Material 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\u00a0revenue. The International CFU was separated from Business forming a new CFU, effective from 1 July 2025. At 31 March 2026 the group had four CFUs: Consumer, Business, International and Openreach. The CFUs are supported by technology units (TUs) comprising Digital and Networks; and five corporate functions (CFs) Finance and Business Services; Strategy and Change; People and Culture; Legal, Regulatory Affairs, Compliance and Company Secretarial; Corporate Affairs and Brand. TUs and CFs 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 them in the \u2018Other\u2019 category to reconcile to the consolidated results of the group. The \u2018Other\u2019 category includes unallocated TU costs and our CFs. | |||
Allocation of certain items to segments Provisions for the settlement of significant legal and commercial 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, in which case they are not reflected in the results of the reportable segment in line with how they are reported to the Executive Committee. The costs incurred by TUs and CFs 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. Depreciation and amortisation incurred by CFs in relation to leased property managed 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 among 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 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. | |||
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 and is based on regulated prices. This occurs both directly, and also indirectly, through TUs which are included within the \u2018Other\u2019 segment. Business internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning services. Intra-group revenue is generated from the sale of regulated products and services and 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\u00a0levels. | |||
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, and goodwill is presented by geography based on the CGU to which it is allocated. The goodwill balance allocated to the International CGU is further disaggregated based on the relative value of operations in each geography. | |||