has not yet prepared its first set of audited financial statements. In order to recognise our share of the Sports JV\u2019s results for our equity-accounted investment, we have prepared the Sports JV\u2019s financial information disclosed below based on management accounts for the period ending 31 March 2023 after making certain adjustments to comply with IFRS. Significant judgements made in preparing the Sports JV\u2019s financial information: \u2013 IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future value of programme rights, and goodwill. \u2013 Revenues from the minimum guarantee in the Sports JV\u2019s distribution agreement with BT should be adjusted to reflect a trading agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 \u2013 this mirrors the accounting treatment applied by BT (see note 23). \u2013 A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss under IFRS 9. \u2013 Hedge accounting should be applied on the Sports JV\u2019s forward contracts with BT (see note 31) with fair value movements on the derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the forward contracts. \u2013 Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed by the Sports JV on a straight-line basis over the programming period which is generally 12 months \u2013 this is consistent with the group\u2019s accounting policy (see note 16). Accounting policies in other areas are consistent with those applied by the group. Ordinary equity shares On completion of the BT Sport transaction, the group recorded an investment in joint venture at an initial fair value of \u00a3414m, relating to our retained ordinary equity interest in the Sports JV entity, in accordance with IFRS 10 and IAS 28. The group has valued this interest in the Sports JV at the estimated fair value at exit, see note 23. Consistent with our accounting policy on associates and joint ventures, we will recognise our share of the change in the Sports JV\u2019s net assets under the equity method of accounting. Year ended 31 March 2023 \u00a3m Group's equity-accounted investment in the Sports JV at formation 414 Share of total comprehensive loss (62) Dividends received during the year \u2013 Carrying amount at the end of the year 352 As required by IAS 36, we have assessed the investment for impairment. There is no impairment at 31 March 2023 as the fair value less costs to sell is higher than the carrying amount of the investment. See below for sensitivities we have applied in determining the fair value less costs to sell. The following is summarised and unaudited financial information for the Sports JV prepared in accordance with IFRS and including adjustments required to align with the group\u2019s accounting policies and provisional fair value adjustments. These results are subject to true-up within the 12 months from Sports JV formation, however any adjustments are not expected to materially impact our share of the Sports JV\u2019s results recorded in the period. Summarised statement of total comprehensive income for year ended 31 March 2023 \u00a3m Revenue 557 Loss for the year a (121) Other comprehensive loss (2) Total comprehensive loss (123) Summarised balance sheet at 31 March 2023 \u00a3m Current assets b 1,106 Non-current assets c 1,236 Current liabilities d (702) Non-current liabilities e (543) Net assets 1,097 a Includes amortisation of \u00a356m on acquired intangibles based on provisional fair value adjustments, net finance income of \u00a36m, and tax income of \u00a317m (current tax charge of \u00a34m less deferred tax credit of \u00a321m). b Includes cash and cash and cash equivalents of \u00a311m. c Includes goodwill and acquired intangibles of \u00a3645m. d Includes current financial liabilities (excluding trade and other payables and provisions) of \u00a3(281)m of which \u00a3(268)m relates to the outstanding liability on the RCF provided by BT (see note 24). e Includes non-current financial liabilities (excluding trade and other payables and provisions) of \u00a3(416)m. The Sports JV\u2019s accounting loss for the year reflects amortisation of acquired intangibles from the BT Sport and Eurosport business transfers, reduced revenues from IFRS 15 adjustments for the off-market minimum guarantee with BT (see note 23) and underperformance against business plan. Underperformance has been driven by cost of living pressures affecting the premium sports subscription market and impacts from a prolonged winter break in European club football from the World Cup. Underlying trading, before accounting adjustments, is expected to recover in the medium to long term as wider macroeconomic and inflationary pressures ease and through the Sports JV reducing its cost base to mitigate any future revenue loss. Preference shares In addition to BT\u2019s ordinary shareholding, BT held the following investments in preference shares in the Sports JV that have not been included within the equity-accounted interest above. At 31 March 2023 \u00a3m 2022 \u00a3m Investment in A preference shares 429 \u2013 Investment in C preference shares 126 \u2013 Total 555 \u2013 \u2013 A preference shares \u2013 we expect these shares to be redeemed by the Sports JV over the 4-year earn-out period in order to effect the distribution of cash to BT under our earn-out entitlement. The fair value of the shares is driven by the underlying cash profit generation of the Sports JV and therefore have been classified as a fair value through profit or loss (FVTPL) financial asset under IFRS 9. In our view, the cash flows due to BT from the A preference shares are akin to contingent consideration and therefore the fair value of \u00a3428m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a31m of fair value gain has been recognised through specific items (see note 9) driven by an increase in forecasted cash flows offset by an increase in the discount rate applied to cash flows. \u2013 C preference shares \u2013 these shares are expected to be sold to WBD at the end of BT\u2019s earn-out entitlement in consideration for any sports rights funded by BT at that point and have been recognised as a financial asset held at FVTPL under IFRS 9. In our view, the cash flows due to BT from the C preference shares are akin to deferred consideration and therefore the fair value of \u00a3161m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a335m of fair value loss has been recognised through specific items (see note 9) driven by an expected reduction in the Sports JV\u2019s cost base to mitigate short- to medium-term revenue loss, which will reduce the expected payment to BT for pre-funded sports rights. The preference shares are held at Level 3 on the fair value hierarchy, reflecting a valuation methodology that does not use inputs based on observable market data. See note 24 for further details on fair value estimation. See below for sensitivities we have applied in determining the fair value. Sensitivities The group\u2019s ordinary equity and preference share investments in the Sports JV, carry both upside and downside risk from changes in micro and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities to these risk factors: \u2013 EBITDA decline from loss of material sports rights or a significant decline in the Sports JV\u2019s revenues from ongoing cost of living pressures; \u2013 EBITDA improvement from outperformance against revised forecasts, particularly with respect to wholesale revenues; \u2013 an increase or decrease in the valuation multiple achieved; and \u2013 an increase or decrease in the discount rate applied. Sensitivity Fair value of A and C preference shares in Sports JV Headroom on impairment test over equity-accounted investment 5% increase or decrease in EBITDA +/- \u00a332m +/- \u00a326m 10pp increase or decrease in discount rate +/- \u00a38m +/- \u00a315m 10% change in valuation multiple \u2013 +/- \u00a352m None of these sensitivities generated an impairment on the group\u2019s equity-accounted investment in the Sports JV. Headroom on the investment has increased since formation of the Sports JV driven by an expected increase in long-term value from the Sports JV reducing its cost base. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-564": { "value": "25. Joint ventures and associates At 31 March 2023 \u00a3m 2022 \u00a3m Interest in joint ventures 354 2 Interest in associates 5 3 Total 359 5 The \u00a3352m movement in joint ventures relates to the disposal of BT Sport and creation of a new sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), see below. This is the only material equity-accounted investment held by the group. Sports JV with Warner Bros. Discovery In August 2022, we formed the Sports JV with WBD, combining BT Sport and WBD\u2019s Eurosport UK business. Further details on the BT Sport transaction are provided in note 23. Significant judgements made in accounting for the sports joint venture Assessment of whether BT has joint control over the Sports JV The Sports JV is classified as a joint venture and hence has been deconsolidated from the group based on an assessment under IFRS 10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD. Factors relevant to our assessment: \u2013 Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new or existing sports rights and distribution arrangements. \u2013 Unequal cash distribution during the first four years due to the earn-out mechanism and relative size of businesses contributed into the Sports JV. \u2013 Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and commitments to sports rights holders. \u2013 WBD\u2019s call option to acquire BT\u2019s 50% interest in the Sports JV is not exercisable before key decisions over material activities of the Sports JV are made such that joint control still applies at the outset. The assessment whether joint control remains in place is reviewed at each reporting period Accounting policies adopted by the Sports JV The Sports JV has a financial year-end of 31 July and therefore has not yet prepared its first set of audited financial statements. In order to recognise our share of the Sports JV\u2019s results for our equity-accounted investment, we have prepared the Sports JV\u2019s financial information disclosed below based on management accounts for the period ending 31 March 2023 after making certain adjustments to comply with IFRS. Significant judgements made in preparing the Sports JV\u2019s financial information: \u2013 IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future value of programme rights, and goodwill. \u2013 Revenues from the minimum guarantee in the Sports JV\u2019s distribution agreement with BT should be adjusted to reflect a trading agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 \u2013 this mirrors the accounting treatment applied by BT (see note 23). \u2013 A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss under IFRS 9. \u2013 Hedge accounting should be applied on the Sports JV\u2019s forward contracts with BT (see note 31) with fair value movements on the derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the forward contracts. \u2013 Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed by the Sports JV on a straight-line basis over the programming period which is generally 12 months \u2013 this is consistent with the group\u2019s accounting policy (see note 16). Accounting policies in other areas are consistent with those applied by the group. Ordinary equity shares On completion of the BT Sport transaction, the group recorded an investment in joint venture at an initial fair value of \u00a3414m, relating to our retained ordinary equity interest in the Sports JV entity, in accordance with IFRS 10 and IAS 28. The group has valued this interest in the Sports JV at the estimated fair value at exit, see note 23. Consistent with our accounting policy on associates and joint ventures, we will recognise our share of the change in the Sports JV\u2019s net assets under the equity method of accounting. Year ended 31 March 2023 \u00a3m Group's equity-accounted investment in the Sports JV at formation 414 Share of total comprehensive loss (62) Dividends received during the year \u2013 Carrying amount at the end of the year 352 As required by IAS 36, we have assessed the investment for impairment. There is no impairment at 31 March 2023 as the fair value less costs to sell is higher than the carrying amount of the investment. See below for sensitivities we have applied in determining the fair value less costs to sell. The following is summarised and unaudited financial information for the Sports JV prepared in accordance with IFRS and including adjustments required to align with the group\u2019s accounting policies and provisional fair value adjustments. These results are subject to true-up within the 12 months from Sports JV formation, however any adjustments are not expected to materially impact our share of the Sports JV\u2019s results recorded in the period. Summarised statement of total comprehensive income for year ended 31 March 2023 \u00a3m Revenue 557 Loss for the year a (121) Other comprehensive loss (2) Total comprehensive loss (123) Summarised balance sheet at 31 March 2023 \u00a3m Current assets b 1,106 Non-current assets c 1,236 Current liabilities d (702) Non-current liabilities e (543) Net assets 1,097 a Includes amortisation of \u00a356m on acquired intangibles based on provisional fair value adjustments, net finance income of \u00a36m, and tax income of \u00a317m (current tax charge of \u00a34m less deferred tax credit of \u00a321m). b Includes cash and cash and cash equivalents of \u00a311m. c Includes goodwill and acquired intangibles of \u00a3645m. d Includes current financial liabilities (excluding trade and other payables and provisions) of \u00a3(281)m of which \u00a3(268)m relates to the outstanding liability on the RCF provided by BT (see note 24). e Includes non-current financial liabilities (excluding trade and other payables and provisions) of \u00a3(416)m. The Sports JV\u2019s accounting loss for the year reflects amortisation of acquired intangibles from the BT Sport and Eurosport business transfers, reduced revenues from IFRS 15 adjustments for the off-market minimum guarantee with BT (see note 23) and underperformance against business plan. Underperformance has been driven by cost of living pressures affecting the premium sports subscription market and impacts from a prolonged winter break in European club football from the World Cup. Underlying trading, before accounting adjustments, is expected to recover in the medium to long term as wider macroeconomic and inflationary pressures ease and through the Sports JV reducing its cost base to mitigate any future revenue loss. Preference shares In addition to BT\u2019s ordinary shareholding, BT held the following investments in preference shares in the Sports JV that have not been included within the equity-accounted interest above. At 31 March 2023 \u00a3m 2022 \u00a3m Investment in A preference shares 429 \u2013 Investment in C preference shares 126 \u2013 Total 555 \u2013 \u2013 A preference shares \u2013 we expect these shares to be redeemed by the Sports JV over the 4-year earn-out period in order to effect the distribution of cash to BT under our earn-out entitlement. The fair value of the shares is driven by the underlying cash profit generation of the Sports JV and therefore have been classified as a fair value through profit or loss (FVTPL) financial asset under IFRS 9. In our view, the cash flows due to BT from the A preference shares are akin to contingent consideration and therefore the fair value of \u00a3428m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a31m of fair value gain has been recognised through specific items (see note 9) driven by an increase in forecasted cash flows offset by an increase in the discount rate applied to cash flows. \u2013 C preference shares \u2013 these shares are expected to be sold to WBD at the end of BT\u2019s earn-out entitlement in consideration for any sports rights funded by BT at that point and have been recognised as a financial asset held at FVTPL under IFRS 9. In our view, the cash flows due to BT from the C preference shares are akin to deferred consideration and therefore the fair value of \u00a3161m on initial recognition has been included in the consideration within the profit on disposal recognised on the BT Sport transaction (see note 23). Subsequent to the initial recognition, \u00a335m of fair value loss has been recognised through specific items (see note 9) driven by an expected reduction in the Sports JV\u2019s cost base to mitigate short- to medium-term revenue loss, which will reduce the expected payment to BT for pre-funded sports rights. The preference shares are held at Level 3 on the fair value hierarchy, reflecting a valuation methodology that does not use inputs based on observable market data. See note 24 for further details on fair value estimation. See below for sensitivities we have applied in determining the fair value. Sensitivities The group\u2019s ordinary equity and preference share investments in the Sports JV, carry both upside and downside risk from changes in micro and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. We have applied the following sensitivities to these risk factors: \u2013 EBITDA decline from loss of material sports rights or a significant decline in the Sports JV\u2019s revenues from ongoing cost of living pressures; \u2013 EBITDA improvement from outperformance against revised forecasts, particularly with respect to wholesale revenues; \u2013 an increase or decrease in the valuation multiple achieved; and \u2013 an increase or decrease in the discount rate applied. Sensitivity Fair value of A and C preference shares in Sports JV Headroom on impairment test over equity-accounted investment 5% increase or decrease in EBITDA +/- \u00a332m +/- \u00a326m 10pp increase or decrease in discount rate +/- \u00a38m +/- \u00a315m 10% change in valuation multiple \u2013 +/- \u00a352m None of these sensitivities generated an impairment on the group\u2019s equity-accounted investment in the Sports JV. Headroom on the investment has increased since formation of the Sports JV driven by an expected increase in long-term value from the Sports JV reducing its cost base. ", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-565": { "value": "26. Cash and cash equivalents Significant accounting policies that apply to cash and cash equivalents Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily convertible to cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less. All are held at amortised cost on the balance sheet, equating to fair value. For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above net of outstanding bank overdrafts. Bank overdrafts are included within the current element of loans and other borrowings (note 27). At 31 March 2023 \u00a3m 2022 \u00a3m Cash at bank and in hand 336 324 Cash equivalents UK deposits \u2013 353 Indian rupee deposits 55 90 Other deposits 1 10 Total cash equivalents a 56 453 Total cash and cash equivalents 392 777 Bank overdrafts (note 27) (11) (85) Cash and cash equivalents per the cash flow statement 381 692 a Total cash equivalents have fallen in line with our treasury strategy. Cash and cash equivalents include restricted cash of \u00a3131m (FY22: \u00a324m), of which \u00a323m (FY22: \u00a322m) was held in countries where local capital or exchange controls currently prevent us from accessing cash balances. The remaining balance of \u00a3108m (FY22: \u00a32m) was held in escrow accounts, or in commercial arrangements akin to escrow. Following an IFRIC agenda decision relating to demand deposits the group identified one bank account with restrictions on use that nonetheless meets the IAS 7 definition of cash. This bank account, which has a balance of \u00a396m (FY22: \u00a3148m) is now reflected in cash and cash equivalents. Comparatives have not been restated as the impact is not considered material. Please see note 1 for further information. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-535": { "value": "Significant accounting policies that apply to cash and cash equivalents Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily convertible to cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less. All are held at amortised cost on the balance sheet, equating to fair value. For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above net of outstanding bank overdrafts. Bank overdrafts are included within the current element of loans and other borrowings (note 27). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-566": { "value": "27. Loans and other borrowings Significant accounting policies that apply to loans and other borrowings We initially recognise loans and other borrowings at the fair value of amounts received net of transaction costs. They are subsequently measured at amortised cost using the effective interest method and, if included in a fair value hedge relationship, are re-valued to reflect the fair value movements on the associated hedged risk. The resulting amortisation of fair value movements, on de-designation of the hedge, is recognised in the income statement. What\u2019s our capital management policy? The objective of our capital management policy is to target an overall level of debt consistent with our credit rating target while investing in the business, supporting the pension scheme and meeting our distribution policy. In order to meet this objective, we may issue or repay debt, issue new shares, repurchase shares, or adjust the amount of dividends paid to shareholders. We manage the capital structure and make adjustments to it accordingly to reflect changes in economic conditions and the risk characteristics of the group. The Board regularly reviews the capital structure. No changes were made to these objectives and processes during FY23. For details of share issues and repurchases in the year see note 21. Our capital structure consists of net debt and shareholders\u2019 equity. The analysis below summarises the components which we manage as capital. At 31 March 2023 \u00a3m 2022 \u00a3m Net debt 18,859 18,009 Total parent shareholders\u2019 equity a 14,490 15,274 Capital structure 33,349 33,283 a Excludes non-controlling interests of \u00a324m (FY22: \u00a322m).
Net debt and net financial debt
Net debt consists of loans and other borrowings and lease liabilities, less current asset investments and cash and cash equivalents,
including items which have been classified as held for sale on the balance sheet.
Currency denominated balances within net debt are translated to sterling at swapped rates where hedged. Fair value adjustments and
accrued interest applied to reflect the effective interest method are removed. Amounts due to joint ventures held within loans and
borrowings are also excluded. Net financial debt is net debt excluding lease liabilities.
Net debt and net financial debt are considered to be alternative performance measures as they are not defined in IFRS. The most directly
comparable IFRS measure is the aggregate of loans and other borrowings and lease liabilities (current and non-current), current asset
investments and cash and cash equivalents. A reconciliation from these IFRS measures to net debt and net financial debt is given below.
At 31 March Notes
2023
\u00a3m
2022
\u00a3m
Loans and other borrowings
a
18,521 16 ,185
Lease liabilities 15 5,359 5,760
Net lease liabilities classified as held for sale
b
23 3 2
Less:
Cash and cash equivalents 26 (392) (777)
Current asset investments 24 (3,548) (2,679)
19,943 18,491
Adjustments:
To retranslate debt balances at swap rates where hedged by currency swaps
c
(819) (234)
To remove accrued interest applied to reflect the effective interest method
and fair value adjustments (254) (248)
Loans with joint ventures 31 (11) \u2013
Net debt 18,859 18,009
Lease liabilities 15 (5,359) (5,760)
Lease liabilities classified as held for sale
b
(3) (2)
Net financial debt 13,497 12,247
a Includes overdrafts of \u00a311m at 31 March 2023 (FY22: \u00a385m).
b There are lease liabilities classified as held for sale, refer to note 23.
c The translation difference between spot rate and hedged rate of loans and borrowings denominated in foreign currency.
The table below shows the key components of net debt and the increase of \u00a3850m this year.
At
31 March
2022
\u00a3m
Cash flows
\u00a3m
Net lease
additions
a
\u00a3m
Foreign
exchange
\u00a3m
Transfer
to within
one year
\u00a3m
Other
movements
d
\u00a3m
At
31 March
2023
\u00a3m
Loans and other borrowings due within one year
b
873 (136) \u2013 65 943 27 1,772
Lease liabilities due within one year 795 (859) \u2013 1 863 \u2013 800
Loans and other borrowings due after one year 15,312 1,746 \u2013 525 (943) 109 16,749
Lease liabilities due after one year 4,965 \u2013 449 11 (863) (3) 4,559
Liabilities classified as held for sale 2 \u2013 \u2013 \u2013 \u2013 1 3
Impact of cross-currency swaps
c
(234) \u2013 \u2013 (585) \u2013 \u2013 (819)
Removal of the accrued interest and fair value adjustments (251) \u2013 \u2013 \u2013 \u2013 (13) (264)
Removal of loans with joint ventures \u2013 (11) \u2013 \u2013 \u2013 \u2013 (11)
Gross debt 21,462 740 449 17 \u2013 121 22,789
Less:
Cash and cash equivalents (777) 379 \u2013 3 \u2013 3 (392)
Current asset investments (2,679) (885) \u2013 (21) \u2013 37 (3,548)
Removal of accrued interest
c
3 \u2013 \u2013 \u2013 \u2013 7 10
Net debt 18,009 234 449 (1) \u2013 168 18,859
At
31 March
2021
\u00a3m
Cash flows
\u00a3m
Net lease
additions
a
\u00a3m
Foreign
exchange
\u00a3m
Transfer to
within one
year
\u00a3m
Other
movements
d
\u00a3m
At
31 March
2022
\u00a3m
Loans and other borrowings due within one year
b
911 (1,421) \u2013 59 1,341 (17) 873
Lease liabilities due within one year 730 (792) \u2013 \u2013 857 \u2013 795
Loans and other borrowings due after one year 15,774 743 \u2013 71 (1,341) 65 15,312
Lease liabilities due after one year 5,422 \u2013 397 3 (857) \u2013 4,965
Liabilities classified as held for sale \u2013 \u2013 \u2013 \u2013 \u2013 2 2
Impact of cross-currency swaps
c
(142) \u2013 \u2013 (92) \u2013 \u2013 (234)
Removal of the accrued interest and fair value adjustments (242) \u2013 \u2013 \u2013 \u2013 (9) (251)
Gross debt 22,453 (1,470) 397 41 \u2013 41 21,462
Less:
Cash and cash equivalents (1,000) 226 \u2013 (3) \u2013 \u2013 (777)
Current asset investments (3,652) 970 \u2013 3 \u2013 \u2013 (2,679)
Removal of accrued interest
c
1 \u2013 \u2013 \u2013 \u2013 2 3
Net debt 17,802 (274) 397 41 \u2013 43 18,009
a Net lease additions are net non-cash movements in lease liabilities during the period, and primarily comprise new and terminated leases, remeasurements of existing leases and
lease interest charges.
b Includes accrued interest and bank overdrafts.
c Translation of debt balances at swap rates where hedged by cross-currency swaps.
d Other movements include removal of accrued interest applied to reflect the effective interest rate method, removal of fair value adjustments and movements relating to held for
sale assets and liabilities (see note 23).
Cash flows from gross debt of \u00a3740m outflow (FY22: \u00a31,470m outflow) include repayment of borrowings \u00a3513m (FY22: \u00a31,374m outflow),
proceeds from bank loans and bonds \u00a32,203m inflow (FY22: \u00a3744m), cash flows from collateral received \u00a317m outflow (FY22: \u00a329m
outflow), payment of lease liabilities \u00a3727m outflow (FY22: \u00a3659m outflow), interest paid on lease liabilities \u00a3143m outflow (FY22: \u00a3133m
outflow), increase in amounts owed to joint venture \u00a311m (FY22: \u00a3nil), and change in bank overdraft \u00a374m outflow (FY22: \u00a319m outflow).
The table below gives details of the listed bonds and other debt.
At 31 March
2023
\u00a3m
2022
\u00a3m
0.875% \u20ac500m bond due September 2023
a,d
270 423
4.5% $675m bond due December 2023
a
554 520
1% \u20ac575m bond due June 2024
a,d
415 489
1% \u20ac1,100m bond due November 2024
a,d
726 929
3.50% \u00a3250m index linked bond due April 2025 524 468
0.5% \u20ac650m bond due September 2025
a
571 549
1.75% \u20ac1,300m bond due March 2026
a
1,143 1,098
1.5% \u20ac1,150m bond due June 2027
a
1,017 977
2.75% \u20ac500m bond due August 2027
a
530 \u2013
2.125% \u20ac600m bond due September 2028
a
442 425
5.125% $700m bond due December 2028
a
573 537
5.75% \u00a3600m bond due December 2028 669 680
1.125% \u20ac750m bond due September 2029
a
657 631
3.25% $1,000m bond due November 2029
a
812 762
9.625% $2,670m bond due December 2030
a
(minimum 8.625%
b
) 2,214 2,077
3.75% \u20ac800m bond due February 2031
a
704 \u2013
3.125% \u00a3500m bond due November 2031 503 503
3.375% \u20ac500m bond due August 2032
a
445 \u2013
3.64% \u00a3330m bond due June 2033 339 339
1.613% \u00a3330m index linked bond due June 2033 380 362
6.375% \u00a3500m bond due June 2037
a
523 523
3.883% \u00a3330m bond due June 2039 340 340
1.739% \u00a3330m index linked bond due June 2039 381 363
5.75% \u00a3350m bond due February 2041 347 \u2013
3.924% \u00a3340m bond due June 2042 350 350
1.774% \u00a3340m index linked bond due June 2042 392 374
2.08% JPY10,000m bond due February 2043
a
61 \u2013
3.625% \u00a3250m bond due November 2047 250 250
4.25% $500m bond due November 2049
a
408 383
1.874% \u20ac500m bond due August 2080
a,c
443 426
4.250% $500m Hybrid bond due November 2081
a,c
404 383
4.875% $500m Hybrid bond due November 2081
a,c
409 384
Total listed bonds 17,796 15,545
Other loans
e
714 555
Bank overdrafts (note 26) 11 85
Total other loans and borrowings 725 640
Total loans and other borrowings 18,521 16,185
a Designated in a cash flow hedge relationship.
b The interest rate payable on this bond attracts an additional 0.25% for rating category downgrade by either Moody\u2019s or Standard & Poor\u2019s to the group\u2019s senior unsecured
debt below A3/A\u2013 respectively. In addition, if Moody\u2019s or Standard & Poor\u2019s subsequently increase the ratings then the interest rate will be decreased by 0.25% for each rating
category upgrade by either rating agency. In no event will the interest rate be reduced below the minimum rate reflected in the above table.
c Includes call options between 2.5 years and 8.5 years.
d Bond partially redeemed in February 2023.
e Includes \u00a3100m relating to an asset monetisation programme, further details below.
Unless previously designated in a fair value hedge relationship, all loans and other borrowings are carried on our balance sheet and in the
table above at amortised cost. The fair value of listed bonds is \u00a316,979m (FY22: \u00a316,750m).
The fair value of our listed bonds is estimated on the basis of quoted market prices (Level 1).
The carrying amount of other loans and bank overdrafts equates to fair value due to the short maturity of these items (Level 3).
The interest rates payable on loans and borrowings disclosed above reflect the coupons on the underlying issued loans and borrowings
and not the interest rates achieved through applying associated cross-currency and interest rate swaps in hedge arrangements.
During the period the group entered into the sale of cash flows related to contract assets related to mobile handsets where the
performance obligations have been substantially delivered to the customer in the amount of \u00a3100m (FY22: \u00a3nil). The right to receive cash
is dependent on the group\u2019s further performance in relation to airtime and so a financial liability has been recognised and the related cash
flows have been included within financing activities in the cash flow statement.
Loans and other borrowings are analysed as follows:
At 31 March
2023
\u00a3m
2022
\u00a3m
Current liabilities
Listed bonds 1,075 233
Amounts owed to joint ventures 11 \u2013
Other loans and bank overdrafts
a
686 640
Total current liabilities 1,772 873
Non-current liabilities
Listed bonds 16,722 15,312
Other loans and bank overdrafts
a
27 \u2013
Total non-current liabilities 16,749 15,312
Total loans and other borrowings 18,521 16,185
a Includes collateral received on swaps of \u00a3557m (FY22: \u00a3555m).
The carrying values disclosed in the above table reflect balances at amortised cost adjusted for accrued interest and fair value adjustments
to the relevant loans or borrowings. These do not reflect the final principal repayments that will arise after taking account of the relevant
derivatives in hedging relationships which are reflected in the table below. All borrowings as at 31 March 2023 were unsecured.
The principal repayments of loans and borrowings at hedged rates amounted to \u00a317,442m (FY22: \u00a315,700m) and repayments fall due
as follows:
2023 2022
At 31 March
Carrying
amount
\u00a3m
Effect of
hedging and
interest
\u00a3m
Principal
repayments
at hedged
rates
\u00a3m
Carrying
amount
\u00a3m
Effect of
hedging and
interest
\u00a3m
Principal
repayments
at hedged
rates
\u00a3m
Within one year, or on demand 1,772 (271) 1,501 873 (233) 640
Between one and two years 1,165 15 1,180 935 43 978
Between two and three years 2,669 (141) 2,528 1,415 76 1,491
Between three and four years 404 (33) 371 2,532 (59) 2,473
Between four and five years 1,539 (14) 1,525 379 (8) 371
After five years 10,983 (646) 10,337 10,041 (294) 9,747
Total due for repayment after more than one year 16,760 (819) 15,941 15,302 (242) 15,060
Total repayments 18,532 (1,090) 17,442 16,175 (475) 15,700
Non cash adjustments
a
(11) 10
Total loans and other borrowings 18,521 16,185
a Fair value adjustments and unamortised bond fees.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-536": { "value": "Significant accounting policies that apply to loans and other borrowings We initially recognise loans and other borrowings at the fair value of amounts received net of transaction costs. They are subsequently measured at amortised cost using the effective interest method and, if included in a fair value hedge relationship, are re-valued to reflect the fair value movements on the associated hedged risk. The resulting amortisation of fair value movements, on de-designation of the hedge, is recognised in the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-567": { "value": "28. Finance expense Year ended 31 March 2023 \u00a3m 2022 \u00a3m Finance expense Interest on: Financial liabilities at amortised cost and associated derivatives 753 628 Lease liabilities 133 133 Derivatives 9 4 Fair value movements on derivatives not in a designated hedge relationship 1 4 Reclassification of cash flow hedge from other comprehensive income (21) 64 Unwinding of discount on provisions and other payables 14 \u2013 Total finance expense before specific items 889 833 Specific items (note 9) a 5 101 Total finance expense 894 934 a Includes \u00a313m credit (FY22: \u00a38m charge) reclassification of cash flow hedge from other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-577": { "value": "
29. Financial instruments and risk management
We issue or hold financial instruments mainly to finance our operations; to finance corporate transactions such as share buybacks and
acquisitions; for the temporary investment of short-term funds; and to manage currency and interest rate risks. In addition, various
financial instruments, for example trade receivables and payables arise directly from operations.
How do we manage financial risk?
Our activities expose us to a variety of financial risks: market risk (including interest rate risk and foreign exchange risk), credit risk and
liquidity risk.
Treasury operation
We have a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as our exposure
to associated market risks, and credit risk.
Treasury policy
Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of borrowing,
investments and group-wide exposures. The Board has delegated authority to operate these policies to a series of panels responsible for
the management of key treasury risks and operations. Appointment to and removal from the key panels requires approval from two of the
following: the Chairman, the Chief Executive or the Chief Financial Officer.
There has been no change in the nature of our risk profile between 31 March 2023 and the date of approval of these financial statements.
How do we manage interest rate risk?
Management policy
Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable rates,
partially offset by cash held at variable rates. Fair value interest rate risk arises from borrowings issued at fixed rates.
Our policy, as set by the Board, is to ensure that at least 70% of ongoing net debt is at fixed rates. Short-term interest rate management
is delegated to the treasury operation while long-term interest rate management decisions require further approval by the chief financial
officer, the corporate finance director or the group treasury director who each have been delegated such authority from the Board.
Hedging strategy
In order to manage our interest rate profile, we enter into cross-currency and interest rate swap agreements to vary the amounts and periods
for which interest rates on borrowings are fixed. The duration of the swap agreements matches the duration of the debt instruments. The
majority of the group\u2019s long-term borrowings are subject to fixed sterling interest rates after applying the impact of these hedging instruments.
How do we manage foreign exchange risk?
Management policy
Foreign currency hedging activities protect the group from the risk that changes in exchange rates will adversely affect future net
cash flows.
The Board\u2019s policy for foreign exchange risk management defines the types of transactions typically covered, including significant
operational, funding and currency interest exposures, and the period over which cover should extend for each type of transaction.
The Board has delegated short-term foreign exchange management to the treasury operation and long-term foreign exchange
management decisions require further approval from the chief financial officer, the corporate finance director or the group
treasury director.
Hedging strategy
A significant proportion of our external revenue and costs arise within the UK and are denominated in sterling. Our non-UK operations
generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility.
We enter into forward currency contracts to hedge foreign currency capital purchases, purchase and sale commitments, interest expense
and foreign currency investments. The commitments hedged are principally denominated in US dollar, euro, Indian rupees and Hungarian
forint. As a result, our exposure to foreign currency arises mainly on non-UK subsidiary investments and on residual currency trading flows.
We use cross-currency swaps to swap foreign currency borrowings into sterling. The table below reflects the currency and interest rate profile of our loans and borrowings after the impact of hedging. 2023 2022 At 31 March Fixed rate interest \u00a3m Floating rate interest \u00a3m Total \u00a3m Fixed rate interest \u00a3m Floating rate interest \u00a3m Total \u00a3m Sterling 15,210 1,773 16,983 13,515 1,746 15,261 Euro \u2013 443 443 \u2013 436 436 Other \u2013 16 16 \u2013 3 3 Total 15,210 2,232 17, 4 42 13,515 2,185 15,700 Ratio of fixed to floating 87% 13% 100% 86% 14% 100% Weighted average effective fixed interest rate \u2013 sterling 4.0% 3.9% The floating rate loans and borrowings and committed facilities bear interest rates fixed in advance for periods up to one year, primarily by reference to RPI, CPI and ARRs where applicable. Sensitivity analysis The income statement and shareholders\u2019 equity are exposed to volatility arising from changes in interest rates and foreign exchange rates. To demonstrate this volatility, management has concluded that the following are reasonable benchmarks for performing sensitivity analysis: \u2013 For interest, a 1% increase in interest rates and parallel shift in yield curves across sterling, US dollar and euro currencies. \u2013 For foreign exchange, a 10% strengthening of sterling against other currencies. The impact on equity, before tax and excluding any impact related to retirement benefit plans, of a 1% increase in interest rates and a 10% strengthening of sterling against other currencies is as detailed below: At 31 March 2023 \u00a3m Increase (reduce) 2022 \u00a3m Increase (reduce) Sterling interest rates 579 666 US dollar interest rates (371) (429) Euro interest rates (284) (247) Sterling strengthening (169) (203) A 1% decrease in interest rates and 10% weakening of sterling against other currencies would have broadly the same impact in the opposite direction. The impact of a 1% change in interest rates on the group\u2019s annual net finance expense and our exposure to foreign exchange volatility in the income statement, after hedging, (excluding translation exposures) would not have been material in FY23 and FY22. Credit ratings We continue to target a BBB+/Baa1 credit rating over the cycle, with a BBB/Baa2 floor. We regularly review the liquidity of the group and our funding strategy takes account of medium-term requirements. These include the pension deficit and shareholder distributions. Our December 2030 bond contains terms that require us to pay higher rates of interest when our credit ratings are below A3 in the case of Moody\u2019s or A\u2013 in the case of Standard & Poor\u2019s (S&P). Additional interest of 0.25% per year accrues for each ratings category downgrade by each agency below those levels effective from the next coupon date following a downgrade. Based on the total notional value of debt outstanding of \u00a32.2bn at 31 March 2023, our finance expense would increase/decrease by approximately \u00a311m a year if the group\u2019s credit rating were to be downgraded/upgraded, respectively, by one credit rating category by both agencies. Our credit ratings were as detailed below: 2023 2022 At 31 March Rating Outlook Rating Outlook Rating agency Fitch BBB Stable BBB Stable Moody\u2019s Baa2 Stable Baa2 Negative Standard & Poor\u2019s BBB Stable BBB Stable How do we manage liquidity risk? Management policy We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding requirements, determined by using short- and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and approves the long-term funding requirements of the group and on an ongoing basis considers any related matters. We manage refinancing risk by limiting the amount of borrowing that matures within any specified period and having appropriate strategies in place to manage refinancing needs as they arise. The maturity profile of our loans and borrowings at 31 March 2023 is disclosed in note 27. We have term debt maturities of \u00a30.8bn in FY24. Our treasury operation reviews and manages our short-term requirements within the parameters of the policies set by the Board. We hold cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March 2023 we had undrawn committed borrowing facilities of \u00a32.1bn (FY22: \u00a32.1bn) maturing in March 2027. The following table provides an analysis of the remaining cash flows including interest payable for our non-derivative financial liabilities on an undiscounted basis, which may therefore differ from both the carrying value and fair value. Non-derivative financial liabilities At 31 March 2023 Loans and other borrowings \u00a3m Interest on loans and other borrowings \u00a3m Trade and other payables \u00a3m Provisions \u00a3m Lease liabilities \u00a3m Total \u00a3m Due within one year 1,512 643 5,451 3 800 8,409 Between one and two years 1,165 637 \u2013 2 774 2,578 Between two and three years 2,669 616 \u2013 2 676 3,963 Between three and four years 404 575 \u2013 2 640 1,621 Between four and five years 1,539 558 \u2013 2 612 2,711 After five years 10,983 2,891 \u2013 \u2013 2,529 16,403 18,272 5,920 5,451 11 6,031 35,685 Interest payments not yet accrued \u2013 (5,660) \u2013 \u2013 \u2013 (5,660) Fair value adjustment (11) \u2013 \u2013 \u2013 \u2013 (11) Impact of discounting \u2013 \u2013 \u2013 (1) (672) (673) Carrying value on the balance sheet a,b 18,261 260 5,451 10 5,359 29,341 At 31 March 2022 Due within one year 640 568 5,224 4 788 7, 224 Between one and two years 935 564 \u2013 4 784 2,287 Between two and three years 1,415 538 \u2013 3 729 2,685 Between three and four years 2,532 515 \u2013 \u2013 626 3,673 Between four and five years 379 477 \u2013 \u2013 589 1,445 After five years 10,041 2,809 \u2013 \u2013 2,983 15,833 15,942 5,471 5,224 11 6,499 33,147 Interest payments not yet accrued \u2013 (5,238) \u2013 \u2013 \u2013 (5,238) Fair value adjustment 10 \u2013 \u2013 \u2013 \u2013 10 Impact of discounting \u2013 \u2013 \u2013 \u2013 (739) (739) Carrying value on the balance sheet a,b 15,952 233 5,224 11 5,760 27,18 0 a Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest cash flows were calculated using the most recent interest or indexation rates at the relevant balance sheet date. b The carrying amount of trade and other payables excludes \u00a3920m (FY22: \u00a3624m) of non-current trade and other payables which relates to non-financial liabilities, and \u00a31,113m (FY22: \u00a3918m) of other taxation, social security and deferred income. Trade and other payables are held at amortised cost. The carrying amount of these balances approximates to fair value due to the short maturity of amounts payable. The following table provides an analysis of the contractually agreed cash flows in respect of the group\u2019s derivative financial instruments. Cash flows are presented on a net or gross basis in accordance with settlement arrangements of the instruments. Derivatives \u2013 Analysed by earliest payment date a Derivatives \u2013 Analysis based on holding instrument to maturity Derivative financial liabilities At 31 March 2023 Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Due within one year 47 2,184 (2,088) 143 47 2,184 (2,088) 143 Between one and two years 47 1,125 (1,058) 114 47 1,125 (1,058) 114 Between two and three years 94 939 (882) 151 46 939 (882) 103 Between three and four years 111 381 (364) 128 46 381 (364) 63 Between four and five years 16 161 (135) 42 46 161 (135) 72 After five years 47 2,127 (2,011) 163 130 2,127 (2,011) 246 Total b 362 6,917 (6,538) 741 362 6,917 (6,538) 741 At 31 March 2022 Due within one year 300 940 (873) 367 77 940 (873) 144 Between one and two years 247 1,615 (1,508) 354 77 1,615 (1,508) 184 Between two and three years 18 1,679 (1,566) 131 77 1,679 (1,566) 190 Between three and four years 17 736 (685) 68 77 736 (685) 128 Between four and five years 17 511 (513) 15 77 511 (513) 75 After five years 65 4,789 (4,725) 129 279 4,789 (4,725) 343 Total b 664 10,270 (9,870) 1,064 664 10,270 (9,870) 1,064 a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty have the right to terminate the swap on certain dates. If the break clause was exercised, the mark to market position would be settled in cash. b Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest rate cash flows were calculated using the most recent rate applied at the relevant balance sheet date. How do we manage energy price risk? Management policy UK (excluding Northern Ireland) and European energy prices continue to be exposed to volatility driven by fears of reduced gas supply as Europe continues the shift from Russian gas to LNG and renewables (which themselves are subject to short-term fluctuations given their intermittent nature). In order to manage our exposure to fluctuating energy prices, we have a target for UK (excluding Northern Ireland) energy demand to be at least 80% hedged one quarter before the start of the next financial year, and 50% hedged for the following financial year. We achieve this through forward over the counter hedges and a mixture of new and existing power purchase agreements (PPAs) and derivative virtual PPAs (vPPAs). Hedging strategy In each financial year our strategy is to build our PPA and vPPA portfolio, exploring opportunities with 5-10 year contracts delivering favourable net present values. We complement this by monitoring the markets and forward purchasing electricity (power) when the market is favourable. In the forthcoming financial year (FY24) the aim is to be 95% hedged, which allows for headroom for increased outputs from the renewable sources should weather conditions prevail. How do we manage credit risk? Management policy Our exposure to credit risk arises from financial assets transacted by the treasury operation (primarily derivatives, investments, cash and cash equivalents) and from trading-related receivables. For treasury-related balances, the Board\u2019s defined policy restricts exposure to any one counterparty by setting credit limits based on the credit quality as defined by Moody\u2019s and Standard & Poor\u2019s. The minimum credit ratings permitted with counterparties in respect of new transactions are A3/A\u2013 for long-term and P1/A1 for short-term investments. If counterparties in respect of existing transactions fall below the permitted criteria we will take action where appropriate. The treasury operation continuously reviews the limits applied to counterparties and will adjust the limit according to the nature and credit standing of the counterparty, and in response to market conditions, up to the maximum allowable limit set by the Board. Operational management policy Our credit policy for trading-related financial assets is applied and managed by each of the customer-facing units (CFUs) to ensure compliance. The policy requires that the creditworthiness and financial strength of customers are assessed at inception and on an ongoing basis. Payment terms are set in accordance with industry standards. Where appropriate, we may minimise risks by requesting securities such as deposits, guarantees and letters of credit. We take proactive steps including constantly reviewing credit ratings of counterparties to minimise the impact of adverse market conditions on trading-related financial assets. Exposures The maximum credit risk exposure of the group\u2019s financial assets at the balance sheet date is as follows: At 31 March Notes 2023 \u00a3m 2022 \u00a3m Derivative financial assets 1,479 1,091 Investments 24 3,577 2,713 Trade and other receivables a 17 1,821 1,489 Contract assets 5 1,934 1,915 Cash and cash equivalents 26 392 777 Total 9,203 7, 985 a The carrying amount excludes \u00a3503m (FY22: \u00a3337m) of non-current trade and other receivables which relate to non-financial assets, and \u00a31,239m (FY22: \u00a31,135m) of prepayments, deferred contract costs, finance lease receivables and other assets. The credit quality and credit concentration of cash equivalents, current asset investments and derivative financial assets are detailed in the tables below. Where the opinion of Moody\u2019s and Standard & Poor\u2019s (S&P) differ, the lower rating is used. Moody\u2019s/S&P credit rating of counterparty 2023 \u00a3m 2022 \u00a3m Aa2/AA and above 3,498 1,946 Aa3/AA\u2013 115 1,118 A1/A+ 957 768 A2/A 400 269 A3/A\u2013 53 122 Baa1/BBB+ \u2013 \u2013 Baa2/BBB and below a 60 \u2013 Total b 5,083 4,223 a Baa2/BBB rated exposure represents the energy derivatives and carrying value of forward currency contracts with Sports JV. b We hold cash collateral of \u00a3557m (FY22: \u00a3555m) in respect of derivative financial assets with certain counterparties. The concentration of credit risk for our trading balances is provided in note 17, which analyses outstanding balances by CFU. Where multiple transactions are undertaken with a single financial counterparty or group of related counterparties, we enter into netting arrangements to reduce our exposure to credit risk by making use of standard International Swaps and Derivatives Association (ISDA) documentation. We have also entered into credit support agreements with certain swap counterparties whereby, on a daily, weekly and monthly basis, the fair value position on notional \u00a32,024m (FY22: \u00a32,024m) of long-dated cross-currency swaps and interest rate swaps is collateralised. Offsetting of financial instruments The table below shows our financial assets and liabilities that are subject to offset in the group\u2019s balance sheet and the impact of enforceable master netting or similar agreements. Related amounts not set off in the balance sheet Financial assets and liabilities At 31 March 2023 Amounts presented in the balance sheet \u00a3m Right of set off with derivative counterparties \u00a3m Cash collateral \u00a3m Net amount \u00a3m Derivative financial assets 1,479 (323) (557) 599 Derivative financial liabilities (383) 323 48 (12) Total 1,096 \u2013 (509) 587 At 31 March 2022 Derivative financial assets 1,091 (431) (555) 105 Derivative financial liabilities (870) 431 67 (372) Total 221 \u2013 (488) (267) Derivatives and hedging We use derivative financial instruments mainly to reduce exposure to foreign exchange and interest rate risks. Derivatives may qualify as hedges for accounting purposes if they meet the criteria for designation as cash flow hedges or fair value hedges in accordance with IFRS 9. Significant accounting policies that apply to derivatives and hedge accounting All of our derivative financial instruments are held at fair value on the balance sheet. Derivatives designated in a cash flow hedge The group designates certain derivatives in a cash flow hedge relationship. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge. To qualify for hedge accounting, hedge documentation must be prepared at inception, the hedge must be in line with BT\u2019s risk management strategy and there must be an economic relationship based on the currency, amount and timing of the respective cash flows of the hedging instrument and hedged item. This is assessed at inception and in subsequent periods in which the hedge remains in operation. Hedge accounting is discontinued when it is no longer in line with BT\u2019s risk management strategy or if it no longer qualifies for hedge accounting. The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument is assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of altered timing, cash flows or value. When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from equity and recognised in the same line of the income statement and in the same period or periods that the hedged transaction affects the income statement. Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income statement. Other derivatives Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some derivatives may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset is more appropriate. We effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including those relating to inflationary features. These derivatives are classified as fair value through profit and loss and are recognised at fair value. Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement are recognised in the income statement in the line that most appropriately reflects the nature of the item or transaction to which they relate. Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from the transaction price, a day one gain or loss will arise which is not recognised in the income statement. Such gains and losses are deferred and amortised to the income statement based on the remaining contractual term and as observable market data becomes available. The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and market rates of interest and foreign exchange at the balance sheet date. At 31 March 2023 Current asset \u00a3m Non-current asset \u00a3m Current liability \u00a3m Non-current liability \u00a3m Designated in a cash flow hedge 78 1,330 62 255 Other 4 67 24 42 Total derivatives 82 1,397 86 297 At 31 March 2022 Designated in a cash flow hedge 77 878 25 712 Other 11 125 26 107 Total derivatives 88 1,003 51 819 All derivative financial instruments are categorised at Level 2, with the exception of the energy contracts which are categorised at Level 3 of the fair value hierarchy as defined in note 24. Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro, US dollar and Japanese yen- denominated borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings relating to the group\u2019s 2030 US dollar bond. The hedged cash flows will affect the group\u2019s income statement as interest and principal amounts are repaid over the remaining term of the borrowings (see note 27). We hedge forecast foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint 12 months forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement over this period. The amounts related to items designated as hedging instruments were as follows: Hedged items At 31 March 2023 Notional principal \u00a3m Asset \u00a3m Liability \u00a3m Balance in cash flow hedge related reserves (gain)/loss \u00a3m Fair value (gain)/loss recognised in OCI \u00a3m Amount recycled from cash flow hedge related reserves to P&L \u00a3m Sterling, euro, US dollar and Japanese yen denominated borrowings a 12,888 1,316 (290) (316) (887) 597 Step up interest on the 2030 US dollar bond b 115 \u2013 (2) (31) (8) 6 Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint c 1, 211 34 (24) (35) (75) 61 Energy contracts d 58 (1) (64) (85) 49 Total cash flow hedges 14,214 1,408 (317) (446) (1,0 55) 713 Deferred tax \u2013 \u2013 106 Derivatives not in a designated hedge relationship 71 (66) \u2013 Carrying value on the balance sheet 1,479 (383) (340) At 31 March 2022 Sterling, euro and US dollar denominated borrowings a 11,688 889 (731) (26) (83) 61 Step up interest on the 2030 US dollar bond b 122 5 \u2013 (29) (6) 3 Foreign currency purchases, principally denominated in US dollar, euro and Indian rupees c 946 30 (3) (21) (51) (10) Energy contracts d 31 (3) (28) (64) \u2013 Total cash flow hedges 12,756 955 (737) (104) (204) 54 Deferred tax \u2013 \u2013 16 Derivatives not in a designated hedge relationship 136 (133) \u2013 Carrying value on the balance sheet 1,091 (870) (88) a Sterling, euro, US dollar and Japanese yen denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are presented within operating costs and finance expense. b Step up interest on US dollar denominated borrowings are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within finance expense. c Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item. d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long-term power cost certainty. Amounts recycled to profit and loss are presented within operating costs. All hedge relationships were fully effective in the period. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-568": { "value": "29. Financial instruments and risk management We issue or hold financial instruments mainly to finance our operations; to finance corporate transactions such as share buybacks and acquisitions; for the temporary investment of short-term funds; and to manage currency and interest rate risks. In addition, various financial instruments, for example trade receivables and payables arise directly from operations. How do we manage financial risk? Our activities expose us to a variety of financial risks: market risk (including interest rate risk and foreign exchange risk), credit risk and liquidity risk. Treasury operation We have a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as our exposure to associated market risks, and credit risk. Treasury policy Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of borrowing, investments and group-wide exposures. The Board has delegated authority to operate these policies to a series of panels responsible for the management of key treasury risks and operations. Appointment to and removal from the key panels requires approval from two of the following: the Chairman, the Chief Executive or the Chief Financial Officer. There has been no change in the nature of our risk profile between 31 March 2023 and the date of approval of these financial statements. How do we manage interest rate risk? Management policy Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable rates, partially offset by cash held at variable rates. Fair value interest rate risk arises from borrowings issued at fixed rates. Our policy, as set by the Board, is to ensure that at least 70% of ongoing net debt is at fixed rates. Short-term interest rate management is delegated to the treasury operation while long-term interest rate management decisions require further approval by the chief financial officer, the corporate finance director or the group treasury director who each have been delegated such authority from the Board. Hedging strategy In order to manage our interest rate profile, we enter into cross-currency and interest rate swap agreements to vary the amounts and periods for which interest rates on borrowings are fixed. The duration of the swap agreements matches the duration of the debt instruments. The majority of the group\u2019s long-term borrowings are subject to fixed sterling interest rates after applying the impact of these hedging instruments. How do we manage foreign exchange risk? Management policy Foreign currency hedging activities protect the group from the risk that changes in exchange rates will adversely affect future net cash flows. The Board\u2019s policy for foreign exchange risk management defines the types of transactions typically covered, including significant operational, funding and currency interest exposures, and the period over which cover should extend for each type of transaction. The Board has delegated short-term foreign exchange management to the treasury operation and long-term foreign exchange management decisions require further approval from the chief financial officer, the corporate finance director or the group treasury director. Hedging strategy A significant proportion of our external revenue and costs arise within the UK and are denominated in sterling. Our non-UK operations generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility. We enter into forward currency contracts to hedge foreign currency capital purchases, purchase and sale commitments, interest expense and foreign currency investments. The commitments hedged are principally denominated in US dollar, euro, Indian rupees and Hungarian forint. As a result, our exposure to foreign currency arises mainly on non-UK subsidiary investments and on residual currency trading flows.
We use cross-currency swaps to swap foreign currency borrowings into sterling. The table below reflects the currency and interest rate
profile of our loans and borrowings after the impact of hedging.
2023 2022
At 31 March
Fixed rate
interest
\u00a3m
Floating rate
interest
\u00a3m
Total
\u00a3m
Fixed rate
interest
\u00a3m
Floating rate
interest
\u00a3m
Total
\u00a3m
Sterling 15,210 1,773 16,983 13,515 1,746 15,261
Euro \u2013 443 443 \u2013 436 436
Other \u2013 16 16 \u2013 3 3
Total 15,210 2,232 17, 4 42 13,515 2,185 15,700
Ratio of fixed to floating 87% 13% 100% 86% 14% 100%
Weighted average effective fixed interest rate \u2013 sterling 4.0% 3.9%
The floating rate loans and borrowings and committed facilities bear interest rates fixed in advance for periods up to one year, primarily
by reference to RPI, CPI and ARRs where applicable.
Sensitivity analysis
The income statement and shareholders\u2019 equity are exposed to volatility arising from changes in interest rates and foreign exchange rates.
To demonstrate this volatility, management has concluded that the following are reasonable benchmarks for performing sensitivity analysis:
\u2013 For interest, a 1% increase in interest rates and parallel shift in yield curves across sterling, US dollar and euro currencies.
\u2013 For foreign exchange, a 10% strengthening of sterling against other currencies.
The impact on equity, before tax and excluding any impact related to retirement benefit plans, of a 1% increase in interest rates and a 10%
strengthening of sterling against other currencies is as detailed below:
At 31 March
2023
\u00a3m
Increase
(reduce)
2022
\u00a3m
Increase
(reduce)
Sterling interest rates 579 666
US dollar interest rates (371) (429)
Euro interest rates (284) (247)
Sterling strengthening (169) (203)
A 1% decrease in interest rates and 10% weakening of sterling against other currencies would have broadly the same impact in the
opposite direction.
The impact of a 1% change in interest rates on the group\u2019s annual net finance expense and our exposure to foreign exchange volatility
in the income statement, after hedging, (excluding translation exposures) would not have been material in FY23 and FY22.
Credit ratings
We continue to target a BBB+/Baa1 credit rating over the cycle, with a BBB/Baa2 floor. We regularly review the liquidity of the group and
our funding strategy takes account of medium-term requirements. These include the pension deficit and shareholder distributions.
Our December 2030 bond contains terms that require us to pay higher rates of interest when our credit ratings are below A3 in the case of
Moody\u2019s or A\u2013 in the case of Standard & Poor\u2019s (S&P). Additional interest of 0.25% per year accrues for each ratings category downgrade
by each agency below those levels effective from the next coupon date following a downgrade. Based on the total notional value of
debt outstanding of \u00a32.2bn at 31 March 2023, our finance expense would increase/decrease by approximately \u00a311m a year if the group\u2019s
credit rating were to be downgraded/upgraded, respectively, by one credit rating category by both agencies.
Our credit ratings were as detailed below:
2023 2022
At 31 March Rating Outlook Rating Outlook
Rating agency
Fitch BBB Stable BBB Stable
Moody\u2019s Baa2 Stable Baa2 Negative
Standard & Poor\u2019s BBB Stable BBB Stable
How do we manage liquidity risk?
Management policy
We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding requirements,
determined by using short- and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is
used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and approves the long-term
funding requirements of the group and on an ongoing basis considers any related matters. We manage refinancing risk by limiting the
amount of borrowing that matures within any specified period and having appropriate strategies in place to manage refinancing needs
as they arise. The maturity profile of our loans and borrowings at 31 March 2023 is disclosed in note 27. We have term debt maturities of
\u00a30.8bn in FY24.
Our treasury operation reviews and manages our short-term requirements within the parameters of the policies set by the Board. We hold
cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March 2023 we had undrawn
committed borrowing facilities of \u00a32.1bn (FY22: \u00a32.1bn) maturing in March 2027.
The following table provides an analysis of the remaining cash flows including interest payable for our non-derivative financial liabilities
on an undiscounted basis, which may therefore differ from both the carrying value and fair value.
Non-derivative financial liabilities
At 31 March 2023
Loans and
other
borrowings
\u00a3m
Interest
on loans
and other
borrowings
\u00a3m
Trade and
other
payables
\u00a3m
Provisions
\u00a3m
Lease
liabilities
\u00a3m
Total
\u00a3m
Due within one year 1,512 643 5,451 3 800 8,409
Between one and two years 1,165 637 \u2013 2 774 2,578
Between two and three years 2,669 616 \u2013 2 676 3,963
Between three and four years 404 575 \u2013 2 640 1,621
Between four and five years 1,539 558 \u2013 2 612 2,711
After five years 10,983 2,891 \u2013 \u2013 2,529 16,403
18,272 5,920 5,451 11 6,031 35,685
Interest payments not yet accrued \u2013 (5,660) \u2013 \u2013 \u2013 (5,660)
Fair value adjustment (11) \u2013 \u2013 \u2013 \u2013 (11)
Impact of discounting \u2013 \u2013 \u2013 (1) (672) (673)
Carrying value on the balance sheet
a,b
18,261 260 5,451 10 5,359 29,341
At 31 March 2022
Due within one year 640 568 5,224 4 788 7, 224
Between one and two years 935 564 \u2013 4 784 2,287
Between two and three years 1,415 538 \u2013 3 729 2,685
Between three and four years 2,532 515 \u2013 \u2013 626 3,673
Between four and five years 379 477 \u2013 \u2013 589 1,445
After five years 10,041 2,809 \u2013 \u2013 2,983 15,833
15,942 5,471 5,224 11 6,499 33,147
Interest payments not yet accrued \u2013 (5,238) \u2013 \u2013 \u2013 (5,238)
Fair value adjustment 10 \u2013 \u2013 \u2013 \u2013 10
Impact of discounting \u2013 \u2013 \u2013 \u2013 (739) (739)
Carrying value on the balance sheet
a,b
15,952 233 5,224 11 5,760 27,18 0
a Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest cash flows were
calculated using the most recent interest or indexation rates at the relevant balance sheet date.
b The carrying amount of trade and other payables excludes \u00a3920m (FY22: \u00a3624m) of non-current trade and other payables which relates to non-financial liabilities,
and \u00a31,113m (FY22: \u00a3918m) of other taxation, social security and deferred income.
Trade and other payables are held at amortised cost. The carrying amount of these balances approximates to fair value due to the
short maturity of amounts payable.
The following table provides an analysis of the contractually agreed cash flows in respect of the group\u2019s derivative financial instruments.
Cash flows are presented on a net or gross basis in accordance with settlement arrangements of the instruments.
Derivatives \u2013
Analysed by earliest payment date
a
Derivatives \u2013
Analysis based on holding instrument to maturity
Derivative financial liabilities
At 31 March 2023
Net settled
\u00a3m
Gross settled
outflows
\u00a3m
Gross settled
inflows
\u00a3m
Total
\u00a3m
Net settled
\u00a3m
Gross settled
outflows
\u00a3m
Gross settled
inflows
\u00a3m
Total
\u00a3m
Due within one year 47 2,184 (2,088) 143 47 2,184 (2,088) 143
Between one and two years 47 1,125 (1,058) 114 47 1,125 (1,058) 114
Between two and three years 94 939 (882) 151 46 939 (882) 103
Between three and four years 111 381 (364) 128 46 381 (364) 63
Between four and five years 16 161 (135) 42 46 161 (135) 72
After five years 47 2,127 (2,011) 163 130 2,127 (2,011) 246
Total
b
362 6,917 (6,538) 741 362 6,917 (6,538) 741
At 31 March 2022
Due within one year 300 940 (873) 367 77 940 (873) 144
Between one and two years 247 1,615 (1,508) 354 77 1,615 (1,508) 184
Between two and three years 18 1,679 (1,566) 131 77 1,679 (1,566) 190
Between three and four years 17 736 (685) 68 77 736 (685) 128
Between four and five years 17 511 (513) 15 77 511 (513) 75
After five years 65 4,789 (4,725) 129 279 4,789 (4,725) 343
Total
b
664 10,270 (9,870) 1,064 664 10,270 (9,870) 1,064
a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty have the right to terminate the swap on certain dates. If the break
clause was exercised, the mark to market position would be settled in cash.
b Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest rate cash flows were calculated
using the most recent rate applied at the relevant balance sheet date.
How do we manage energy price risk?
Management policy
UK (excluding Northern Ireland) and European energy prices continue to be exposed to volatility driven by fears of reduced gas supply as
Europe continues the shift from Russian gas to LNG and renewables (which themselves are subject to short-term fluctuations given their
intermittent nature). In order to manage our exposure to fluctuating energy prices, we have a target for UK (excluding Northern Ireland)
energy demand to be at least 80% hedged one quarter before the start of the next financial year, and 50% hedged for the following
financial year. We achieve this through forward over the counter hedges and a mixture of new and existing power purchase agreements
(PPAs) and derivative virtual PPAs (vPPAs).
Hedging strategy
In each financial year our strategy is to build our PPA and vPPA portfolio, exploring opportunities with 5-10 year contracts delivering
favourable net present values. We complement this by monitoring the markets and forward purchasing electricity (power) when the
market is favourable. In the forthcoming financial year (FY24) the aim is to be 95% hedged, which allows for headroom for increased
outputs from the renewable sources should weather conditions prevail.
How do we manage credit risk?
Management policy
Our exposure to credit risk arises from financial assets transacted by the treasury operation (primarily derivatives, investments, cash and
cash equivalents) and from trading-related receivables.
For treasury-related balances, the Board\u2019s defined policy restricts exposure to any one counterparty by setting credit limits based on the
credit quality as defined by Moody\u2019s and Standard & Poor\u2019s. The minimum credit ratings permitted with counterparties in respect of new
transactions are A3/A\u2013 for long-term and P1/A1 for short-term investments. If counterparties in respect of existing transactions fall below
the permitted criteria we will take action where appropriate.
The treasury operation continuously reviews the limits applied to counterparties and will adjust the limit according to the nature and credit
standing of the counterparty, and in response to market conditions, up to the maximum allowable limit set by the Board.
Operational management policy
Our credit policy for trading-related financial assets is applied and managed by each of the customer-facing units (CFUs) to ensure
compliance. The policy requires that the creditworthiness and financial strength of customers are assessed at inception and on an ongoing
basis. Payment terms are set in accordance with industry standards. Where appropriate, we may minimise risks by requesting securities
such as deposits, guarantees and letters of credit. We take proactive steps including constantly reviewing credit ratings of counterparties
to minimise the impact of adverse market conditions on trading-related financial assets.
Exposures
The maximum credit risk exposure of the group\u2019s financial assets at the balance sheet date is as follows:
At 31 March Notes
2023
\u00a3m
2022
\u00a3m
Derivative financial assets 1,479 1,091
Investments 24 3,577 2,713
Trade and other receivables
a
17 1,821 1,489
Contract assets 5 1,934 1,915
Cash and cash equivalents 26 392 777
Total 9,203 7, 985
a The carrying amount excludes \u00a3503m (FY22: \u00a3337m) of non-current trade and other receivables which relate to non-financial assets, and \u00a31,239m (FY22: \u00a31,135m) of
prepayments, deferred contract costs, finance lease receivables and other assets.
The credit quality and credit concentration of cash equivalents, current asset investments and derivative financial assets are detailed
in the tables below. Where the opinion of Moody\u2019s and Standard & Poor\u2019s (S&P) differ, the lower rating is used.
Moody\u2019s/S&P credit rating of counterparty
2023
\u00a3m
2022
\u00a3m
Aa2/AA and above 3,498 1,946
Aa3/AA\u2013 115 1,118
A1/A+ 957 768
A2/A 400 269
A3/A\u2013 53 122
Baa1/BBB+ \u2013 \u2013
Baa2/BBB and below
a
60 \u2013
Total
b
5,083 4,223
a Baa2/BBB rated exposure represents the energy derivatives and carrying value of forward currency contracts with Sports JV.
b We hold cash collateral of \u00a3557m (FY22: \u00a3555m) in respect of derivative financial assets with certain counterparties.
The concentration of credit risk for our trading balances is provided in note 17, which analyses outstanding balances by CFU. Where multiple
transactions are undertaken with a single financial counterparty or group of related counterparties, we enter into netting arrangements to
reduce our exposure to credit risk by making use of standard International Swaps and Derivatives Association (ISDA) documentation. We
have also entered into credit support agreements with certain swap counterparties whereby, on a daily, weekly and monthly basis, the fair
value position on notional \u00a32,024m (FY22: \u00a32,024m) of long-dated cross-currency swaps and interest rate swaps is collateralised.
Offsetting of financial instruments
The table below shows our financial assets and liabilities that are subject to offset in the group\u2019s balance sheet and the impact of
enforceable master netting or similar agreements.
Related amounts not set off in the balance sheet
Financial assets and liabilities
At 31 March 2023
Amounts
presented in the
balance sheet
\u00a3m
Right of set off
with derivative
counterparties
\u00a3m
Cash
collateral
\u00a3m
Net
amount
\u00a3m
Derivative financial assets 1,479 (323) (557) 599
Derivative financial liabilities (383) 323 48 (12)
Total 1,096 \u2013 (509) 587
At 31 March 2022
Derivative financial assets 1,091 (431) (555) 105
Derivative financial liabilities (870) 431 67 (372)
Total 221 \u2013 (488) (267)
Derivatives and hedging
We use derivative financial instruments mainly to reduce exposure to foreign exchange and interest rate risks. Derivatives may qualify as
hedges for accounting purposes if they meet the criteria for designation as cash flow hedges or fair value hedges in accordance with IFRS 9.
Significant accounting policies that apply to derivatives and hedge accounting All of our derivative financial instruments are held at fair value on the balance sheet. Derivatives designated in a cash flow hedge The group designates certain derivatives in a cash flow hedge relationship. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge. To qualify for hedge accounting, hedge documentation must be prepared at inception, the hedge must be in line with BT\u2019s risk management strategy and there must be an economic relationship based on the currency, amount and timing of the respective cash flows of the hedging instrument and hedged item. This is assessed at inception and in subsequent periods in which the hedge remains in operation. Hedge accounting is discontinued when it is no longer in line with BT\u2019s risk management strategy or if it no longer qualifies for hedge accounting. The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument is assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of altered timing, cash flows or value. When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from equity and recognised in the same line of the income statement and in the same period or periods that the hedged transaction affects the income statement. Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income statement. Other derivatives Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some derivatives may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset is more appropriate. We effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including those relating to inflationary features. These derivatives are classified as fair value through profit and loss and are recognised at fair value. Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement are recognised in the income statement in the line that most appropriately reflects the nature of the item or transaction to which they relate. Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from the transaction price, a day one gain or loss will arise which is not recognised in the income statement. Such gains and losses are deferred and amortised to the income statement based on the remaining contractual term and as observable market data becomes available. The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and market rates of interest and foreign exchange at the balance sheet date. At 31 March 2023 Current asset \u00a3m Non-current asset \u00a3m Current liability \u00a3m Non-current liability \u00a3m Designated in a cash flow hedge 78 1,330 62 255 Other 4 67 24 42 Total derivatives 82 1,397 86 297 At 31 March 2022 Designated in a cash flow hedge 77 878 25 712 Other 11 125 26 107 Total derivatives 88 1,003 51 819 All derivative financial instruments are categorised at Level 2, with the exception of the energy contracts which are categorised at Level 3 of the fair value hierarchy as defined in note 24. Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro, US dollar and Japanese yen- denominated borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings relating to the group\u2019s 2030 US dollar bond. The hedged cash flows will affect the group\u2019s income statement as interest and principal amounts are repaid over the remaining term of the borrowings (see note 27). We hedge forecast foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint 12 months forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement over this period.
The amounts related to items designated as hedging instruments were as follows:
Hedged items
At 31 March 2023
Notional
principal
\u00a3m
Asset
\u00a3m
Liability
\u00a3m
Balance in
cash flow
hedge
related
reserves
(gain)/loss
\u00a3m
Fair value
(gain)/loss
recognised
in OCI
\u00a3m
Amount
recycled
from cash
flow hedge
related
reserves to
P&L
\u00a3m
Sterling, euro, US dollar and Japanese yen denominated
borrowings
a
12,888 1,316 (290) (316) (887) 597
Step up interest on the 2030 US dollar bond
b
115 \u2013 (2) (31) (8) 6
Foreign currency purchases, principally denominated in US
dollar, euro, Indian rupees and Hungarian forint
c
1, 211 34 (24) (35) (75) 61
Energy contracts
d
58 (1) (64) (85) 49
Total cash flow hedges 14,214 1,408 (317) (446) (1,0 55) 713
Deferred tax \u2013 \u2013 106
Derivatives not in a designated hedge relationship 71 (66) \u2013
Carrying value on the balance sheet 1,479 (383) (340)
At 31 March 2022
Sterling, euro and US dollar denominated borrowings
a
11,688 889 (731) (26) (83) 61
Step up interest on the 2030 US dollar bond
b
122 5 \u2013 (29) (6) 3
Foreign currency purchases, principally denominated in US
dollar, euro and Indian rupees
c
946 30 (3) (21) (51) (10)
Energy contracts
d
31 (3) (28) (64) \u2013
Total cash flow hedges 12,756 955 (737) (104) (204) 54
Deferred tax \u2013 \u2013 16
Derivatives not in a designated hedge relationship 136 (133) \u2013
Carrying value on the balance sheet 1,091 (870) (88)
a Sterling, euro, US dollar and Japanese yen denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are
presented within operating costs and finance expense.
b Step up interest on US dollar denominated borrowings are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within finance expense.
c Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint are hedged using forward currency contracts. Amounts recycled to
profit and loss are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item.
d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long-term power cost certainty. Amounts recycled to
profit and loss are presented within operating costs.
All hedge relationships were fully effective in the period.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-582": { "value": "How do we manage liquidity risk? Management policy We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding requirements, determined by using short- and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and approves the long-term funding requirements of the group and on an ongoing basis considers any related matters. We manage refinancing risk by limiting the amount of borrowing that matures within any specified period and having appropriate strategies in place to manage refinancing needs as they arise. The maturity profile of our loans and borrowings at 31 March 2023 is disclosed in note 27. We have term debt maturities of \u00a30.8bn in FY24. Our treasury operation reviews and manages our short-term requirements within the parameters of the policies set by the Board. We hold cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March 2023 we had undrawn committed borrowing facilities of \u00a32.1bn (FY22: \u00a32.1bn) maturing in March 2027. The following table provides an analysis of the remaining cash flows including interest payable for our non-derivative financial liabilities on an undiscounted basis, which may therefore differ from both the carrying value and fair value. Non-derivative financial liabilities At 31 March 2023 Loans and other borrowings \u00a3m Interest on loans and other borrowings \u00a3m Trade and other payables \u00a3m Provisions \u00a3m Lease liabilities \u00a3m Total \u00a3m Due within one year 1,512 643 5,451 3 800 8,409 Between one and two years 1,165 637 \u2013 2 774 2,578 Between two and three years 2,669 616 \u2013 2 676 3,963 Between three and four years 404 575 \u2013 2 640 1,621 Between four and five years 1,539 558 \u2013 2 612 2,711 After five years 10,983 2,891 \u2013 \u2013 2,529 16,403 18,272 5,920 5,451 11 6,031 35,685 Interest payments not yet accrued \u2013 (5,660) \u2013 \u2013 \u2013 (5,660) Fair value adjustment (11) \u2013 \u2013 \u2013 \u2013 (11) Impact of discounting \u2013 \u2013 \u2013 (1) (672) (673) Carrying value on the balance sheet a,b 18,261 260 5,451 10 5,359 29,341 At 31 March 2022 Due within one year 640 568 5,224 4 788 7, 224 Between one and two years 935 564 \u2013 4 784 2,287 Between two and three years 1,415 538 \u2013 3 729 2,685 Between three and four years 2,532 515 \u2013 \u2013 626 3,673 Between four and five years 379 477 \u2013 \u2013 589 1,445 After five years 10,041 2,809 \u2013 \u2013 2,983 15,833 15,942 5,471 5,224 11 6,499 33,147 Interest payments not yet accrued \u2013 (5,238) \u2013 \u2013 \u2013 (5,238) Fair value adjustment 10 \u2013 \u2013 \u2013 \u2013 10 Impact of discounting \u2013 \u2013 \u2013 \u2013 (739) (739) Carrying value on the balance sheet a,b 15,952 233 5,224 11 5,760 27,18 0 a Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest cash flows were calculated using the most recent interest or indexation rates at the relevant balance sheet date. b The carrying amount of trade and other payables excludes \u00a3920m (FY22: \u00a3624m) of non-current trade and other payables which relates to non-financial liabilities, and \u00a31,113m (FY22: \u00a3918m) of other taxation, social security and deferred income. Trade and other payables are held at amortised cost. The carrying amount of these balances approximates to fair value due to the short maturity of amounts payable. The following table provides an analysis of the contractually agreed cash flows in respect of the group\u2019s derivative financial instruments. Cash flows are presented on a net or gross basis in accordance with settlement arrangements of the instruments. Derivatives \u2013 Analysed by earliest payment date a Derivatives \u2013 Analysis based on holding instrument to maturity Derivative financial liabilities At 31 March 2023 Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Net settled \u00a3m Gross settled outflows \u00a3m Gross settled inflows \u00a3m Total \u00a3m Due within one year 47 2,184 (2,088) 143 47 2,184 (2,088) 143 Between one and two years 47 1,125 (1,058) 114 47 1,125 (1,058) 114 Between two and three years 94 939 (882) 151 46 939 (882) 103 Between three and four years 111 381 (364) 128 46 381 (364) 63 Between four and five years 16 161 (135) 42 46 161 (135) 72 After five years 47 2,127 (2,011) 163 130 2,127 (2,011) 246 Total b 362 6,917 (6,538) 741 362 6,917 (6,538) 741 At 31 March 2022 Due within one year 300 940 (873) 367 77 940 (873) 144 Between one and two years 247 1,615 (1,508) 354 77 1,615 (1,508) 184 Between two and three years 18 1,679 (1,566) 131 77 1,679 (1,566) 190 Between three and four years 17 736 (685) 68 77 736 (685) 128 Between four and five years 17 511 (513) 15 77 511 (513) 75 After five years 65 4,789 (4,725) 129 279 4,789 (4,725) 343 Total b 664 10,270 (9,870) 1,064 664 10,270 (9,870) 1,064 a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty have the right to terminate the swap on certain dates. If the break clause was exercised, the mark to market position would be settled in cash. b Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest rate cash flows were calculated using the most recent rate applied at the relevant balance sheet date. ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-583": { "value": "How do we manage credit risk? Management policy Our exposure to credit risk arises from financial assets transacted by the treasury operation (primarily derivatives, investments, cash and cash equivalents) and from trading-related receivables. For treasury-related balances, the Board\u2019s defined policy restricts exposure to any one counterparty by setting credit limits based on the credit quality as defined by Moody\u2019s and Standard & Poor\u2019s. The minimum credit ratings permitted with counterparties in respect of new transactions are A3/A\u2013 for long-term and P1/A1 for short-term investments. If counterparties in respect of existing transactions fall below the permitted criteria we will take action where appropriate. The treasury operation continuously reviews the limits applied to counterparties and will adjust the limit according to the nature and credit standing of the counterparty, and in response to market conditions, up to the maximum allowable limit set by the Board. Operational management policy Our credit policy for trading-related financial assets is applied and managed by each of the customer-facing units (CFUs) to ensure compliance. The policy requires that the creditworthiness and financial strength of customers are assessed at inception and on an ongoing basis. Payment terms are set in accordance with industry standards. Where appropriate, we may minimise risks by requesting securities such as deposits, guarantees and letters of credit. We take proactive steps including constantly reviewing credit ratings of counterparties to minimise the impact of adverse market conditions on trading-related financial assets. Exposures The maximum credit risk exposure of the group\u2019s financial assets at the balance sheet date is as follows: At 31 March Notes 2023 \u00a3m 2022 \u00a3m Derivative financial assets 1,479 1,091 Investments 24 3,577 2,713 Trade and other receivables a 17 1,821 1,489 Contract assets 5 1,934 1,915 Cash and cash equivalents 26 392 777 Total 9,203 7, 985 a The carrying amount excludes \u00a3503m (FY22: \u00a3337m) of non-current trade and other receivables which relate to non-financial assets, and \u00a31,239m (FY22: \u00a31,135m) of prepayments, deferred contract costs, finance lease receivables and other assets. The credit quality and credit concentration of cash equivalents, current asset investments and derivative financial assets are detailed in the tables below. Where the opinion of Moody\u2019s and Standard & Poor\u2019s (S&P) differ, the lower rating is used. Moody\u2019s/S&P credit rating of counterparty 2023 \u00a3m 2022 \u00a3m Aa2/AA and above 3,498 1,946 Aa3/AA\u2013 115 1,118 A1/A+ 957 768 A2/A 400 269 A3/A\u2013 53 122 Baa1/BBB+ \u2013 \u2013 Baa2/BBB and below a 60 \u2013 Total b 5,083 4,223 a Baa2/BBB rated exposure represents the energy derivatives and carrying value of forward currency contracts with Sports JV. b We hold cash collateral of \u00a3557m (FY22: \u00a3555m) in respect of derivative financial assets with certain counterparties. The concentration of credit risk for our trading balances is provided in note 17, which analyses outstanding balances by CFU. Where multiple transactions are undertaken with a single financial counterparty or group of related counterparties, we enter into netting arrangements to reduce our exposure to credit risk by making use of standard International Swaps and Derivatives Association (ISDA) documentation. We have also entered into credit support agreements with certain swap counterparties whereby, on a daily, weekly and monthly basis, the fair value position on notional \u00a32,024m (FY22: \u00a32,024m) of long-dated cross-currency swaps and interest rate swaps is collateralised. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-537": { "value": "Significant accounting policies that apply to derivatives and hedge accounting All of our derivative financial instruments are held at fair value on the balance sheet. Derivatives designated in a cash flow hedge The group designates certain derivatives in a cash flow hedge relationship. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge. To qualify for hedge accounting, hedge documentation must be prepared at inception, the hedge must be in line with BT\u2019s risk management strategy and there must be an economic relationship based on the currency, amount and timing of the respective cash flows of the hedging instrument and hedged item. This is assessed at inception and in subsequent periods in which the hedge remains in operation. Hedge accounting is discontinued when it is no longer in line with BT\u2019s risk management strategy or if it no longer qualifies for hedge accounting. The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument is assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of altered timing, cash flows or value. When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from equity and recognised in the same line of the income statement and in the same period or periods that the hedged transaction affects the income statement. Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income statement. Other derivatives Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some derivatives may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset is more appropriate. We effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including those relating to inflationary features. These derivatives are classified as fair value through profit and loss and are recognised at fair value. Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement are recognised in the income statement in the line that most appropriately reflects the nature of the item or transaction to which they relate. Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from the transaction price, a day one gain or loss will arise which is not recognised in the income statement. Such gains and losses are deferred and amortised to the income statement based on the remaining contractual term and as observable market data becomes available. The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and market rates of interest and foreign exchange at the balance sheet date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-584": { "value": "
At 31 March 2023
Current
asset
\u00a3m
Non-current
asset
\u00a3m
Current
liability
\u00a3m
Non-current
liability
\u00a3m
Designated in a cash flow hedge 78 1,330 62 255
Other 4 67 24 42
Total derivatives 82 1,397 86 297
At 31 March 2022
Designated in a cash flow hedge 77 878 25 712
Other 11 125 26 107
Total derivatives 88 1,003 51 819
All derivative financial instruments are categorised at Level 2, with the exception of the energy contracts which are categorised at Level 3
of the fair value hierarchy as defined in note 24.
Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro, US dollar and Japanese
yen- denominated borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings
relating to the group\u2019s 2030 US dollar bond. The hedged cash flows will affect the group\u2019s income statement as interest and principal
amounts are repaid over the remaining term of the borrowings (see note 27).
We hedge forecast foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint 12 months
forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement over
this period.
The amounts related to items designated as hedging instruments were as follows: Hedged items At 31 March 2023 Notional principal \u00a3m Asset \u00a3m Liability \u00a3m Balance in cash flow hedge related reserves (gain)/loss \u00a3m Fair value (gain)/loss recognised in OCI \u00a3m Amount recycled from cash flow hedge related reserves to P&L \u00a3m Sterling, euro, US dollar and Japanese yen denominated borrowings a 12,888 1,316 (290) (316) (887) 597 Step up interest on the 2030 US dollar bond b 115 \u2013 (2) (31) (8) 6 Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint c 1, 211 34 (24) (35) (75) 61 Energy contracts d 58 (1) (64) (85) 49 Total cash flow hedges 14,214 1,408 (317) (446) (1,0 55) 713 Deferred tax \u2013 \u2013 106 Derivatives not in a designated hedge relationship 71 (66) \u2013 Carrying value on the balance sheet 1,479 (383) (340) At 31 March 2022 Sterling, euro and US dollar denominated borrowings a 11,688 889 (731) (26) (83) 61 Step up interest on the 2030 US dollar bond b 122 5 \u2013 (29) (6) 3 Foreign currency purchases, principally denominated in US dollar, euro and Indian rupees c 946 30 (3) (21) (51) (10) Energy contracts d 31 (3) (28) (64) \u2013 Total cash flow hedges 12,756 955 (737) (104) (204) 54 Deferred tax \u2013 \u2013 16 Derivatives not in a designated hedge relationship 136 (133) \u2013 Carrying value on the balance sheet 1,091 (870) (88) a Sterling, euro, US dollar and Japanese yen denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are presented within operating costs and finance expense. b Step up interest on US dollar denominated borrowings are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within finance expense. c Foreign currency purchases, principally denominated in US dollar, euro, Indian rupees and Hungarian forint are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item. d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long-term power cost certainty. Amounts recycled to profit and loss are presented within operating costs. All hedge relationships were fully effective in the period. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-569": { "value": "30. Other reserves Other comprehensive income Capital redemption reserve \u00a3m Cash flow reserve a \u00a3m Fair value reserve \u00a3m Cost of hedging reserve b \u00a3m Translation reserve c,d \u00a3m Total \u00a3m At 1 April 2021 27 (90) \u2013 59 440 436 Exchange differences e \u2013 \u2013 \u2013 \u2013 65 65 Net fair value gain (loss) on cash flow hedges f \u2013 59 \u2013 145 \u2013 204 Movements in relation to cash flow hedges recognised in income and expense g \u2013 (86) \u2013 32 \u2013 (54) Fair value movement on assets at fair value through other comprehensive income \u2013 \u2013 6 \u2013 \u2013 6 Tax recognised in other comprehensive income \u2013 (31) \u2013 \u2013 \u2013 (31) Transfer to realised profit h \u2013 \u2013 (7) \u2013 \u2013 (7) At 31 March 2022 27 (14 8) (1) 236 505 619 Reclassification i \u2013 472 \u2013 (472) \u2013 \u2013 Exchange differences e \u2013 \u2013 \u2013 \u2013 89 89 Net fair value gain (loss) on cash flow hedges f \u2013 864 \u2013 191 \u2013 1,055 Movements in relation to cash flow hedges recognised in income and expense g \u2013 (721) \u2013 8 \u2013 (713) Fair value movement on assets at fair value through other comprehensive income \u2013 \u2013 (3) \u2013 \u2013 (3) Tax recognised in other comprehensive income \u2013 (90) \u2013 \u2013 \u2013 (90) At 31 March 2023 27 377 (4) (37) 594 957 a The cash flow 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. b The cost of hedging reserve reflects the gain or loss on the portion excluded from the designated hedging instrument that relates to the currency basis element of our cross-currency swaps and forward points on certain foreign exchange contracts. It is initially recognised in other comprehensive income and accounted for similarly to gains or losses in the cash flow reserve. c The translation reserve is used to record cumulative translation differences on the net assets of foreign operations. The cumulative translation differences are recycled to the income statement on disposal of the foreign operation. d Movement in translation reserve includes \u00a3nil (FY22: \u00a31m) which relate to disposals (see note 23). e Excludes \u00a32m (FY22: \u00a31m) of exchange differences in relation to retained earnings attributed to non-controlling interests. f The large swing in the year of \u00a31,055m (FY22: \u00a3204m) was due to large fluctuations in interest rates, energy prices and foreign exchange rates. g Movements in cash flow hedge-related reserves recognised in income and expense of \u00a3713m (FY22: \u00a354m) include a net charge to other comprehensive income of \u00a3679m (FY22: \u00a3126m) which have been reclassified to operating costs, and a net charge of \u00a334m (FY22: credit of \u00a372m) which have been reclassified to finance expense (see note 28). h Realised profit includes profit on disposal of investments held at fair value through other comprehensive income. i Reclassification on cash flow hedges includes \u00a3472m (FY22: \u00a3nil) reclassification from cash flow hedge reserve to cost of hedging reserve. ", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-572": { "value": "31. Related party transactions Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is disclosed in note 6. Amounts paid to the group\u2019s retirement benefit plans are set out in note 20. Associates and joint ventures related parties include the Sports JV formed in August 2022 (see note 23). Sales of services to the Sports JV during FY23 were \u00a323m and purchases from the Sports JV were \u00a3176m. The amount receivable from the Sports JV as at 31 March 2023 was \u00a310m and the amount payable to the Sports JV was \u00a3123m. As part of the BT Sport transaction, the group has committed to providing the Sports JV with a sterling Revolving Credit Facility (RCF), up to a maximum for \u00a3300m, for short-term liquidity required by the Sports JV to fund its working capital and commitments to sports rights holders. Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with the group\u2019s external short-term borrowings. The outstanding balance under the RCF of \u00a3268m is treated as a loan receivable and held at amortised cost, see note 17. The capacity of the RCF is expected to reduce to \u00a3200m during FY24. There is also a loan payable to the Sports JV of \u00a311m, see note 27. The Sports JV has a foreign exchange hedging arrangement with the group to secure Euros required to meet its commitments to certain sports rights holders; the group has external forward contracts in place to purchase the Euros at an agreed sterling rate in order to mitigate its exposure to exchange risk. The group holds a \u00a314m derivative liability in respect of forward contracts provided to the Sports JV. Transactions from commercial trading arrangements with associates and joint ventures, including the Sports JV, are shown below: At 31 March 2023 \u00a3m 2022 \u00a3m Sales of services to associates and joint ventures 29 5 Purchases from associates and joint ventures 216 44 Amounts receivable from associates and joint ventures 10 2 Amounts payable to associates and joint ventures 124 1 Other related party transactions include the purchase of energy from an entity owned by the BT Pension Scheme. Total purchases during the year were \u00a313m (FY22: \u00a312m). \u00a31m was due to the other party as at 31 March 2023 (FY22: \u00a31m). The balance is unsecured and no guarantees have been given. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-578": { "value": "31. Related party transactions Key management personnel comprise Executive and Non-Executive Directors and members of the Executive Committee. Compensation of key management personnel is disclosed in note 6. Amounts paid to the group\u2019s retirement benefit plans are set out in note 20. Associates and joint ventures related parties include the Sports JV formed in August 2022 (see note 23). Sales of services to the Sports JV during FY23 were \u00a323m and purchases from the Sports JV were \u00a3176m. The amount receivable from the Sports JV as at 31 March 2023 was \u00a310m and the amount payable to the Sports JV was \u00a3123m. As part of the BT Sport transaction, the group has committed to providing the Sports JV with a sterling Revolving Credit Facility (RCF), up to a maximum for \u00a3300m, for short-term liquidity required by the Sports JV to fund its working capital and commitments to sports rights holders. Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with the group\u2019s external short-term borrowings. The outstanding balance under the RCF of \u00a3268m is treated as a loan receivable and held at amortised cost, see note 17. The capacity of the RCF is expected to reduce to \u00a3200m during FY24. There is also a loan payable to the Sports JV of \u00a311m, see note 27. The Sports JV has a foreign exchange hedging arrangement with the group to secure Euros required to meet its commitments to certain sports rights holders; the group has external forward contracts in place to purchase the Euros at an agreed sterling rate in order to mitigate its exposure to exchange risk. The group holds a \u00a314m derivative liability in respect of forward contracts provided to the Sports JV. Transactions from commercial trading arrangements with associates and joint ventures, including the Sports JV, are shown below: At 31 March 2023 \u00a3m 2022 \u00a3m Sales of services to associates and joint ventures 29 5 Purchases from associates and joint ventures 216 44 Amounts receivable from associates and joint ventures 10 2 Amounts payable to associates and joint ventures 124 1 Other related party transactions include the purchase of energy from an entity owned by the BT Pension Scheme. Total purchases during the year were \u00a313m (FY22: \u00a312m). \u00a31m was due to the other party as at 31 March 2023 (FY22: \u00a31m). The balance is unsecured and no guarantees have been given. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-570": { "value": "32. Financial commitments Financial commitments as at 31 March 2023 include capital commitments of \u00a31,480m (FY22: \u00a31,596m) and device purchase commitments of \u00a3217m (FY22: \u00a3295m). TV programme rights commitments were \u00a3nil (FY22: \u00a3997m) as these were transferred to the Sports JV formed with Warner Bros. Discovery (WBD) during FY23 (see note 23); both the group and WBD have guaranteed the Sports JV\u2019s obligations under certain programme rights commitments but we consider the risk of these guarantees being called as remote. Other than as disclosed below and in note 19, there were no contingent liabilities or guarantees at 31 March 2023 other than those arising in the ordinary course of the group\u2019s business and on these no material losses are anticipated. We have insurance cover to certain limits for major risks on property and major claims in connection with legal liabilities arising in the course of our operations. Otherwise, the group generally carries its own risks. Guarantees BT plc From March 2019 a formal guarantee was put in place by BT Group plc to fully and unconditionally guarantee the obligations of its wholly owned subsidiary British Telecommunications plc (\u201cBT plc\u201d) under its corporate bonds. This guarantee has been given in respect of all bonds issued since that date and was retrospectively applied to bonds issued prior to that date. It applies to all bonds issued in BT plc\u2019s Yankee, Euro Medium Term Note and hybrid bond programmes, and under the BT plc \u00a3600m 5.75% bonds due in 2028. Legal and regulatory proceedings See note 19 for contingent liabilities associated with legal and regulatory proceedings. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-571": { "value": "33. Post balance sheet events No material post balance sheet events have been identified.", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-502": { "value": "BT Group plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-16": { "value": "BT Group plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-504": { "value": "BT Group plc", "dimensions": { "concept": "ifrs-full:NameOfUltimateParentOfGroup", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-538": { "value": "plc", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } }, "fact-17": { "value": "1 Braham Street, London E1 8EE", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:213800LRO7NS5CYQMN21", "period": "2022-04-01T00:00:00/2023-04-01T00:00:00" } } } }