Financial statements


Consolidated statement of income and expenditure 

for the year ended 31 March 

2006 2005 
Note £m £m 
Income (including share of joint ventures) 4,234.5 3,997.1 
Less: share of joint ventures 13b ii (229.5) (161.8) 
Group income 1 4,005.0 3,835.3 
Operating expenditure excluding exceptional restructuring costs (4,094.1) (4,022.2) 
Exceptional restructuring costs 4c (119.1) (50.7) 
Total operating expenditure 2 (4,213.2) (4,072.9) 
Group operating deficit (208.2) (237.6) 
Share of operating surplus of associates and joint ventures 31.2 19.7 
Operating deficit: Group and share of associates and joint ventures 3 (177.0) (217.9) 
Profit on sale and termination of operations 5 125.2 28.2 
Profit/(loss) on disposal of fixed assets 6 16.0 (43.1) 
Deficit before interest and taxation (35.8) (232.8) 
Interest receivable and similar items 7a 13.5 5.2 
Interest payable and similar items 7b (12.0) (11.3) 
Other net finance income (from defined benefit pension scheme) 8c ii 65.7 65.4 
Surplus/(deficit) before taxation and minority interest 1 31.4 (173.5) 
Taxation 9 (27.7) (15.2) 
Minority interest (0.1) 0.5 
Surplus/(deficit) for the financial year 18 3.6 (188.2) 

All results arise from continuing operations.
There is no difference between the results as disclosed above and the results on an historical cost basis.


BBC Annual Report and Accounts 2005/2006 95 

Financial statements 

Balance sheets 

at 31 March 

UK Public UK Public 
Service Service 
Group Group Broadcasting Broadcasting 
2006 2005 2006 2005 
Note £m £m £m £m 

Fixed assets 
Intangible fixed assets 10 19.3 20.3 – – 
Tangible fixed assets 11 697.2 721.6 493.0 488.1 
Investment in programmes for future sale 12 106.5 97.3 – – 
Other investments 13 46.3 40.6 283.9 285.4 

869.3 879.8 776.9 773.5 
Current assets 
Stocks 14 462.4 458.8 447.6 439.5 
Long-term debtors 
Current debtors 
15 
15 
45.9 
727.1 
106.1 
674.8 
26.9 
582.8 
84.3 
547.4 
Total debtors 
Short-term investments 
Cash at bank and in hand 
21 
21 
773.0 
– 
160.2 
780.9 
41.9 
38.3 
609.7 
– 
104.6 
631.7 
22.6 
7.6 
Creditors – amounts falling due 
within one year 16b 
1,395.6 
(919.8) 
1,319.9 
(918.3) 
1,161.9 
(729.5) 
1,101.4 
(775.2) 
Net current assets 475.8 401.6 432.4 326.2 
Total assets less current liabilities 
Creditors – amounts falling due after 
more than one year 
Provisions for liabilities 
16c 
17 
1,345.1 
(116.8) 
(196.2) 
1,281.4 
(187.6) 
(139.6) 
1,209.3 
(33.3) 
(164.5) 
1,099.7 
(34.7) 
(94.9) 
Net assets excluding pension asset/(liability) 1,032.1 954.2 1,011.5 970.1 

Pension asset 8c i 170.2 – – –
Pension liability 8c i (5.3) (426.8) – –


Net assets 1,197.0 527.4 1,011.5 970.1 
Represented by 
Operating reserve excluding pension reserve 
Pension reserve 
18 
18 
257.5 
164.9 
188.7 
(426.8) 
237.0 
– 
204.3 
– 
Total operating reserve 
Capital reserve 
Revaluation reserve 
18 
18 
18 
422.4 
771.3 
3.2 
(238.1) 
761.8 
4.0 
237.0 
771.3 
3.2 
204.3 
761.8 
4.0 
Minority interest 
1,196.9 
0.1 
527.7 
(0.3) 
1,011.5 
– 
970.1 
– 
1,197.0 527.4 1,011.5 970.1 

The financial statements were approved by the Governors and Executive Board on 14 June 2006 and signed 
on their behalf by: 

Michael Grade Chairman 
Mark Thompson Director-General 
Zarin Patel Group Finance Director 

96 BBC Annual Report and Accounts 2005/2006 

Financial statements 

Consolidated statement of total recognised gains and losses 

for the year ended 31 March 

2006 2005 
Note £m £m 
Group surplus/(deficit) for the financial year 3.6 (188.2) 
Exchange differences on retranslation of overseas subsidiaries 1.9 (0.5) 
Unrealised gain on disposal of business – 22.8 
Actuarial gain on defined benefit pension schemes 8c iii 661.1 80.9 
Total recognised gains and losses relating to the year 666.6 (85.0) 
Adjustment on adopting FRS 26The adjustment to reserves 18 2.6 – 
Total gains and losses since last annual report 
on adoption of FRS 26 relates 
to the fair value of derivatives 669.2 (85.0) 
existing at 1 April 2005 which 
have not been recognised in 
the comparatives, as permitted 
by the standard. 
Reconciliations of movement in reserves 
for the year ended 31 March 
UK Public UK Public 
Service Service 
Group Group Broadcasting Broadcasting 
2006 2005 2006 2005 
£m £m £m £m 
Surplus/(deficit) for the financial year 3.6 (188.2) 41.4 (16.5) 
Other recognised gains and losses relating to the year (net) 663.0 103.2 – – 
Increase/(decrease) in reserves during the year 666.6 (85.0) 41.4 (16.5) 
Adjustment on adopting FRS 26 2.6 – – – 
Increase/(decrease) in reserves since last annual report 669.2 (85.0) 41.4 (16.5) 
Opening reserves 527.7 612.7 970.1 986.6 
Closing reserves 1,196.9 527.7 1,011.5 970.1 

BBC Annual Report and Accounts 2005/2006 97 

Financial statements 

Consolidated cash flow statement 

for the year ended 31 March 

Reconciliation of Group operating deficit to net cash flow from operating activities 
2006 2005 
£m £m 
Group operating deficit (208.2) (237.6) 
Depreciation and amortisation 197.3 198.6 
Difference between pension charge and cash contribution 135.1 136.8 
Loss on disposal of tangible fixed assets 2.4 8.8 
Increase in stocks (6.8) (38.2) 
Increase in debtors (28.7) (43.8) 
Increase in creditors 47.5 24.4 
Increase in provisions 77.5 32.9 
Cash outflow on termination of operations – (1.7) 
Net cash inflow from operating activities 216.1 80.2 
Cash flow statement 
2006 2005 
Note £m £m 
Net cash inflow from operating activities 216.1 80.2 
Dividends received from joint ventures and associates 13a 19.8 13.6 
Return on investments and servicing of finance 
Interest received 13.5 5.2 
Interest paid (9.2) (11.3) 
Interest paid on finance leases (0.5) – 
Net cash inflow/(outflow) from return on investments and servicing of finance 3.8 (6.1) 
Taxation 
Taxation paid (12.0) (2.0) 
Capital expenditure and financial investments 
Purchase of tangible fixed assets (130.7) (487.7) 
Investment in programmes for future sale (73.6) (75.5) 
Investment in intangible fixed assets (0.4) (0.5) 
Repayment of loan to associate undertaking 0.4 0.3 
Proceeds from the sale of tangible fixed assets 20.2 382.6 
Net cash outflow from capital expenditure and financial investments (184.1) (180.8) 
Acquisitions and disposals 
Purchase of a subsidiary (0.8) – 
Purchase of interest in associates and joint ventures (4.1) (7.1) 
Proceeds from sale of operations 166.1 144.1 
Proceeds from disposal of interests in associates – 21.0 
Net cash inflow from acquisitions and disposals 161.2 158.0 
Net cash inflow before use of liquid resources and financing 204.8 62.9 
Management of liquid resources 
Sale/(purchase) of other liquid resources 20 41.9 (29.3) 
Net cash inflow/(outflow) from management of liquid resources 20 41.9 (29.3) 
Financing 
Increase in loans 57.0 20.0 
Repayment of loans (135.0) (50.0) 
Capital repayment of finance leases (9.4) (3.2) 
Repayment of loan notes (0.5) (0.1) 
Net cash outflow from financing 20 (87.9) (33.3) 
Increase in cash in the year 20 158.8 0.3 

98 BBC Annual Report and Accounts 2005/2006 

Financial statements 

Statement of accounting policies 

This section explains the BBC’s main accounting policies, which 
have been applied consistently throughout the year and in the 
preceding year except where stated. A footnote in italics follows 
some policies to explain technical aspects of the accounting 
treatment in plain English. 

The financial statements have been prepared in accordance with 
the provisions of the BBC’s Charter and Agreement.Although 
not mandatory, the BBC has in previous years chosen to follow 
the accounting and disclosure provisions of the Companies Act 
1985, applicable UK accounting standards and the Financial 
Services Authority Listing Rules to ensure that its financial 
statements were prepared on a basis consistent with those 
of UK public limited companies. 

Following changes in company law, if it had continued to report as 
if it were a public limited company, the BBC would have prepared 
its Group financial statements in accordance with EU-adopted 
International Financial Reporting Standards (IFRS) from 1 April 2005. 
However, as discussed in the Financial review (see pages 92 to 94), 
reporting under IFRS would be inconsistent with Government 
reporting. Instead the current financial statements have been 
prepared under UK GAAP as in previous years. 

In line with other companies, the BBC files with Companies House 
audited financial statements for all its subsidiary companies. 

Basis of accounting 

The financial statements are presented in accordance with 
UK GAAP under the historical cost accounting convention as 
modified by the revaluation of certain plant, machinery, furniture 
and fittings. 

Adoption of new accounting standards 

The BBC has adopted the following applicable UK accounting 
standards for the first time in these Group accounts. 

 FRS 21 (IAS 10) Events after the balance sheet date.This has had 
no impact on the statement of income and expenditure or the 
balance sheet. 
 FRS 23 (IAS 21) The effects of changes in foreign exchange rates. 
The principal effect of this change is that transactions are now 
recorded at the prevailing exchange rate and not the forward 
contract rate if a related foreign currency contract has been entered 
into.The gain or loss when the forward contract is discharged 
flows directly to the statement of income and expenditure. 
 FRS 25 (IAS 32) Financial Instruments: Disclosure and Presentation and 
FRS 26 (IAS 39) Financial Instruments: Measurement.The principal 
effect of these standards has been to recognise derivative financial 
instruments. As permitted under these standards the 2005 
comparatives have not been restated and continue to be 
presented under previously applicable accounting standards. 
 FRS 28 Corresponding amounts.This has had no impact on the 
statement of income and expenditure or the balance sheet. 
Basis of consolidation 

The Group comprises: 

 UK Public Service Broadcasting (the deemed parent company) 
and those subsidiaries incorporated to act solely on its behalf, 
notably Centre House Productions Limited, BBC Property 

Limited, BBC Property Investment Limited and BBC Free 

to View Limited (UK Public Service Broadcasting Group) 

 BBC World Service (and its subsidiaries) 
 Commercial subsidiary companies comprising BBC Commercial 
Holdings Limited and its various subsidiaries (notably BBC 
World Group and BBC Ventures Group – which includes 
BBC Worldwide) 
Unless otherwise stated, the acquisition method of accounting has 
been adopted. Under this method, the results of subsidiaries acquired 
or disposed of in the year are included in the consolidated statement 
of income and expenditure from the date of acquisition or up to the 
date of disposal. 

An associate is an undertaking in which the Group has a long-term 
interest, usually between 20% and 50% of the equity voting rights, 
and over which it exercises significant influence. A joint venture is an 
undertaking in which the Group has a long-term interest and over 
which it exercises joint control.The Group’s share of profits less 
losses of associates and joint ventures is included in the consolidated 
statement of income and expenditure and its interest in their net 
assets is included in the consolidated balance sheet except where 
the BBC has no obligation to make good its share of their 
cumulative operating losses. 

A separate statement of income and expenditure reflecting the 
results of UK Public Service Broadcasting has not been presented, 
as permitted by Section 230 of the Companies Act 1985 as if it 
were a company. 

These accounts of the Group include the results of UK Public Service 
Broadcasting, BBC World Service and all other businesses controlled 
by the BBC (subsidiaries) together with the BBC’s share of the 
results of businesses over which the BBC has influence but not 
control (associates) and those which the BBC jointly controls 
(joint ventures). 

Investments in Group undertakings 

Other than the BBC World Service, investments are recorded on 
the balance sheet of UK Public Service Broadcasting at cost less 
provision for any impairment in value. 

The funding of UK Public Service Broadcasting and of BBC World 
Service is legally separate and cross-subsidisation is not permissible. 
Accordingly, for the purposes of preparing UK Public Service 
Broadcasting’s balance sheet, UK Public Service Broadcasting is 
considered to have an investment in BBC World Service equal 
to the net assets of BBC World Service. 

Income 

Income, which excludes value added tax, trade discounts and 
sales between Group companies, is comprised of the following 
key classes of revenue, which are recognised as follows: 

 Television licences 
Income derived from television licences is recognised when 
receivable from the Department for Culture, Media and Sport. 
This represents the value of licences issued in the year.The amount 
which can be paid in cash to the BBC for any year cannot exceed 
the total amount voted by Parliament for that year. Any excess 
between the value of licences issued and the amount voted is 
recognised in the following year. 

BBC Annual Report and Accounts 2005/2006 99 

Financial statements 

Statement of accounting policies 

 Grant-in-Aid from the Foreign and Commonwealth Office 
BBC World Service Grant-in-Aid is recognised when receivable 
from the Foreign and Commonwealth Office. It is intended to meet 
estimated expenditure in the year but unexpended receipts for 
the year, within predetermined limits, are not liable to surrender. 

 Provision of equipment, facilities and services 
With the exception of long-term contracts, income is recognised 
when the equipment, facilities and services are provided to customers. 

For long-term contracts, the amount of profit attributable to the 
stage of completion is recognised when the outcome of the 
contract can be foreseen with reasonable certainty.Turnover for 
such contracts is stated at the cost appropriate to their stage of 
completion plus attributable profits, less amounts recognised in prior 
years. Provision is made for any future losses as they are foreseen. 

 Provision of programme making facilities and services 
Recognised on provision of service. 

 Distribution and advertising income 
Recognised on provision of service. 

 Licence fees from international television programme sales 
Recognised at the start of the licence period unless the programme 
rights have not been delivered by that date, in which case, revenue 
is recognised on delivery of the rights. 

 Sale of promotional merchandise and income from publishing 
Recognised at the time of delivery or on provision of service. Sales 
are stated after deduction of the sales value of actual and estimated 
returned goods. 

The distinction between the various income sources is important.The BBC 
is careful not to cross-subsidise commercial, UK Public Service Broadcasting 
or BBC World Service activities. More information on these BBC fair trading 
requirements and policies can be found on pages 76 to 78 of this report. 

Foreign currency translation 

Transactions in foreign currencies are translated into sterling 
at the rates of exchange ruling at the date of the transactions. 

Monetary assets and liabilities denominated in foreign currencies 
are translated into sterling at the rates of exchange ruling at 
31 March. Surpluses and deficits arising from the translation of 
assets and liabilities at these rates of exchange, together with 
exchange differences arising from trading, are included in the 
statement of income and expenditure. 

The profit and loss accounts and cash flows of overseas subsidiaries 
are translated into sterling at average rates for the year. Exchange 
differences arising on consolidation from the retranslation of the 
opening net assets of overseas subsidiaries and any related long-
term foreign currency borrowings together with the differences 
arising when the profit and loss accounts are retranslated at the 
rates ruling at the year end, are taken to the statement of total 
recognised gains and losses. 

As these financial statements are prepared in sterling, the BBC’s 
foreign currency transactions and balances must be translated, at 
appropriate exchange rates, into sterling.This policy states how those 
retranslations are included in the financial statements and is consistent 
with the methods used by many companies. 

Pension costs 

The BBC operates both defined benefit and defined contribution 
schemes for the benefit of employees. 

The amounts charged as expenditure for the defined contribution 
schemes represent the contributions payable by the BBC for the 
accounting periods in respect of these schemes. 

The defined benefit schemes, of which the majority of staff are 
members, provide benefits based on final pensionable pay.The assets 
of the BBC’s main scheme are held separately from those of 
the Group. 

Pension scheme assets are measured using market values. Pension 
scheme liabilities are measured using a projected unit method 
and discounted at the current rate of return on a high quality 
corporate bond of equivalent term and currency to the liability. 

The pension scheme surplus (to the extent that it is recoverable) 
or deficit is recognised in full.The movement in the scheme surplus/ 
deficit is split between operating charges, finance items and, in the 
statement of total recognised gains and losses, actuarial gains 
and losses. 

Amounts are charged to expenditure so as to spread the cost 
of pensions over employees’ working lives with the BBC. 

The BBC pension scheme is a Group wide scheme and UK Public 
Service Broadcasting and its subsidiary undertakings are unable 
to identify their shares of the underlying assets and liabilities of the 
scheme on a reasonable and consistent basis.Therefore as required 
by FRS 17, Retirement benefits, UK Public Service Broadcasting 
accounts for the scheme as if it were a defined contribution scheme. 
As a result the expenditure charged under FRS 17 for UK Public 
Service Broadcasting represents the contributions payable in the year. 

On retirement, members of the BBC’s main pension scheme are paid their 
pensions from a fund which is kept separate from the Group.The BBC 
makes cash contributions to that fund in advance of members’ retirement. 

Research and development 

Research and development expenditure is written off as incurred. 

Intangible fixed assets 

Goodwill 

Purchased goodwill (representing the excess of the fair value of 
the purchase consideration plus any related costs of acquisition 
over the fair value attributable to the separable net assets acquired) 
arising on acquisition of a subsidiary or business, is capitalised and 
amortised on a straight line basis over its useful economic life 
(usually 20 years), subject to reviews for impairment. On the 
subsequent disposal or termination of a business, the surplus or 
deficit is calculated after charging the unamortised amount of any 
related goodwill. As is permitted by FRS 10 Goodwill and intangible 
assets goodwill arising in periods up to 1 April 1998 remains offset 
against the operating reserve. On disposal, goodwill previously 
written off against reserves is transferred to the statement of 
income and expenditure for the year. 

Goodwill arises when the BBC pays more for a business than the sum 
of the business’ net assets acquired, representing the fact that the Group 
places more value on the business entity as a whole (usually due to 
expected synergies or earning potential of that business). As such, this 

100 BBC Annual Report and Accounts 2005/2006 

premium is treated as being an asset in its own right and held on the 
Group’s balance sheet, with a presumed economic life of 20 years. 

As with any other asset, the profit or loss on sale or disposal 
(in this case sale/disposal of the business) is calculated after writing 
off the unamortised amount still held on the Group’s balance sheet. 

Other intangibles 

Other intangibles are capitalised and amortised on a straight line 
basis over their useful economic life (usually 2–4 years) subject to 
review for impairment. 

Tangible fixed assets 

Expenditure on fixed assets is capitalised together with incremental 
internal direct labour costs incurred on capital projects.Tangible fixed 
assets are stated in the balance sheet at cost less accumulated 
depreciation and any provision for impairment. 

UK Public Service Broadcasting’s plant and machinery is stated 
at the estimated current replacement cost of the assets, as at 
31 March 1993, adjusted for remaining service potential, or cost 
if acquired later, less accumulated depreciation. 

BBC World Service’s plant and machinery and furniture and fittings 
are stated at the estimated current replacement cost of the assets, 
as at 1 April 1996, as adjusted for remaining service potential, or 
cost if acquired later, less accumulated depreciation. 

There is no material difference between the net book value of 
these tangible fixed assets and their value as determined on an 
historical cost basis. 

Depreciation is calculated so as to write off the cost or valuation, 
less estimated residual value, of fixed assets on a straight line basis 
over their expected useful lives. Depreciation commences from 
the date an asset is brought into service. 

The BBC’s useful lives for depreciation purposes for the principal 

categories of assets are: 
Land and buildings 
Freehold land – not depreciated 
Freehold and long-leasehold buildings – 50 years 
Short-leasehold land and buildings – unexpired lease term 
Plant and machinery 
Computer equipment – three to five years 
Electrical and mechanical infrastructure – ten to 25 years 
Other – three to ten years 
Furniture and fittings – three to ten years 

The BBC has revalued its assets once, when the internal market was 
introduced, but has chosen not to revalue them on an ongoing basis. 
This reflects the fact that they are used within the BBC rather than 
being held for resale or their investment potential. Assets are therefore 
included at the amount they cost when purchased or constructed 
(in either case less subsequent depreciation). 

Investment in programmes for future sale 

Investment in programmes for future sale is stated at cost, 
after writing off the costs of programmes that are considered 
irrecoverable,less accumulated amortisation.Amortisation 

of investment in programmes for future sale is charged to 
the statement of income and expenditure over the estimated 
average marketable life of the programme genre which is 
generally between two and ten years.The cost and accumulated 
amortisation of investment in programmes for future sale are 
reduced by programmes which are fully written off. 

The cost of programmes for sale is charged to the statement of 
income and expenditure to match the expected timing of income 
from future sales. 

Impairment of fixed assets 

The Group reviews the carrying amounts of its fixed assets when 
there is an indication that those assets may have suffered an 
impairment loss. 

If the recoverable amount of an asset (or cash generating unit) 
is estimated to be less than its carrying amount, the resulting 
impairment loss is recognised in the statement of income and 
expenditure immediately. 

Originated programme stocks and work in progress 

Originated programme stocks and work in progress, including 
those commissioned from independent producers, are stated 
at the lower of cost and net realisable value.With the exception 
of the costs of prepaid repeats of independent programmes, the 
full stock value is written off on first transmission. 

Cost includes all direct costs, production overheads and a 
proportion of other attributable overheads. 

Programme development costs are expensed to the statement 
of income and expenditure until such time as there is a strong 
indication that the development work will result in a commissioned 
programme when any further costs are capitalised as work in progress. 

Net realisable value is based upon arm’s length contract prices 
negotiated between the channel controllers and programme makers. 

Acquired programmes and film stocks 

The costs of acquired programmes and film stocks are written 
off on first transmission except to the extent that further 
showings are likely in the foreseeable future, when they are 
written off according to their expected transmission profile. 
Assets and liabilities relating to acquired programmes are 
recognised at the point of payment or commencement of the 
licence period, whichever is earlier. Agreements for the future 
purchase of programmes whose licence period has not 
commenced and where there has been no payment by the 
balance sheet date are disclosed as purchase commitments. 

Other stocks 

Raw materials and other physical stocks are stated at the lower 
of cost and net realisable value. 

Provisions 

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

BBC Annual Report and Accounts 2005/2006 101 

Financial statements 

Statement of accounting policies 

Deferred tax 

Deferred tax is computed under the liability method. Full provision, 
without discounting, is made in respect of timing differences between 
certain items in the financial statements and their treatment for 
taxation purposes at the balance sheet date except as otherwise 
required by FRS 19 Deferred tax. Deferred tax assets are recognised 
to the extent that it is regarded as more likely than not that they will 
be recovered. 

Deferred tax is corporation tax which is not payable at a specific time 
but which is expected to become payable in the future. 

Operating leases 

Operating lease rentals are written off on a straight line basis over 
the term of the lease. 

An operating lease is a lease in which the lessee has not taken on the 
risks and rewards of owning and operating the asset.The lessee – the 
BBC – has not acquired an asset but is hiring it, so the hire charge is 
included in the BBC’s costs. 

The BBC receives operating lease income which is also accounted 
for on a straight line basis over the term of the lease. 

Finance leases 

Assets acquired under finance leases are included within fixed 
assets at the total of the lease payments due over the life of the 
lease discounted at the rate of interest inherent in the lease. 
The same amount is included in creditors. Rental payments are 
apportioned between the finance element,which is charged in the 
statement of income and expenditure and the capital element, 
which reduces the lease creditor. 

A finance lease is a lease that transfers substantially all the risks and 
rewards of owning and operating an asset to the lessee. Effectively the 
lessee owns the asset and has financed it by borrowing, so the asset 
and borrowing are included separately in the balance sheet. 

Reserves 

Each year an amount equivalent to the costs expended by the 
Home and World Services on capital assets over and above 
depreciation, adjusted for disposals, is transferred to capital reserve 
so that, at the balance sheet date, the amount of the capital reserve 
is equivalent to the historical cost net book value of Home and 
World Services’ fixed assets. 

The revaluation reserve reflects the difference between the net book 
value of fixed assets of UK Public Service Broadcasting and BBC 
World Service at historic cost compared with their revalued amount. 

The operating reserve is the accumulated surplus of the income 
and expenditure account to date. 

The pension reserve represents the net surplus or liability of the 
Group’s defined benefit pension schemes. 

The BBC is careful not to mix UK Public Service Broadcasting and 
BBC World Service reserves.Hence BBC World Service reserves are 
shown separately in the notes to the financial statements. 

Cash and liquid resources 

Cash, for the purposes of the cash flow statement, comprises cash 
in hand and deposits repayable on demand, less overdrafts payable 

on demand. Liquid resources are current asset investments 
which are readily convertible into known amounts of cash at, 
or close to, their carrying values: they comprise money market 
deposits and liquidity funds with a notice period in excess of 
one working day. 

Financial instruments 

The Group does not enter into speculative derivative contracts. 
However some derivative financial instruments are used with a 
view to managing the BBC’s exposure to fluctuations in foreign 
currency exchange rates and interest rates. 

Derivative financial instruments are initially recognised at cost 
and are subsequently remeasured at fair value with movements 
recorded in the statement of income and expenditure. 

A limited number of derivative financial instruments are used 
to hedge the Group’s exposure to fluctuations in interest rates. 
The fair value of interest swaps is the estimated amount that the 
Group would receive or pay to terminate the swap at the balance 
sheet date, taking into account current interest rates and the 
current creditworthiness of swap counterparties. 

Some hedging contracts are undertaken in order to limit the 
Group’s exposure to foreign exchange fluctuations.The fair value 
of foreign currency forward contract rates is determined by using 
forward exchange market rates at the balance sheet date. 

The Group does not apply hedge accounting but instead allows 
the movement on the fair values of the hedging contracts to flow 
to the statement of income and expenditure as it arises. 

The Group’s loans are stated at amortised cost using the effective 
interest rate. 

Disclosure of the Group’s loans and other financial assets and 
liabilities is provided within Note 23 to the financial statements. 

The BBC’s derivative financial instruments comprise forward exchange 
contracts and interest rate swaps. 

Forward exchange contracts provide certainty of future expenses and 
income in a foreign currency by fixing the exchange rate rather than 
waiting for the prevailing exchange rate at the time of the transaction 
or payment.The BBCalso enters into interest rate swaps to effectively 
swap a floating rate loan into a fixed rate loan, again to provide more 
certainty of interest payments. 

Depending on how exchange rates and interest rates move between 
the time the Group enters into the transaction and the year end, these 
derivatives can either be profitable (‘in the money’) or loss-making in 
their own right. However, the rationale in entering into these derivatives 
is not to profit from currency markets or interest rate fluctuations, 
but to provide stability to the BBC’s cashflows.The movements relating 
to these derivatives (ie where they are either in profit or loss-making), 
are taken to the Group’s statement of income and expenditure for 
the year. 

102 BBC Annual Report and Accounts 2005/2006 

Financial statements 

Notes to the financial statements 

Note 1 provides analysis of 
the different business areas 
within the BBC. 
1 Analysis of income, surplus/(deficit) and net assets 
1a Analysis of income, surplus/(deficit) and net assets by activity 
UK Public 
Service BBC 
Broadcasting World Commercial 
Group Service Businesses Total 
Note £m £m £m £m 
UK Public Service 
Broadcasting Group (referred 
to as ‘Home Services’ within 
2006 
Total income 3,242.1 260.5 976.6 4,479.2 
the BBC Charter) comprises Less: Intra-Group income (117.3) (0.3) (127.1) (244.7) 
the UK Public Service 
Broadcasting operations and Total external income 3,124.8 260.2 849.5 4,234.5 
those subsidiary companies 
incorporated to act solely 
Less: Share of joint ventures – – (229.5) (229.5) 
on behalf of those public 
service operations. 
Group income 1b,d,g,h 3,124.8 260.2 620.0 4,005.0 
BBC World Service 
comprises broadcasting and 
media monitoring activities. 
Surplus/(deficit) before interest, taxation 
and non-cash pension costs 1e,h (105.7) 
Defined benefit pension scheme 
– additional operating costs*† 
(1.9) 206.9 99.3 
(135.1) 
Commercial Businesses – other net finance income* 65.7 
comprise businesses which 
generate external income Net interest receivable 1.5 
from exploitation of the 
BBC’s programmes, other Surplus before taxation and minority interest 31.4 
assets and skill base. Net assets (excluding pension asset) 1f,h 730.5 158.6 143.0 1,032.1 

Net pension asset*† 164.9 

Net assets 1,197.0 

2005 

Total income 3,084.8 247.7 1,090.3 4,422.8 
Less: Intra-Group income (120.1) (0.5) (305.1) (425.7) 

Total external income 2,964.7 247.2 785.2 3,997.1
Less: Share of joint ventures (0.9) – (160.9) (161.8)


Group income 1b,d,g,h 2,963.8 247.2 624.3 3,835.3 

(Deficit)/surplus before interest, taxation 
and non-cash pension costs 1e,h (194.5) 7.1 91.4 (96.0) 
Defined benefit pension scheme 

– additional operating costs*† (136.8) 
– other net finance income* 65.4 
Net interest payable (6.1) 
Deficit before taxation and minority interest (173.5) 

Net assets (excluding pension liability) 1f,h 689.2 160.1 104.9 954.2 

Pension liability*† (426.8) 

Net assets 527.4 

*In accordance with FRS 17 these items are not split between business classes because they are managed centrally across the 
Group and it is not possible to allocate them on a reasonable and consistent basis 

†The actual employer cash contribution to the defined benefit pension scheme is included in the surplus/(deficit) before interest, 
taxation and non-cash pension costs of each entity.The additional operating cost is the cost to the Group over and above these 
cash contributions 
BBC Annual Report and Accounts 2005/2006 103 

Financial statements 

Notes to the financial statements 

The income from licences 1b UK Public Service Broadcasting Group income 
represents the value of all 2006 2005 
licences issued in the year. Licence fee income £m £m 
Colour 2,622.3 2,489.2 
Monochrome 1.8 2.0 
Concessionary 0.9 0.9 
Over 75s 459.2 432.3 
Quarterly payment scheme premium 16.4 15.9 
Total licence fee income 3,100.6 2,940.3 
Other income includes Other income 24.2 23.5the provision of content 
and services to overseas Total external income 3,124.8 2,963.8broadcasters, concert ticket 
sales and exploitation of 
the programme archive. 

During the year 3.3 million (2005 3.2 million) colour licences were issued under the quarterly payment 
scheme at a premium of £5 each (2005 £5). 

Households in which one or more persons over the age of 75 reside, as their primary residence, are entitled 
to a free licence.The BBC is reimbursed for these free licences by the relevant Government departments. 

2006 2005 
Number Number 
Licences in force are those Licences in force m m 

which are still valid as at 

31 March each year. Colour 20.8 20.6 
Monochrome 0.1 0.1 
Over 75s 3.9 3.8 
Concessionary 0.2 0.2 

25.0 24.7 
2006 2005 
Licence fees are set by the Licence fees £ £ 
Department for Culture, 
Media and Sport. Colour 126.50 121.00 
Monochrome 42.00 40.50 
Concessionary 5.00 5.00 

From 1 April 2006 the colour and monochrome licence fees were increased to £131.50 and £44 
respectively.The concessionary licence remained at £5. 

1c Geographical analysis of UK Public Service Broadcasting Group 

UK Public Service Broadcasting Group income and deficit arise in the UK.The net assets used by these 

operations are located in the UK. 
Other income is generated 
from the sale of programmes, 
co-production deals, 
publishing activities and the 
provision of media 
monitoring services. 
1d BBC World Service income 
2006 2005 
£m £m 
Grant-in-Aid 239.1 225.1 
Subscriptions 15.8 16.7 
Other income 5.3 5.4 
Total external income 260.2 247.2 

1e BBC World Service (deficit)/surplus before interest and taxation by activity 
2006 2005 
Broadcasting 
£m 
0.7 
£m 
7.7 
BBC Monitoring 
Total (deficit)/surplus before interest and taxation 
(2.6) 
(1.9) 
(0.6) 
7.1 

104 BBC Annual Report and Accounts 2005/2006 

1f Geographical analysis of BBC World Service 
BBC World Service income, operating expenditure and (deficit)/surplus arises primarily in the UK. 
Location of BBC World Service net assets: 
2006 
£m 
2005 
£m 
UK 
Overseas 
65.8 
92.8 
66.2 
93.9 
Net assets 158.6 160.1 
1g Analysis of Commercial Businesses’ income by activity 
2006 
£m 
2005 
£m 
Children’s, new media and home entertainment 
Television sales 
Magazines 
Entertainment and news television channels 
Provision of playout and channel management services 
Provision of programme making facilities and services 
Provision of technology services 
Less intra-Group income 
133.5 
193.5 
152.1 
112.1 
31.5 
124.4 
– 
(127.1) 
161.0 
158.2 
163.5 
90.8 
108.9 
135.1 
111.9 
(305.1) 
Total external income 620.0 624.3 
This table shows where the 
customers of Commercial 
Businesses are based. 
1h Geographical analysis of Commercial Businesses 
2006 
External income by destination 
United 
Kingdom 
£m 
302.4 
Americas 
£m 
147.6 
Rest of 
the world 
£m 
170.0 
Total 
£m 
620.0 
Surplus before interest and taxation 167.5 7.6 31.8 206.9 
Net assets 106.8 35.9 0.3 143.0 
2005 
External income by destination 358.9 115.6 149.8 624.3 
Surplus before interest and taxation 69.7 4.1 17.6 91.4 
Net assets 75.9 28.5 0.5 104.9 

All commercial income originates in the UK as this is where rights for exploitation and the skills and services 
of the Commercial Businesses are developed. 

BBC Annual Report and Accounts 2005/2006 105 

Financial statements 

Notes to the financial statements 

2 Operating expenditure 
2a Analysis of operating expenditure by activity 
Total Total 
2006 2005 
Note £m £m 
UK Public Service Broadcasting Group 2b 3,236.7 3,107.7 
BBC World Service* 2c 262.1 240.1 
Commercial Businesses 2d 579.3 588.3 
Non-cash pension scheme operating costs** 135.1 136.8 
4,213.2 4,072.9 

*BBC World Service expenditure of £262.1million (2005 £240.1million) excludes £0.3million (2005 £0.5million) of expenditure 
on the provision of services to other BBC Group companies 
**In accordance with FRS 17 the non-cash operating costs are not split between the business activities as it is not possible to do 
this on a reasonable and consistent basis 

2b UK Public Service Broadcasting Group expenditure 
2006 2005 
Note £m £m 
Analogue services 
BBC One (i) 840.4 872.9 
BBC Two (i) 374.1 374.5 
National and regional television (ii) 228.6 213.5 
National, regional and local radio 141.3 142.2 
BBC Radio 1 17.7 17.8 
BBC Radio 2 24.1 23.8 
BBC Radio 3 31.1 32.0 
BBC Radio 4 71.4 71.3 
BBC Radio Five Live (i) 48.9 53.8 
1,777.6 1,801.8 

Digital services 
The CBBC Channel, CBeebies (iii) 63.2 49.7 
BBC Three 92.9 92.9 
BBC News 24 23.1 22.9 
BBC Parliament 1.9 2.2 
BBC Four (iv) 46.9 41.1 
Interactive television (BBCi) 18.2 17.1 
1Xtra 5.7 5.7 
BBC Radio Five Live Sports Extra 1.6 1.6 
6 Music 4.4 4.5 
BBC 7 5.0 4.8 
BBC Asian Network (v) 7.6 5.4 
bbc.co.uk 72.3 69.2 
BBC jam (formerly known as Digital Curriculum) (vi) 35.5 8.3 

378.3 325.4 
Transmitted programme spend 2,155.9 2,127.2 

table continues 

106 BBC Annual Report and Accounts 2005/2006 

2b UK Public Service Broadcasting Group expenditure continued 
Note 
2006 
£m 
2005 
£m 
Programme related spend 
Newsgathering 
Collecting society 
Orchestras and performing groups 
Marketing, press and publicity 
On-air trails 
Market research and consumer services 
Libraries, helplines, development and one-off events 
89.5 
60.4 
19.0 
40.3 
23.7 
12.1 
93.3 
89.5 
57.2 
17.9 
49.6 
24.5 
16.0 
84.2 
338.3 338.9 
Total programme spend 
Overheads excluding restructuring (vii) 
2,494.2 
311.5 
2,466.1 
281.6 
Total output spend 2,805.7 2,747.7 
Percentage of output spend on programmes 89% 90% 
Licence fee collection costs 
Transmission costs (viii) 
153.4 
166.9 
152.0 
157.3 
Exceptional restructuring costs 
Digital UK costs 
(ix), 4c 
(x) 
320.3 
106.7 
4.0 
309.3 
50.7 
– 
Total UK PSB expenditure 3,236.7 3,107.7 

(i) Spend on BBC One and BBC Radio Five Live was higher in 2005 due to coverage of the Olympics and Euro 2004. 
(ii) National and regional television spend increased in 2006 to support the BBC’s policy of investment in local television 
initiatives and local politics programming. 
(iii) Spend on the children’s channels has increased due to proportionally more quality content, particularly drama, being 
premiered on The CBBC Channel and CBeebies, rather than BBC One or BBC Two. 
(iv) Spend on BBC Four reflects the continuation of the channel’s investment programme in original output, including drama 
and comedy. 
(v) Increased costs were incurred by BBC Asian Network on new refurbished facilities and the first phase of a new strategy 
which will see a strengthening schedule with increased investment in journalism. 
(vi) BBC jam, formerly known as the Digital Curriculum, launched in January 2006 with content available in four subject areas. 
The service will continue to expand over the next two and a half years, with content covering a range of subjects across 
the curriculum and Key Stages being made available at regular intervals. 
(vii) Overheads are the costs associated with the provision of physical infrastructure and support services across the BBC, which 
include the cost of accommodation, technology, finance and human resources.The proportion of these costs which are 
directly attributable to programme making are included within total programme spend, whilst the costs of services provided 
across the BBCas a whole are shown as overhead spend.In 2000 the BBCadopted a target to increase the proportion 
it spends on programmes, in relation to its total output spend. Output spend excludes licence fee collection costs, 
transmission costs, exceptional restructuring costs and Digital UK costs.The BBCtargeted to increase the proportion of spend 
on programming to 85% which was achieved in 2003, and in 2006 the proportion of output spend incurred on programming 
was 89%. Overheads in 2006 are higher than 2005, as a result of one-off rebates in National Insurance and property rates 
in 2005. 
(viii)Of the transmission costs, £77.2million relates to analogue services (2005 £76.7million) and £89.7million to digital services 
(2005 £80.6million). 

(ix) Restructuring costs include those costs relating to the change programme occurring within the BBC which will deliver 
£355million savings annually from 2008/2009. 
(x) Digital UK costs represent the BBC share of the running costs and marketing expense for Digital UK, the company that will 
drive switchover in the UK, in line with Government strategy. 
BBC Annual Report and Accounts 2005/2006 107 

Financial statements 

Notes to the financial statements 

BBC World Service 2c BBC World Service expenditure 
expenditure excludes 2006 2005 
expenditure on intra-Group £m £m 
activities. 
Radio 178.4 159.1 
Monitoring 26.5 25.2 
Transmission and distribution costs 42.8 42.3 
Internet activity 14.4 13.5 

Total 262.1 240.1 

BBC World Service expenditure includes £12.4million of exceptional restructuring costs (see Note 4c). 

The expenditure shown for 2d Commercial Businesses’ expenditure 
Commercial Businesses 2006 2005 
relates only to external Note £m £m 
income and excludes 
expenditure relating to sales Cost of sales 325.8 323.5 
within the BBC. Distribution costs 149.5 136.9 

Administrative and other costs 21.7 48.9 
Amortisation of programme investment 12 82.3 79.0 

Total 579.3 588.3 

3 Operating deficit 

The operating deficit before interest and taxation is stated after charging/(crediting) the following items: 

2006 2005 
£m £m 

Payments under operating leases 

– land and buildings 60.8 59.5 
– plant and machinery 4.3 13.2 
– other 12.5 10.2 
Research and development 16.2 18.8 
Programme development 31.7 29.2 
Depreciation 
– owned assets 107.1 113.9 
– leased assets 6.5 1.7 
Loss on disposal of tangible fixed assets* 2.4 8.8 
Amortisation of investment in programmes for future sale 82.3 79.0 
Amortisation of intangible fixed assets 1.4 4.0 
Net exchange differences (0.5) (2.8) 
Fair value losses on embedded derivatives 5.1 – 
Fair value gains on forward foreign currency contracts (4.3) – 
Auditors’ remuneration (KPMG LLP) 
– financial audit – UK Public Service Broadcasting 0.7 0.6 
– other 0.5 0.5 
– further assurance services 0.3 0.4 
– tax advisory services 0.3 0.4 
– other non-audit services 0.4 0.3 
Fair trading auditors’ remuneration (PricewaterhouseCoopers LLP) 0.4 0.4 
*Loss on disposal of tangible fixed assets represents adjustments to depreciation on disposals in the ordinary course of business. 
Significant disposals are disclosed separately in Note 6 

108 BBC Annual Report and Accounts 2005/2006 

4 Employees and remuneration 

4a Persons employed 

The average number of persons employed in the year was: 

Average for the year 

2006 2005 
Number Number 

UK Public Service Broadcasting 18,860 19,647 
BBC World Service 2,367 2,347 
Commercial Businesses 4,150 5,270 
Group total 25,377 27,264 

Within the averages above, 2,981 (2005 3,414) part-time employees have been included at their full-time 
equivalent of 1,717 (2005 1,593). 

In addition to the above, the Group employed an average full-time equivalent of 823 (2005 785) persons 
on a casual basis and the BBC Orchestra and BBC Singers, employed on programme contracts, totalled 382 
(2005 378) full-time equivalents. 

On 31 July 2005 the equivalent of 1,056 full-time employees transferred to Red Bee Media Limited as part 
of the sale of BBCBroadcast Limited.This transfer is reflected in the average for 2006. 

4b Staff costs 
2006 2005 
Note £m £m 
Salaries and wages 988.4 1,038.6 
Social security costs 88.4 95.1 
Pension costs 
– main scheme (defined benefit) 8c ii 184.9 176.8 
– other schemes 8c ii 1.1 1.6 
Redundancy costs 4c 129.5 61.5 
1,392.3 1,373.6 
Comprising: 
UK Public Service Broadcasting 986.9 909.9 
BBC World Service 100.6 84.3 
Commercial Businesses 169.7 242.6 
Main pension scheme additional operating cost (defined benefit)* 135.1 136.8 
1,392.3 1,373.6 

*The actual employer cash contributions to the defined benefit pension scheme are borne by each business.The additional 
operating cost is the cost to the Group over and above these contributions. It is not possible to allocate this to each business 
on a reasonable and consistent basis 

4c Restructuring costs 
2006 2005 
Note £m £m 
Exceptional redundancy costs: 
– UK Public Service Broadcasting 2b 106.7 50.7 
– BBC World Service 12.4 – 
119.1 50.7 

Non-exceptional redundancy costs: 

– BBC World Service 3.9 3.0 
– Commercial Businesses 6.5 7.8 
10.4 10.8 
4b 129.5 61.5 

Exceptional redundancy costs relate to the change programme occurring within UK Public Service 
Broadcasting and the strategic review of BBCWorld Service. 

BBC Annual Report and Accounts 2005/2006 109 

Financial statements 

Notes to the financial statements 

4d Remuneration of the Board of Governors and Executive Board 

The emoluments of the Governors and of the Executive Board members are disclosed on page 88 
in the Governors’ remuneration report. 

5 Profit on sale and termination of operations 
2006 2005 
Note £m £m 

Profit on sale of BBC Broadcast Limited 19 108.8 –
Profit on sale of BBC Technology Holdings Limited 15.2 32.4
Profit on disposal of learning business 19 1.7 –
Loss on termination of operations (0.5) (4.6)
Profit on disposal of children’s book business – 0.4


Profit on sale and termination of operations 125.2 28.2 

On 31 July 2005, the Group sold BBC Broadcast Limited, a wholly owned subsidiary, for £166.0million 
consideration to Creative Broadcast Services Limited, a company owned by Macquarie Capital Alliance 
Group and Macquarie Bank Limited (see Note 19). BBC Broadcast Limited provided playout and channel 
management services. 

On 30 September 2004 the Group sold BBC Technology Holdings Limited to Siemens Business Services 
Limited. A profit of £32.4million was recorded in 2005 after providing £21.1million for the estimated pension 
liability in respect of the expected number of BBC Pension Scheme members transferring to Siemens Business 
Services Limited. During the year, after confirmation of the actual staff transferred from the BBC to the 
Siemens pension scheme the value of the pension liability was confirmed as £5.9million, resulting in a further 
profit of £15.2million. 

In October 2005 BBC Worldwide entered into an agreement with Pearsons Education to form a partnership 
named BBC Active. In return for the transfer of the assets of its learning division to the partnership, BBC 
Worldwide acquired a 15% share in the new partnership together with cash of £6.6million (see Note 19). 
The Group is accounting for its investment as an associate undertaking. 

In August 2005, BBC Worldwide announced its intention to terminate its teacher learning business, which 
maintained a learning website. During the year ended 31 March 2006 termination costs totalling £0.5million 
were charged to the profit and loss account, of which £0.3million was in respect of the write off of assets 
held at 31 March 2005.The balance of £0.2million comprised the cash costs of exiting the business. 

During the prior year BBC Worldwide Limited terminated its multimedia publishing business which 
developed and marketed gaming titles for Playstation, Xbox and Gameboy platforms.This resulted in 
termination costs of £2.7million of which £1.4million comprised the cash costs of exiting the business and 
£1.3million comprised the write-down of stocks held at 31 March 2004. 

In July 2004 the Group decided to terminate the operations of BBC Vecta Limited.This resulted in a loss on 
termination of business of £1.9million of which £0.3million comprised cash termination costs. 

6 Profit/(loss) on disposal of fixed assets 
2006 2005 
£m £m 

Disposal of music publishing rights 9.3 – 
Regional properties 1.5 

19.4 
Other properties 5.2 – 
White City site – (62.5) 
Profit/(loss) on disposal of fixed assets 16.0 (43.1) 

In May 2005 BBC Worldwide completed the sale of its current catalogue of music publishing rights held 
within Investment in programmes for future sale. Consideration of £10.3million was received, with a profit 
of £9.3million. A cash advance against the deal was received in March 2005. 

110 BBC Annual Report and Accounts 2005/2006 

In 2005 the BBC entered into a sale and leaseback of regional properties; 20 regional properties were 
disposed in 2005 realising a profit of £19.4million. In 2006, two further regional properties were disposed 
in this way realising a profit of £1.5million. In 2006 the BBC also disposed of Melbourne House, the 
Hippodrome and Motspur Park properties realising a combined profit of £5.2million. 

In the prior year the BBC changed the terms on which it occupies the White City site.This involved a 
number of discrete legal steps, including: purchase of the freehold of the White City site from the BBC’s joint 
venture with Land Securities Trillium (LST); cancellation of the existing lease on the White City site and the 
White City Development Partnership capital;and the sale and leaseback of the White City site with a new 
third party investment vehicle. 

The BBC considers that the substance of these discrete steps is that they formed part of a single property 
related transaction.This gave rise to a net charge to the income and expenditure account in the year of 
£62.5million, comprising a £1.5million loss on disposal of the White City site, £8.5million accelerated 
amortisation of goodwill in the property partnerships and £52.5million from the accelerated amortisation 
of balances previously shown in long-term prepayments.There was no cash effect from this accelerated 
amortisation.The BBC expects that the charge recorded in 2005 will be more than compensated in future 
years through reduced rental payments. 

7 Interest 

7a Interest receivable and similar items 

2006 2005 
£m £m 

Interest receivable 13.5 5.2 
7b Interest payable and similar items 
2006 2005 
£m £m 
Fair value losses on interest rate swaps (2.3) – 
Interest payable on bank and other loans (9.2) (11.3) 
Finance charges payable in respect of finance leases (0.5) – 
Interest payable and similar items (12.0) (11.3) 

8 Pensions 

8a Group pension schemes 

The Group operates several pension schemes.The BBC Pension Scheme (the BBC’s most significant 
scheme) and a small unfunded scheme (which is closed to new members) are contributory defined 
benefit schemes. Additionally the Group Personal Pension Scheme and other small schemes are defined 
contribution schemes. Note 8b describes the BBC Pension Scheme and Note 8c explains all the amounts 
included in the financial statements. 

8b BBC Pension Scheme 

The BBC Pension Scheme is the main pension scheme of the Group and covers the majority of employees. 
This scheme provides salary related benefits on a defined benefit basis funded from assets held in separate 
trustee-administered funds. 

The pension scheme trustees manage the scheme in the short, medium and long-term.They make 
funding decisions based on valuations which take a longer term view of the assets required to fund 
the scheme’s liabilities. 

Valuations of the scheme are performed by Watson Wyatt, consulting actuaries. Formal valuations are 
undertaken every three years, and interim updates of the latest formal valuation are carried out for each 
financial year end.The most recent formal valuation was carried out as at 1 April 2005 and, consistent with 
changes in the valuation methodology used by other pension schemes, the actuarial valuation of the assets 
has changed and has been carried out using a market-based method.The previous formal valuation (April 2002) 
and its interim updates, including March 2005, were carried out on the basis of an assessed value method 
(see Note 8b iv). 

BBC Annual Report and Accounts 2005/2006 111 

Financial statements 

Notes to the financial statements 

The maturity of a scheme 8b i Scheme membership analysis and maturity profile 
provides an indication of the 
cash requirements of the 2006 2005 2004 
scheme and the likely Number Number Number 

attitude of the trustees to 
risk within their investment Contributors 19,864 21,093 21,426 
policy.The more mature a Pensioners 16,803 16,567 16,302scheme, the more likely that Dependants 3,676 3,622 3,555

trustees will favour low risk 

investments. Deferred pensioners 16,890 16,241 14,864 

8b ii Funding the scheme 

The scheme has shown an actuarial surplus for many years which has allowed both the BBC and the scheme 
members to pay contributions at reduced rates. 

As a result of the 2005 market-based valuation by Watson Wyatt, it has been agreed between the Group and 
the trustees that employer contributions will increase to 7.5% on 1 April 2006 (with employee contributions 
rising to 6% in summer 2006) and then rise to 17.3% on 1 April 2007 with employee contributions rising to 
7.5% on the same date.This is part of the ongoing consultation process with BBC staff on the proposed changes 
to the pension scheme. Ordinarily the next formal actuarial vaulation would be performed on 1 April 2008, 
however, given the current consultation, the next formal valuation has been brought forward to 1 April 2007. 
The position will be reviewed again once the results of the 1 April 2007 valuation are known. 

Projections 
2008 2007 2006 2005 2004 2003 
% % % % % % 
Employer 17.3 7.5 6.0 5.5 5.0 4.5 
Employee 7.5 5.5/6.0 5.5 5.0 4.5 4.5 
Underlying cost of scheme to BBC 
as % of pensionable salaries* 17.3 19.3/18.8 19.3 19.0 19.5 20.4 

*Excludes the cost effectively paid for by the employee 

8b iii Scheme cash flows (day-to-day liquidity) 

In 2006 cash outflows from the pension scheme exceed its cash inflows, however, this includes an outgoing 
of £29.8million due to transfers out relating to the sale of BBC Technology. 

2006 2005 2004 
£m £m £m 

Contributions (employer and employee) 112 99 90
Investment income 189 187 167


Cash inflows 301 286 257 
Payments of pensions and transfers out (275) (239) (220) 
Expenses (29) (22) (20) 
Net cash inflow (3) 25 17 

112 BBC Annual Report and Accounts 2005/2006 

This note considers 
whether the scheme’s 
assets are sufficient to 
cover the scheme’s liabilities. 

The FRS 17 valuation 
takes assets at their market 
value and discounts the 
accrued liabilities by 
reference to the discount 
rate of an AA rated 
corporate bond. 

8b iv Ability to meet long-term commitments and scheme financial position 

The most recent formal valuation (as at 1 April 2005) shows a surplus of £13.0million (with assets sufficient 
to cover just over 100% of the benefits due to members). 

2006 2005 2004 2003 2002 
FRS 17 valuation £m £m £m £m £m 
Scheme assets (Note 8b v) 7,846 6,342 5,880 4,903 6,219 
Scheme liabilities (Note 8b vi) (7,676) (6,764) (6,312) (5,973) (5,254) 
Surplus/(deficit) 170 (422) (432) (1,070) 965 

Percentage by which scheme assets cover liabilities 102% 94% 93% 82% 118% 
2005 2005 2004 2003 2002 
Final Interim Interim Interim Final 
An actuarial valuation assumes Actuarial valuation* £m £m £m £m £m 
the scheme will continue for 
the foreseeable future. Scheme assets (Note 8b v) 6,406 6,038 5,668 5,496 5,392 
Scheme liabilities (Note 8b vi) (6,393) (5,764) (5,525) (5,229) (4,951) 
Surplus 13 274 143 267 441 

Percentage by which scheme assets cover liabilities 100% 105% 103% 105% 109% 

*For the years 2002 to 2005 interim, the actuarial valuation of assets was carried out on an assessed value method which values 
assets by projecting the income that will be generated by the assets, and discounts both assets and liabilities by reference to a 
prudent long-term average discount rate which is consistent with the scheme’s asset portfolio 

The 2005 final actuarial valuation has been carried out using a market-based method which takes assets 
at their market value on the assessment date and discounts the liabilities by reference to a discount rate 
consistent with market conditions at that time and the scheme’s asset portfolio. 

A deferred tax asset or liability will not arise for the Group because most of the Group’s public service 
activity is not subject to taxation. 

BBC Annual Report and Accounts 2005/2006 113 

Financial statements 

Notes to the financial statements 

Where FRS 17 values are 
higher than actuarial values 
in 2004 and 2005 it means 
the market was anticipating 
greater future investment 
returns than were being 
assumed in funding the 
scheme’s liabilities. 

8b v Scheme assets 

The allocation of assets by the scheme trustees is governed by a need to manage risk against the desire 
for high returns and any liquidity needs. A high percentage of assets are held in equities which the trustees 
expect will produce higher returns in the long term.The target allocation, based on market values, for 
equities is 60%, bonds and gilts 30% and property 10%. 

Long-term rate 

of return expected 
at 31 March 
(used for FRS 17 value 
Actuarial value* 
Final 
Actuarial value* 
Interim 
Type of asset market value) £m % £m % £m % 

2006 
Equities 
Bonds and gilts 
Property 
Cash 
7.7% 
4.4% 
6.1% 
3.9% 
5,687 
1,116 
890 
153 
73 
14 
11 
2 
Total assets 7,846 
2005 
Equities 
Bonds and gilts 
Property 
Cash 
7.7% 
4.7% 
6.2% 
3.7% 
4,333 
1,050 
737 
222 
68 
17 
12 
3 
4,320 
1,063 
737 
286 
67 
17 
12 
4 
4,294 
909 
668 
167 
71 
15 
11 
3 
Total assets 6,342 6,406 6,038 
2004 
Equities 
Bonds and gilts 
Property 
Cash 
7.9% 
4.8% 
6.3% 
3.9% 
4,118 
1,048 
597 
117 
70 
18 
10 
2 
4,109 
902 
556 
101 
72 
16 
10 
2 
Total assets 5,880 5,668 

*As per 8b iv, for the 2004 and 2005 actuarial valuations the scheme assets were valued on an assessed value basis, but for the 
2005 final a market-based method was used for the actuarial valuation and therefore the scheme assets would be valued at 
the same amount for both FRS 17 and actuarial purposes from 2006 onwards. 

The last formal valuation was undertaken in 2005.The 2005 and 2004 figures are from an interim update of 
the 2002 formal valuation. 

114 BBC Annual Report and Accounts 2005/2006 

8b vi Scheme liabilities 

The calculation of the scheme liabilities requires a number of assumptions, both demographic and financial, to 
be made.The key financial assumptions made by the actuaries were: 

2006 2005 2005 2004 
Final Interm Interim 
Key financial assumptions % % % % 

The discount rate for 
the FRS 17 value is taken 
as the rate for an AA rated 
corporate bond. 
FRS 17 valuation 
Rate of increase in salaries 
Rate of increase in pension payments 
Inflation assumption 
Discount rate for FRS 17 valuation 
4.9 
2.9 
2.9 
5.0 
4.7 
2.7 
2.7 
5.5 
4.7 
2.7 
2.7 
5.6 
Longevity assumption post-retirement (age 60) – Males 
Longevity assumption post-retirement (age 60) – Females 
23.5 years 
25.7 years 
22.0 years 
24.5 years 
22.0 years 
24.5 years 
The discount rate used in the 
actuarial valuation of liabilities 
is that of the expected return 
on assets held by the scheme 
and is considered to be a 
prudent long-term average. 
Actuarial valuation 
Rate of increase in salaries 
Rate of increase in pension payments* 
Inflation assumption 
Discount rate for actuarial valuation** 
Longevity assumption post-retirement (age 60) – Males 
Longevity assumption post-retirement (age 60) – Females 
4.7 
2.5/2.7 
2.7 
5.45/6.7 
23.5 years 
25.7 years 
4.5 
2.5 
2.5 
6.25 
22.0 years 
24.5 years 
4.5 
2.5 
2.5 
6.25 
22.0 years 
24.5 years 
Scheme liabilities at present value 
2006 
£m 
2005 
Final 
£m 
2005 
Interim 
£m 
2004 
Interim 
£m 
A higher discount rate means 
a lower value for the liabilities. 
FRS 17 valuation 
Actuarial valuation 
7,676 
6,393 
6,764 
5,764 
6,312 
5,525 

*This increase in new benefit pension payments has been held at 2.5% as in previous years, however, old benefits have been 
increased in line with the inflation assumption. New Benefits members’ pension increase with RPI up to a limit of 5% (for Old 
Benefits the limit is 10%).This assumption is adopted on the basis that in some years RPI may increase above 5% and New 
Benefit pension increases will be capped, so on average the increases for New Benefits will be lower than actual RPI 

**For the 2005 valuation a dual discount has been adopted since the assets backing the post-retirement benefits have a different 
split between equities, bonds, property, and cash to those backing the pension liabilities in payment, with the investment 
assumptions for post-retirement funding being more risk averse and therefore leading to a lower discount rate 

8c Pension charges and balances within financial statements 

8c i Movement in pension liability during year 
BBC 
Pension 
Scheme 
2006 
£m 
Unfunded 
scheme 
2006 
£m 
Total 
2006 
£m 
BBC 
Pension 
Scheme 
2005 
£m 
Unfunded 
Scheme 
2005 
£m 
Total 
2005 
£m 

The defined contribution Net pension liability at start of year (421.8) (5.0) (426.8) (431.6) (4.7) (436.3)

schemes do not give rise to 

balance sheet pension assets/ Contributions (from employer)* 49.8 0.2 50.0 40.0 0.2 40.2 
liabilities as there is no ongoing Operating charge for year (184.9) (0.2) (185.1) (176.8) (0.2) (177.0) 
liability to the employer from Net finance income/(cost) 66.0 (0.3) 65.7 65.7 (0.3) 65.4 

these schemes once the 

contributions due for the Net gain recognised in STRGL 661.1 – 661.1 80.9 – 80.9 

year have been settled. Closing net pension asset/(liability) 170.2 (5.3) 164.9 (421.8) (5.0) (426.8) 

* The contribution shown for the unfunded scheme represents the pensions paid to members during the year. The assumptions 
for pension scheme liabilities of the unfunded scheme are the same as the main scheme. As the scheme is unfunded there are 
no assets and hence no expected return on assets 
BBC Annual Report and Accounts 2005/2006 115 

Financial statements 

Notes to the financial statements 

8c ii Pension charges in statement of income and expenditure 
The current service cost is 
the underlying cost to the 
BBC of pension rights earned 
by employees during the year. 
Defined benefit scheme 
BBC Pension Unfunded 
Scheme scheme 
£m £m 
Defined 
contribution 
schemes 
£m 
All schemes 
£m 

The past service cost arises 2006
from members of the Current service cost (194.1) (0.2) (0.9) (195.2)


scheme becoming entitled to 

improved defined retirement Past service cost (9.8) – – (9.8)
benefits, resulting in a charge Gain on settlements and curtailments* 19.0 – – 19.0
for years of service before the
award of the improvement. Operating cost (184.9) (0.2) (0.9) (186.0)


The finance return comprises Expected return on pension scheme assets 431.8 – – 431.8 
estimates based on predictions Interest on pension scheme liabilities (365.8) (0.3) – (366.1)

of future performance and 
economic conditions. Net finance income/(cost) 66.0 (0.3) – 65.7 

Net cost in statement of income and expenditure (118.9) (0.5) (0.9) (120.3) 

2005 

Current service cost (192.3) (0.2) (1.4) (193.9) 
Past service cost (7.5) – – (7.5) 
Gain on settlements and curtailments 23.0 – – 23.0 

Operating cost (176.8) (0.2) (1.4) (178.4) 
Expected return on pension scheme assets 412.7 – n/a 412.7 
Interest on pension scheme liabilities (347.0) (0.3) n/a (347.3) 
Net finance income/(cost) 65.7 (0.3) – 65.4 
Net cost in statement of income and expenditure (111.1) (0.5) (1.4) (113.0) 

*There was a curtailment gain of £19.0million during the year in respect of the transfer for BBC Broadcast Limited employees, 
395 of whom have elected to transfer their past service benefits to the Red Bee Media Pension Plan. In addition, there was 
a further curtailment gain of £3.0million during the year in respect of approximately 180 members who left the Scheme 
on 31 March 2006 as part of the HR outsourcing exercise.Also there was a settlement loss during the year of around 
£3.0million in respect of the bulk transfer payment of £29.8million for the BBC Technology Limited employees to Siemens 
on 16 November 2005 

8c iii Pension costs in statement of total recognised gains and losses (STRGL) 
2006 2005 
£m £m 

These gains and losses arise Actual return less expected return on pension scheme assets 1,249.2 198.7 

from actual performance 

being different from that Experience gains/(losses) arising on scheme liabilities 208.6 (1.4) 
predicted – for example Changes in assumptions underlying present value of scheme liabilities (796.7) (116.4) 

changes in economic 
conditions or the Net gain recognised in STRGL 661.1 80.9 
demographic profile of 
BBC employees. 

Only defined benefit schemes give rise to gains and losses in the STRGL. 

The actual return on scheme assets is significantly higher than the previous year due to very strong market 
performance in 2006, particularly in the run up to the year end. However, some of these gains have been 
lost since the year end as the markets have fallen sharply since 31 March 2006. 

The gains on scheme assets are offset in part by an actuarial loss due to changes in assumptions relating 
to the calculation of the scheme’s liabilities.The key changes are that longevity rates have been increased 
as pensioners and dependants are living longer (and therefore drawing pensions for longer) than 
previously assumed and that the discount rate (taken to be that of an AA rated corporate bond) has 
fallen from 5.5% to 5.0%. 

116 BBC Annual Report and Accounts 2005/2006 

This note is designed to show 
trends over several years. 
8c iv History of experience gains and losses 
Amount by which the expected return 
on scheme assets is (higher)/lower than 
the actual return: 
2006 2005 2004 2003 2002 
Amount (£million) 
Percentage of scheme assets 
1,249.2 
15.9% 
198.7 
3.1% 
778.4 
13.2% 
(1,607.9) 
32.8% 
(532.0) 
8.6% 
Experience gains and (losses) on scheme liabilities: 
Amount (£million) 208.6 
Percentage of present value of scheme liabilities 2.7% 
(1.4) 
0.0% 
0.1 
0.0% 
(12.4) 
0.2% 
26.6 
0.5% 
Total gain/(loss) recognised in STRGL: 
Amount (£million) 
Percentage of present value of scheme liabilities 
661.1 
8.6% 
80.9 
1.2% 
778.5 
12.3% 
(2,013.4) 
33.7% 
(725.4) 
13.8% 

8d UK Public Service Broadcasting pension charge 

UK Public Service Broadcasting, in accordance with the group scheme provision within FRS 17, accounts for 
the scheme as if it were a defined contribution scheme.This is because it is not possible to identify its share 
of the underlying assets and liabilities of the scheme on a reasonable and consistent basis.The expenditure 
for UK Public Service Broadcasting of £38.2million therefore represents the contributions payable in the year. 
These contributions are set based on the funding needs identified from the valuation and benefit from the 
actuarial surplus (see Note 8b iv).They are therefore lower than the underlying cost. 

9 Taxation 

9a Analysis of charges for the year 

The charge for the year, based on the rate of corporation tax of 30% (2005 30%) comprised: 

2006 2005 
Note £m £m 
Current tax 
UK corporation tax 17.6 7.1 
Deduct: double tax relief (3.2) (2.7) 
14.4 4.4 
Adjustments in respect of prior years 0.3 (8.3) 

14.7 (3.9) 
Foreign tax 8.2 3.8 
Share of associates and joint ventures tax 8.9 5.5 
Total current tax 9b 31.8 5.4 
Deferred tax 
Origination and reversal of timing differences 
Adjustments in respect of previous years 
(0.4) 
(3.7) 
5.3 
4.5 
Total deferred tax 9d (4.1) 9.8 
Total charge for the year 27.7 15.2 

BBC Annual Report and Accounts 2005/2006 117 

Financial statements 

Notes to the financial statements 

9b Factors affecting the tax charge 

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

2006 2005 
Note £m £m 

Surplus/(deficit) before tax 31.4 (173.5) 

Surplus/(deficit) before tax multiplied by standard rate of corporation tax 
in the UK of 30% (2005 30%) 9.4 (52.0) 
Effects of 
Public Services taxable external income (2.1) 1.7 
Non-taxable deficit in Public Services 38.4 59.4 
FRS 17 element of net Group pension charge 20.8 21.5 

Commercial activities 

Non-taxable income (38.4) (17.2) 
Disallowed expenditure 2.1 3.1 
UK taxation on intra-group overseas dividends – 1.6 
Capital allowances in excess of depreciation (3.8) (3.5) 
Tax differential re overseas earnings 1.6 (0.7) 
Other 3.5 (0.2) 
Adjustments in respect of previous periods 0.3 (8.3) 

Current tax charge for the year 9a 31.8 5.4 

9c Factors that may affect future tax charges 

The Group anticipates that the future tax charge will not alter materially since all licence fee income is free 
of tax. 

9d Deferred tax analysis 
2006 2005 
Movement on deferred tax provision/(asset) in the year Note £m £m 
Provision/(asset) at start of year 10.0 (1.9) 
Exchange adjustment (0.4) 0.2 
Deferred tax (credit)/charge 9a (4.1) 9.8 
Disposal of subsidiary (2.4) 1.9 
Deferred tax provision at end of year 3.1 10.0 

Analysis of deferred tax provision/(asset) at end of year 

Accelerated capital allowances 13.1 15.4 
Other timing differences (3.6) (0.1) 
Deferred tax provision 9.5 15.3 
US timing differences (6.4) (5.3) 
Deferred tax asset (6.4) (5.3) 
Deferred tax provision at year end 3.1 10.0 

118 BBC Annual Report and Accounts 2005/2006 

Goodwill is the difference 
between the value paid for a 
business and the fair value of 
its net assets. It represents 
the premium the purchaser 
is prepared to pay for the 
business. 

10 Intangible fixed assets 
Other 
Goodwill intangibles Total 
£m £m £m 
Cost 
At 1 April 2005 22.8 0.4 23.2 
Additions 0.1 0.3 0.4 
At 31 March 2006 22.9 0.7 23.6 
Amortisation 
At 1 April 2005 2.5 0.4 2.9 
Charge for the year 1.3 0.1 1.4 
At 31 March 2006 3.8 0.5 4.3 
Net book value 
At 31 March 2006 19.1 0.2 19.3 
At 31 March 2005 20.3 – 20.3 

The addition to goodwill in the year relates to the final adjustment to the contingent purchase consideration 
for Origin Publishing Limited. On acquisition of 100% of the share capital of Origin Publishing Limited on 
20 February 2004 by BBC Worldwide, contingent consideration of up to £5.1million was payable, based 
on the performance of the acquired business in the period to 30 September 2005.The full £5.1million was 
settled in the year ended 31 March 2006 of which £0.8million was paid in cash and the balance of £4.3million 
settled by way of the issue of loan notes. Of the £5.1million settled, £5.0million had been accrued and recognised 
as additional goodwill in the year ended 31 March 2005. 

Other intangibles comprise of a customer list of names and brand names. Additions to other intangible assets 
comprise the purchase of customer listings during the year and these are amortised on a straight line basis 

over 2–4 years subject to reviews for impairment. 
11 Tangible fixed assets 
11a Group 
Land and 
buildings 
£m 
Plant and 
machinery 
£m 
Furniture and 
fittings 
£m 
Assets under 
construction 
£m 
Total 
£m 

Cost or valuation 
At 1 April 2005 431.5 950.2 146.5 87.2 1,615.4 
Additions 6.1 56.1 15.7 65.6 143.5 
Brought into service 3.5 52.0 5.8 (61.3) – 
Disposals (14.8) (26.7) (8.0) (1.4) (50.9) 
Disposal of subsidiary – (75.7) (4.8) (1.7) (82.2) 
At 31 March 2006 426.3 955.9 155.2 88.4 1,625.8 

Depreciation 
At 1 April 2005 225.2 597.4 71.2 – 893.8 
Charge for the year 14.6 85.1 13.9 – 113.6 
Elimination in respect of disposals (4.7) (23.4) (5.7) – (33.8) 
Disposal of subsidiary – (43.8) (1.2) – (45.0) 

At 31 March 2006 235.1 615.3 78.2 – 928.6 
Net book value 
At 31 March 2006 191.2 340.6 77.0 88.4 697.2 
At 31 March 2005 206.3 352.8 75.3 87.2 721.6 

BBC Annual Report and Accounts 2005/2006 119 

Financial statements 

Notes to the financial statements 

11b UK Public Service Broadcasting 
Land and Plant and Furniture and Assets under 
buildings machinery fittings construction Total 
£m £m £m £m £m 
Cost or valuation 
At 1 April 2005 362.1 510.0 120.9 63.7 1,056.7 
Additions 6.0 38.9 11.1 37.4 93.4 
Brought into service 1.6 34.7 3.0 (39.3) – 
Disposals (14.7) (14.6) (6.8) (0.4) (36.5) 
At 31 March 2006 355.0 569.0 128.2 61.4 1,113.6 

Depreciation 
At 1 April 2005 185.9 327.8 54.9 – 568.6 
Charge for the year 11.5 52.0 11.2 – 74.7 
Elimination in respect of disposals (4.4) (13.7) (4.6) – (22.7) 

At 31 March 2006 193.0 366.1 61.5 – 620.6 
Net book value 
At 31 March 2006 162.0 202.9 66.7 61.4 493.0 
At 31 March 2005 176.2 182.2 66.0 63.7 488.1 
11c Land and building at net book value comprise: 
UK Public UK Public 
Service Service 
Group Group Broadcasting Broadcasting 
2006 2005 2006 2005 
£m £m £m £m 
Undepreciated land 18.3 21.7 18.0 21.6 
Freehold buildings 105.2 121.4 95.5 110.1 
Total freeholds 123.5 143.1 113.5 131.7 
Long leaseholds 45.5 52.0 26.3 33.3 
Short leaseholds 22.2 11.2 22.2 11.2 
191.2 206.3 162.0 176.2 
11d Finance leases 
Assets held under finance leases, capitalised and included in tangible fixed assets: 
UK Public UK Public 
Service Service 
Group Group Broadcasting Broadcasting 
2006 2005 2006 2005 
£m £m £m £m 

Cost 15.6 – 14.2 –
Accumulated depreciation (6.5) – (5.9) –


Net book value 9.1 – 8.3 – 

The finance leases relate to IT equipment that was originally leased to the BBC under operating leases.
As at 1 April 2005 the contract was varied to allow the assets to be used by the BBC for substantially their
entire economic lives. As a result these assets have been capitalised and included in tangible fixed assets.


120 BBC Annual Report and Accounts 2005/2006 

12 Investment in programmes for future sale 
Group 
£m 
Cost 
At 1 April 2005 228.7 
Exchange adjustment 1.9 
Additions 93.5 
Disposals (4.1) 
Elimination in respect of programmes fully amortised (73.0) 
At 31 March 2006 247.0 
Amortisation 
At 1 April 2005 131.4 
Exchange adjustment 1.1 
Charge for the year 82.3 
Disposals (1.3) 
Elimination in respect of programmes fully amortised (73.0) 
At 31 March 2006 140.5 
Net book value 
At 31 March 2006 106.5 
At 31 March 2005 97.3 

Investment by BBC Worldwide in programmes for future sale relates to programmes provided by the BBC and 
external producers.The additions figure above includes £89.0million direct investment in BBC programmes 
(2005 £74.6million). 

Included in the net book value is £3.6million (2005 £2.5million) relating to investments held under a licence agreement. 

During the year there were disposals of music publishing rights with a carrying value of £1.0million (see Note 6) 
and as part of the sale of BBC Worldwide Limited’s learning business there was a disposal with a carrying value 

of £1.8million (see Note 19). 
13 Other investments (including BBC World Service net assets) 
13a Movements in the year for the Group 
Interests in Interests in 
joint ventures associates Total 
Note 13b Note 13c Group 
£m £m £m 

Cost 
At 1 April 2005 10.7 0.8 11.5 
Exchange adjustment – 0.1 0.1 
Additions 1.5 – 1.5 
Disposals – (0.4) (0.4) 

At 31 March 2006 12.2 0.5 12.7 

Share of post acquisition reserves 
At 1 April 2005 1.7 0.5 2.2 
Exchange adjustment (0.2) – (0.2) 
Share of profits/(losses) after taxation 30.0 (9.3) 20.7 
Dividends received (19.4) (0.4) (19.8) 
Adjustment to reflect effective obligations (5.8) 9.8 4.0 

At 31 March 2006 6.3 0.6 6.9 

Goodwill 
At 1 April 2005 26.9 – 26.9 
Additions 1.5 – 1.5 
Amortisation (1.7) – (1.7) 

At 31 March 2006 26.7 – 26.7 
Net book value 
At 31 March 2006 45.2 1.1 46.3 
At 31 March 2005 39.3 1.3 40.6 

BBC Annual Report and Accounts 2005/2006 121 

Financial statements 

Notes to the financial statements 

Joint ventures are businesses 13b Interests in joint ventures 
the BBC jointly controls with 13b i Significant joint ventures and their activities

other parties. 

The Group has a 50% equity interest in the following joint ventures which are all incorporated in Great Britain 
and registered in England and Wales, unless otherwise stated: 

Name of entity Activity Partner Accounting date 
UK Channel Management Limited Channels Flextech 31 December 2005 
UK Gold Holdings Limited Channels Flextech 31 December 2005 
UKTV New Ventures Limited Channels Flextech 31 December 2005 
UKTV Interactive Limited Channels Flextech 31 December 2005 
JV Programmes LLC1 Channels Discovery 31 December 2005 
BBC Haymarket Exhibitions Limited Publishing Haymarket Exhibitions 31 December 2005 
Limited 
Worldwide Media Limited2 Magazines Bennett, Coleman 31 July 2005 
and Company Limited 
2|entertain Limited3 Video/DVD Woolworths 28 January 2006 
DTV Services Limited4 Marketing Crown Castle UK Limited, 31 August 2005 
British Sky Broadcasting 
Limited 
Insight Property Partnership Property Land Securities Trillium 31 March 2006 
(Media Services) Limited 
Daunus Limited5 Property Land Securities Trillium 30 November 2005 
(BH) Limited, 
Morgan Stanley Delta LLC, 
Structured Finance 
Management Limited 

1 Incorporated in the USA 
2 Incorporated in India 
3 60% equity interest 
4 20% equity interest 
5 100% holding of ‘A’class shares,representing 10% of the total issued shares of Daunus Limited.The rest of the shares in Daunus 

Limited are held by the other partners.The BBC holds its investment in Daunus Limited through a subsidiary, BBC Property 

Development Limited. 

For a number of years the BBC,through its subsidiary BBC Worldwide,has had major partnership deals with 
Flextech, the content division of Telewest Communications plc, for the production and marketing of subscription 
channels in the UK and with Discovery Communications Inc. for new channels around the world and providing 
new co-production funding for programmes.The joint ventures operated by these alliances are included in the list 
above.The BBC has no obligation to make good its share of their cumulative operating losses. 

The BBC is part of a joint venture, DTV Services Limited, to provide marketing services for digital channels 
on a terrestrial platform in the UK.The BBC’s subsidiary BBC Free to View Limited (see Note 13e) holds the 
BBC’s digital terrestrial multiplex licence and its equity interest in the joint venture to ensure the costs of this 
joint venture are managed separately from licence fee-funded activities. On 11 October 2005 the Group 
sold a 13% stake in DTV Services Limited reducing its equity interest to 20%. 

The joint venture with Land Securities Trillium (LST),the Insight Property Partnership,provides a range of 
property and development services to the BBC. Related joint ventures and associate companies have been 
set up to develop particular BBC properties. In May 2005 the BBC and LST agreed to restructure this 
partnership.The Insight Property Partnership’s contract to provide facilities management and property 
services to the BBC will expire on 30 June 2006. 

In December 2004, BBC Worldwide completed the acquisition of a 50% equity interest in Worldwide 
Media Limited, a magazine publishing joint venture based in India for total cash consideration of £5.5million. 
Goodwill of £2.9million arose on the transaction. Contingent consideration paid to the joint venture of up to 
245million rupees (£3.0million) may be payable, based on the financial performance of the acquired business 
in the period to 31 July 2006. Based on the applicable financial targets and the expected short-term financial 
performance of the business during this period, the full contingent consideration has been recognised in the 
calculation of goodwill during the year ended 31 March 2006.This additional investment payable to the joint 
venture has been recorded as an addition to the Group’s share of joint venture net assets (£1.5million) and 
as additional goodwill £1.5million. 

122 BBC Annual Report and Accounts 2005/2006 

The following disclosures represent the Group’s equity shares of the assets and liabilities of its joint ventures 
based on the results for the latest accounting periods as shown above.Where the latest accounting period 
for the joint venture is more than three months prior to the Group’s accounting reference date of 31 March 
the latest interim financial information has been used. 

13b ii Group share of joint ventures results and net assets 

UK Gold UK Channel Total 
2|entertain Holdings Management Other joint joint ventures 
Limited Limited* Limited* ventures 2006 
Group share of: £m £m £m £m £m 

2006 
Turnover 115.2 40.8 36.3 37.2 229.5 
Profit/(loss) before tax 28.2 7.8 11.7 (1.7) 46.0 
Taxation (8.5) (3.8) (3.5) (0.2) (16.0) 
Profit/(loss) after tax 19.7 4.0 8.2 (1.9) 30.0 

Fixed assets 5.2 – –7.9 13.1
Goodwill 22.6 – –4.1 26.7
Current assets 59.3 16.4 34.5 29.5 139.7
Liabilities less than one year (53.5) (8.9) (13.4) (6.4) (82.2)
Liabilities more than one year – (22.7) (25.1) (41.5) (89.3)
Adjustment to reflect effective obligations – 15.2 4.0 18.0 37.2


Net book value 33.6 – – 11.6 45.2 
2005 
Turnover 64.0 36.8 31.6 29.4 161.8 
Profit/(loss) before tax 16.7 11.0 9.0 (3.1) 33.6 
Taxation (5.1) (2.8) (2.7) (0.1) (10.7) 
Profit/(loss) after tax 11.6 8.2 6.3 (3.2) 22.9 

Fixed assets 3.8 – – 7.4 11.2
Goodwill 24.1 – – 2.8 26.9
Current assets 68.2 15.6 21.1 25.5 130.4
Liabilities less than one year (65.0) (6.6) (2.9) (5.1) (79.6)
Liabilities more than one year – (28.1) (30.4) (37.8) (96.3)
Adjustment to reflect effective obligations – 19.1 12.2 15.4 46.7


Net book value 31.1 – – 8.2 39.3 

*The figures are based on unaudited financial statements 

Under the terms of the agreements with Flextech and Discovery, the Group has no obligation to fund losses 
incurred by the entities nor to make good their net liabilities. As a result, the Group does not share in losses/net 
liabilities of the relevant entities and accordingly no share of these is included in the financial statements for the 
year ended 31 March 2006 (2005 £nil).The share of net liabilities not recognised comprises the £37.2million 
shown in the table as ‘adjustment to reflect effective obligations’.The Group is entitled to its share of any profits 
or net assets only once the ventures’ cumulative profits exceed cumulative losses since incorporation. 

BBC Annual Report and Accounts 2005/2006 123 

Financial statements 

Notes to the financial statements 

Associates are businesses 13c Interests in associates 
over which the BBC exerts 13c i Significant associates and their activities

significant influence but does 

not have overall control. The Group holds (directly and indirectly) significant interests in the associates listed below which, except 
where otherwise stated, are incorporated in Great Britain and registered in England and Wales. A full list of 
associates is available on request from The Secretary, BBC, Room MC3C3, Media Centre, 201 Wood Lane, 
London W12 7TQ. 

Holding 
of issued 
ordinary 

shares 
% Activity 

Parliamentary Broadcasting Unit Limited 33 Content provider 
Broadcasters Audience Research Board Limited (BARB) * Audience research 
The Commonwealth Broadcasting Association * Broadcasting forum 
Radio Joint Audience Research Limited (RAJAR) 50 Audience research 
Frontline Limited 23 Publishing 
UKTV Pty Limited (incorporated in Australia) 20 Channels 
People and Arts (Latin America) LLC (incorporated in the USA)** 50 Channels 
Animal Planet LLC (incorporated in the USA)**** 25 Channels 
The Animal Planet Europe Partnership** 50 Channels 
Animal Planet Japan KK (incorporated in Japan)** 33 Channels 
Jasper Broadcasting Inc (incorporated in Canada) 20 Channels 
Jasper Junior Broadcasting Inc (incorporated in Canada) 20 Channels 
3sixtymedia Limited 10 Production 
White City Development Partnership *** Property 

* Broadcasters Audience Research Board Limited and The Commonwealth Broadcasting Association are companies limited 
by guarantee, of which the BBC is a joint member with other broadcasters 
** Discovery associate 
*** 50% partnership share 
**** Animal Planet LLC (Discovery Associate). On 3 April 2006 the Group sold its shareholding 

124 BBC Annual Report and Accounts 2005/2006 

13c ii Group share of associates’ turnover and net assets 

The following additional disclosures are based on the results of the Discovery associates for the year ended 
31 December 2005 and the remaining associates’ disclosures are based on the results at the date of their 
individual financial statements.These additional disclosures represent the Group’s equity share of assets and 
liabilities of those entities. 

2006 2005 
Group interests in associates £m £m 
Share of turnover 49.6 42.9 
Share of fixed assets 52.0 38.8 
Share of current assets 28.2 24.5 
Share of liabilities due within one year (22.5) (19.3) 
Share of liabilities due after more than one year (160.9) (123.9) 
Adjustment to reflect effective obligation 104.3 81.2 
Net interests in associates 1.1 1.3 

The results include the Group share of the operating profit/(loss) of UKTV Pty Limited of £0.5million 
(2005 £0.5million), Frontline Limited of £0.5million (2005 £0.7million), Children’s Character Books Limited 
£(0.2)million (2005 £(0.1)million) and BBC World (India) Private Limited of £nil (2005 £0.1million). 
The Group’s share of the remaining associates, including Jasper Broadcasting Inc. and Jasper Junior Broadcasting Inc., 
operated in partnership with Alliance Atlantis, was £nil (2005 £nil). 

Under the terms of the agreements with Discovery and Alliance Atlantis, the Group has no obligation to 
fund losses incurred by the entities nor to make good their net liabilities. As a result, the Group does not 
share in losses or net liabilities of the relevant entities and accordingly no share of these are included in the 
financial statements for the year ended 31 March 2006 (2005 £nil).The Group is entitled to its share of any 
profits or net assets once the ventures’ cumulative profits exceed cumulative losses since incorporation, with 
the exception of JV Network LLC. JV Network LLC was formed for the purpose of providing debt funding 
from Discovery to the other Discovery joint ventures and BBC Worldwide is not entitled to any profits 
arising within this entity. 

13d Movements in the year for UK Public Service Broadcasting 
Interest in 
BBC World 
Service net Interests in 
assets subsidiaries Total 
£m £m £m 

At 1 April 2005 160.1 125.3 285.4 
Deficit for year (1.5) – (1.5) 
At 31 March 2006 158.6 125.3 283.9 

BBC Annual Report and Accounts 2005/2006 125 

Financial statements 

Notes to the financial statements 

Subsidiary undertakings are 13e Subsidiary undertakings 

businesses the BBC controls. The principal subsidiary undertakings of the BBC at 31 March 2006 are listed below.All are wholly owned 
and incorporated in Great Britain and registered in England and Wales. A full list of subsidiaries is available on 
request from The Secretary, BBC, Room MC3C3, Media Centre, 201 Wood Lane, London W12 7TQ. 

Name of entity Activity 

BBC Commercial Holdings Limited * Holding company 
BBC Worldwide Limited ** Publishing, channels and 

programme distribution 
BBC World Limited ** Channels 
BBC Ventures Limited ** Holding company 
BBC Resources Limited ** Programme making facilities 

and services 
BBC Free To View Limited * Holding company 

for digital licence 
BBC Property Limited * Property 
BBC Property Development Limited * Property 
BBC Property Investment Limited * Property 
Centre House Productions Limited * Production financing 
Switchco Limited1 (Digital UK) * Digital switchover 

*Directly owned 
**Indirectly owned 

1The BBC controls 56% of the voting rights of Switchco Limited and therefore it is a subsidiary. Its results have been 
consolidated into the Group accounts. Switchco Limited is a company limited by guarantee of which the BBC is a joint 

member with other broadcasters 
14 Stocks 
Group 
2006 
£m 
Group 
2005 
£m 
UK Public 
Service 
Broadcasting 
2006 
£m 
UK Public 
Service 
Broadcasting 
2005 
£m 

Raw materials 1.7 2.9 0.2 0.7 
Work in progress 
– originated programmes 287.9 281.0 287.8 280.7 
– other 1.9 2.4 0.1 0.1 
Finished programmes 

– acquired programmes and films 98.5 88.1 98.5 88.1 
– originated programmes 61.0 69.9 61.0 69.9 
Other 11.4 14.5 – – 
Total 462.4 458.8 447.6 439.5 

126 BBC Annual Report and Accounts 2005/2006 

15 Debtors 
Note 
Group 
2006 
£m 
Group 
2005 
£m 
UK Public 
Service 
Broadcasting 
2006 
£m 
UK Public 
Service 
Broadcasting 
2005 
£m 
Receivable within one year 
Trade debtors 
Department for Culture, Media and Sport 
– licence fee debtors 
Amounts owed by subsidiaries 
Amounts owed by associates and joint ventures 
VAT recoverable 
Other debtors 
Prepayments 
114.9 
318.2 
– 
34.9 
36.0 
28.8 
190.8 
119.5 
285.8 
– 
10.2 
35.5 
102.3 
121.5 
17.1 
318.2 
27.2 
14.5 
33.9 
6.6 
165.3 
12.9 
285.8 
28.0 
5.8 
32.6 
78.6 
103.7 
723.6 674.8 582.8 547.4 
Financial assets 23e 3.5 – – – 
Total current debtors 727.1 674.8 582.8 547.4 
Receivable after more than one year 
Other debtors 
Prepayments 
2.7 
40.0 
6.1 
100.0 
– 
26.9 
– 
84.3 
42.7 106.1 26.9 84.3 
Financial assets 23e 3.2 – – – 
Total long-term debtors 45.9 106.1 26.9 84.3 
Total 773.0 780.9 609.7 631.7 

Other debtors in 2005 included £56.6million in relation to the sale of the White City site, see Note 6 
for details. 

16 Creditors 

16a Prompt payment policy 

It is the BBC’s policy to comply with the Better Payment Practice Code in relation to the payment of 
suppliers, provided that the supplier is complying with the relevant terms and conditions of their contracts. 
The BBC monitors compliance against the terms of this code. Payments for programme acquisitions are 
made in accordance with contractual terms.The Group’s number of creditor days outstanding in respect 
of other trade creditors at 31 March 2006 was 35 days (2005 35 days). 

Residual creditors and associated costs have been excluded for the purpose of this calculation, as they relate 
to payments to artists and contributors other than trade creditors. 

BBC Annual Report and Accounts 2005/2006 127 

Financial statements 

Notes to the financial statements 

16b Amounts falling due within one year 
Note 
Group 
2006 
£m 
Group 
2005 
£m 
UK Public 
Service 
Broadcasting 
2006 
£m 
UK Public 
Service 
Broadcasting 
2005 
£m 

Bank overdrafts and other loans 
Bank overdrafts 21 – 36.9 – 31.2 
Unsecured loan notes 23b 5.3 1.5 – – 

5.3 38.4 – 31.2 
Trade creditors 
Programme creditors 74.9 60.1 74.7 58.9 
Programme acquisitions 31.3 26.5 31.0 26.3 
Salaries and wages 64.4 59.0 41.4 36.0 
Residual copyright payments 25.6 21.5 – – 
Other trade creditors 169.8 167.0 119.6 107.2 
366.0 334.1 266.7 228.4 

Other creditors 
Amounts owed to subsidiaries – – 37.2 51.7 
Amounts owed to associates and joint ventures – 8.5 – – 
Corporation tax 11.5 5.8 4.7 2.3 
Other taxation and social security 28.7 28.6 26.8 26.6 
Obligations under finance leases 23b 4.8 – 4.7 – 
Other 14.7 59.9 11.4 59.9 

59.7 102.8 84.8 140.5 
Accruals and deferred income 
Accruals and deferred income 393.5 342.6 285.9 274.7 
Licence savings stamps deposits and direct debit instalments 92.1 100.4 92.1 100.4 
485.6 443.0 378.0 375.1 
Financial liabilities 23e 3.2 – – – 
Total 919.8 918.3 729.5 775.2 

Other creditors in 2005 included £59.9million in relation to the sale of the White City site, see Note 6. 

16c Amounts falling due after more than one year 

UK Public UK Public 
Service Service 
Group Group Broadcasting Broadcasting 
2006 2005 2006 2005 
Note £m £m £m £m 

Bank and other loans 23b 72.0 150.0 – – 
Trade creditors 
Programme acquisitions 3.6 7.1 3.6 7.1 
Other creditors 
Obligations under finance leases 
Amounts owed to subsidiaries 
Other 
23b 28.5 
– 
8.7 
27.1 
– 
3.4 
3.8 
25.9 
– 
– 
27.6 
– 
37.2 30.5 29.7 27.6 
Financial liabilities 23e 4.0 – – – 
Total 116.8 187.6 33.3 34.7 

128 BBC Annual Report and Accounts 2005/2006 

17 Provisions for liabilities 
Utilised Released At 
At 1 April Provisions during during Charge for 31 March 
2005 disposed the year the year the year 2006 
Group £m £m £m £m £m £m 

Licence fee 17.2 – (17.2) – 19.5 19.5 
Restructuring 47.4 (0.5) (41.8) (3.4) 127.7 129.4 
Litigation and insurance 13.8 (0.1) (1.8) (1.8) 6.5 16.6 
Property 11.8 – (0.7) (0.9) 3.0 13.2 
Pension 21.1 – (5.9) (15.2) – – 
Deferred tax 15.3 (2.6) (7.0) – 3.8 9.5 
Other 13.0 – (8.0) (5.0) 8.0 8.0 

Total 139.6 (3.2) (82.4) (26.3) 168.5 196.2 

Licence fee provisions are made for the expected level of refunds (money repayable on the unexpired 
portion of a licence where the licence is no longer required) and revocations (where no money is received 
in relation to a licence sold). 

The restructuring provision includes a net charge for the year of £119.1million of exceptional redundancy 
costs relating to the change programme occurring within the BBC and non-exceptional redundancy costs 
of £5.2million. In addition, non-exceptional redundancy costs of £5.2million are included in other creditors 
as there was no uncertainty over the amount or timing of these payments. 

Property provisions relate to the cost of returning leasehold properties to their original condition at the end 
of the lease, and include BBC World Service’s liability of £3.4million (2005 £3.3million) to restore Bush 
House to its original condition. 

Pension provisions comprised an amount of £21.1million which crystallised on the sale of BBC Technology 
Holdings Limited.The final valuation of the pension liability was £5.9million and this liability has been 
transferred to creditors.The remaining £15.2million was released during the year (see Note 5). 

Other provisions consist of a number of balances arising across the BBC in the normal course of business. 

Provisions disposed of during the year relate entirely to the sale of BBC Broadcast Limited. 

Provision Utilised Released At 
At 1 April acquired this during during Charge for 31 March 
2005 year the year the year the year 2006 
UK Public Service Broadcasting £m £m £m £m £m £m 

Licence fee 17.2 – (17.2) – 19.5 19.5 
Restructuring 45.6 – (36.2) (2.9) 109.6 116.1 
Litigation and insurance 12.0 – (0.8) (2.0) 2.1 11.3 
Property 7.8 – (0.5) (0.3) 2.8 9.8 
Pension – 21.1 (5.9) (15.2) – – 
Deferred tax – – – – 3.5 3.5 
Other 12.3 – (8.0) (4.3) 4.3 4.3 

Total 94.9 21.1 (68.6) (24.7) 141.8 164.5 

BBC Annual Report and Accounts 2005/2006 129 

Financial statements 

Notes to the financial statements 

18 Reserves 
Operating 
reserve Total 
excluding Pension operating Capital Revaluation 
pension reserve reserve reserve reserve reserve Total 
Group £m £m £m £m £m £m 

At 1 April 2005 188.7 (426.8) (238.1) 761.8 4.0 527.7 
Adjustment on adopting FRS 26 2.6 – 2.6 –– 2.6 
Exchange difference 1.9 – 1.9 –– 1.9 
Surplus for financial year 3.6 – 3.6 –– 3.6 
Actuarial gain on defined benefit 
pension schemes – 661.1 661.1 –– 661.1 
Revaluation reserve transfer 0.8 – 0.8 – (0.8) – 
Pension reserve transfer 69.4 (69.4) – –– – 
Capital reserve transfer (9.5) – (9.5) 9.5 – – 

At 31 March 2006 
Represented by: 
General Group reserves 
BBC World Service reserves 
257.5 
256.0 
1.5 
257.5 
164.9 
164.9 
– 
164.9 
422.4 
420.9 
1.5 
422.4 
771.3 
617.4 
153.9 
771.3 
3.2 
– 
3.2 
3.2 
1,196.9 
1,038.3 
158.6 
1,196.9 
UK Public Service 
Broadcasting and BBC World 
Service are funded from 
different sources. As such, 
the reserves relating to 
BBC World Service are 
maintained separately from 
the rest of the Group and 
are restricted for use solely 
on BBC World Service 
activities. 
UK Public Service Broadcasting 
At 1 April 2005 
Surplus for financial year 
Revaluation reserve transfer 
Capital reserve transfer 
At 31 March 2006 
Represented by: 
UK Public Service Broadcasting reserves 
BBC World Service reserves 
Operating 
reserve£m 
204.3 
41.4 
0.8 
(9.5) 
237.0 
235.5 
1.5 
237.0 
Capital 
reserve 
£m 
761.8 
– 
– 
9.5 
771.3 
617.4 
153.9 
771.3 
Revaluation 
reserve 
£m 
4.0 
– 
(0.8) 
– 
3.2 
– 
3.2 
3.2 
Total 
£m 
970.1 
41.4 
– 
– 
1,011.5 
852.9 
158.6 
1,011.5 

Under the accounting standard FRS 10 Goodwill and intangible assets any newly arising goodwill must be 
capitalised and amortised over its useful life.As is permitted by the standard,goodwill arising in periods prior 
to 1999 of £6.8million (2005 £6.8million) remains offset against the operating reserve. 

The Group has adopted FRS 26 Financial Instruments: Measurement this year and has also taken the 
exemption in the standard to not restate comparatives.This therefore requires an adjustment to reserves 
for balances existing at 1 April 2005 not previously recognised.The fair value gains and losses on the Group’s 
financial instruments between this date and the year end (for stand alone derivatives such as forward 
exchange contracts and interest rate swaps, and derivatives embedded within contracts) have been taken to 
the current year’s statement of income and expenditure. 

The cumulative translation differences at 31 March 2006 were £1.9million. In accordance with FRS 23, any 
differences relating to prior years have not been separated out and remain within the operating reserve. 

130 BBC Annual Report and Accounts 2005/2006 

19 Sale of businesses 
BBC 
Learning Broadcast 
business Limited Total 
2006 2006 2006 
£m £m £m 

Investment in programmes for future sale 1.8 – 1.8 
Net assets disposed 2.8 48.9 51.7 
Profit on disposal 1.7 108.8 110.5 

6.3 157.7 164.0 
Of which: 
Cash consideration received 
Less transaction costs 
6.6 
(0.3) 
166.0 
(8.3) 
172.6 
(8.6) 
Net proceeds from sale of businesses 6.3 157.7 164.0 
20 Reconciliation of net cash flow to movement in net funds/(debt) 
2006 
£m 
2005 
£m 
Increase in cash in year 
Net cash (inflow)/outflow from management of liquid resources 
Net cash outflow from decrease in loans and finance leases 
158.8 
(41.9) 
87.9 
0.3 
29.3 
33.3 
Change in net debt resulting from cash flows 
Non-cash increase in finance leases 
Non-cash increase in unsecured loan notes 
204.8 
(15.6) 
(4.3) 
62.9 
– 
– 
Change in net debt 
Net debt at the beginning of the year 
184.9 
(135.3) 
62.9 
(198.2) 
Net funds/(debt) at the end of the year 49.6 (135.3) 
Liquid resources are current 
asset investments that are 
readily disposable without 
disrupting the BBC, and are 
either readily convertible into 
known amounts of cash at, 
or close to, their carrying 
amount, or are traded in an 
active market. In relation to 
the BBC, liquid resources are 
sterling amounts on deposit. 
21 Analysis of changes in net (debt)/funds 
Net cash 
Bank overdrafts 
Cash at bank and in hand 
Liquid resources 
Short-term investments 
At 1 April 
2005 
£m 
(36.9) 
38.3 
1.4 
41.9 
Cash flows 
£m 
36.9 
121.9 
158.8 
(41.9) 
Non-cash 
changes 
£m 
– 
– 
– 
– 
At 31 March 
2006 
£m 
– 
160.2 
160.2 
– 
Gross funds 43.3 116.9 – 160.2 
Debt 
Loans from third parties 
Unsecured loan notes 
Finance leases 
(150.0) 
(1.5) 
(27.1) 
78.0 
(0.5) 
9.4 
– 
(4.3) 
(15.6) 
(72.0) 
(5.3) 
(33.3) 
Net (debt)/funds (135.3) 204.8 (19.9) 49.6 

Made up of: 

Public Service (including World Service) 11.6 113.8 (15.2) 110.2 
Commercial Businesses (121.7) 87.8 (4.7) (38.6) 
Centre House Productions Limited (25.2) 3.2 – (22.0) 
Net (debt)/funds (135.3) 204.8 (19.9) 49.6 

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

BBC Annual Report and Accounts 2005/2006 131 

Financial statements 

Notes to the financial statements 

Public Services in this context 
22 Reconciliation of net funds/(debt) to the Department for Culture, Media and Sport (DCMS) 
borrowing ceilings 
Public Public Commercial 
Services Services Businesses 
2006 2005 2006 
Note £m £m £m 
Commercial 
Businesses 
2005 
£m 
represent the UK Public 
Service Broadcasting Group 
and BBC World Service. 
Net funds/(debt) 
Licence savings stamps deposits and 
direct debit instalments* 
21 
16b 
110.2 
(92.1) 
11.6 
(100.4) 
(38.6) 
– 
(121.7) 
– 
Funds/(borrowings) as defined by DCMS 
borrowing ceiling 18.1 (88.8) (38.6) (121.7) 
Borrowing ceiling (200.0) (200.0) (350.0) (350.0) 

A forward currency contract 
is a contract to buy or sell 
foreign currency in exchange 
for sterling at a specific rate 
on a specific date. Companies 
typically enter into forward 
contracts to lock into a 
particular exchange rate, 
thereby eliminating currency 
risk that may be associated 
with a future purchase or sale. 

* The BBC must be able to repay the licence savings stamps deposits and direct debit instalments on demand and they are 
therefore included in the Public Service Borrowings. 
The Public Service borrowing limit of £200million is set within the BBC Charter.As at 31 March 2006 and 
31 March 2005, and throughout the financial year, the BBC was in compliance with this borrowing ceiling. 

When the DCMS granted a £350million borrowing limit for BBC Commercial Holdings Limited in July 2002, 
three financial covenants were defined which are required to be met as at 31 March each year. As at 
31 March 2006 and 31 March 2005 BBC Commercial Holdings Group was in compliance with each of these 
covenants. Compliance with the borrowing ceiling is detailed in the table above. 

23 Financial instruments 

The Group has adopted FRS 25 (IAS 32) Financial Instruments: Disclosure and Presentation and FRS 26 
(IAS 39) Financial Instruments: Measurement for the first time in this financial year. 

Accounting and disclosures for the current year are in accordance with FRS 25 and FRS 26, and as permitted 
under both standards the comparatives have not been restated and continue to be presented under 
previously applicable accounting standards (FRS 4 and FRS 13). 

Had FRS 25 and FRS 26 been applied in the prior year the effect would have been to restate the 2005 
balance sheet for derivatives existing at 31 March 2005, and the prior year statement of income and 
expenditure for the movement in the fair value of derivatives between 1 April 2004 and 31 March 2005. 

23a Financial risk management 

The Group’s financial risk management operations are carried out by a Group Treasury function,within 
parameters defined formally within the policies and procedures manual agreed by the Executive Board. 
Group Treasury’s activity is routinely reported and is subject to review by internal and external auditors. 

Group Treasury uses financial instruments to raise finance and to manage financial risk arising from the BBC’s 
operations in accordance with its objectives which are: 

 to ensure the business of the BBC, both Public Services and Commercial, is fully funded in the most 
efficient manner and remains compliant with borrowing limits 
 to protect the value of the BBC’s assets, liabilities and cash flows from the effects of adverse interest rates 
and foreign exchange fluctuations 
 to maximise the return on surplus funds, whilst ensuring sufficient cash is retained to meet foreseeable 
liquidity requirements 
The Group’s financial instruments, other than those used for treasury risk management purposes, comprise 
cash and liquid resources, borrowings and various items such as trade debtors and creditors that arise 
directly from its operations.The Group finances its operations from these financial instruments.The Group 
does not undertake speculative treasury transactions. 

Currency risk 

The Group is principally a domestic organisation with the majority of transactions, assets and liabilities being 
in the UK and sterling based. However, the Group undertakes some transactions in currencies other than 
sterling. Due to movements in exchange rates over time, the amount the Group expects to receive or pay 
when it enters into a transaction may differ from the amount that it actually receives or pays when it settles 
the transaction.The Group enters into forward currency contracts to manage this currency risk.These allow 
the Group to settle transactions at known exchange rates, thereby eliminating much of this uncertainty. 

132 BBC Annual Report and Accounts 2005/2006 

An interest rate swap is 
a contract between two 
parties to change the basis 
of their interest rate payment 
or receipts either from fixed 
to floating rates or vice versa. 
Companies typically enter 
into these arrangements 
to reduce the exposure to 
interest rate risk by fixing a 
floating interest rate thereby 
giving certainty to the level 
of future interest payments. 
Alternatively, a company may 
believe that interest rates may 
fall and wish to convert a fixed 
rate loan to a floating rate. 

The Group has one significant overseas operation, BBC Worldwide America, which operates in the USA and 
whose revenues and expenses are denominated exclusively in US dollars. 

Interest rate risk 

The Group’s main exposure to interest rate fluctuations arises on external borrowings. Since March 2003 
the Group has been borrowing at floating rates of interest and then used interest rate swaps to generate 
the desired interest profile and to manage the Group’s exposure to interest rate fluctuations. 

Market price risk of financial assets 

The Group invests surplus cash in money market funds and money market deposits, therefore it is not 
subject to market price risk. 

Credit risk 

Due to the unique way in which the BBC is funded via the licence fee, the BBC does not believe that it is 
exposed to major concentrations of credit risk. 

Liquidity risk 

The BBC is subject to limits on its borrowings imposed under the Charter and by the DCMS.The BBC’s 
Group Treasury manages the Group’s borrowings in order to comply with these limits together with the 
terms of the individual debt instruments.The BBC holds its surplus liquidity in readily convertible financial 

instruments with highly rated financial institutions. 
23b Fair values of financial instruments 
Carrying 
value 
2006 
£m 
Fair 
value 
2006 
£m 

Amounts receivable within one year 
Trade debtors 427.7 427.7 
Other debtors 4.9 4.9 
Derivative financial instruments 3.5 3.5 
Amounts receivable after more than one year 
Derivative financial instruments 3.2 3.2 
Cash at bank and in hand 160.2 160.2 
Amounts payable falling due within one year 
Loans (5.3) (5.3) 
Trade creditors (252.8) (252.8) 
Programme acquisitions (36.6) (36.6) 
Obligations under finance leases (4.8) (4.8) 
Derivative financial instruments (3.2) (3.2) 
Amounts payable falling due after more than one year 
Loans (72.0) (72.0) 
Programme acquisitions (3.6) (3.6) 
Obligations under finance leases (28.5) (28.5) 
Derivative financial instruments (4.0) (4.0) 
Provisions for liabilities and charges (3.4) (3.4) 

As at 31 March 2006 there are no significant differences between fair value and carrying value of any 
of the Group’s financial instruments.The fair value of forward currency contracts, interest rate swaps, 
and embedded derivatives are based on market prices and exchange rates at the balance sheet date. 
The remaining financial instruments are carried at cost or amortised cost in accordance with FRS 26 which 
approximates to fair value. 

BBC Annual Report and Accounts 2005/2006 133 

Financial statements 

Notes to the financial statements 

At 31 March 2005 there were no significant differences in value between the book and fair value of the 
Group’s financial instruments except for derivatives which were not recognised on the balance sheet in 
accordance with applicable standards at that time. 

The fair value of these derivatives was an unrealised loss of £7.8million on forward exchange hedging contracts 
and an unrealised gain of £3.3million for interest rate swaps.These, along with £7.1million of unrealised 
gains on embedded derivatives at 31 March 2006 result in an adjustment to reserves on adoption of 
FRS 26 of £2.6million. 

23c Financial assets 

After taking account of the various interest rate swaps and forward foreign currency contracts entered into 
by the Group, the maturity profile of the Group’s financial assets at 31 March 2006 was: 

Greater 

Effective Within 1-2 2-3 3-4 4-5 than 5 Total 

interest rate 1 year years years years years years 2006 

% £m £m £m £m£m £m £m 

2006 
Cash at bank and in hand 4.5 160.2 – – – – – 160.2 
Trade and licence 
fee debtors – 427.7 – – – – – 427.7 
Other debtors – 4.9 – – – – – 4.9 
Derivative financial 
instruments 0.8 3.5 2.6 0.3 0.3 – – 6.7 

596.3 2.6 0.3 0.3 – – 599.5 
The Group’s financial assets are subject to floating rate interest. Included within derivatives are forward 
foreign currency contracts (which are not subject to interest) and interest rate swaps (which have the effect 
of converting the variable rate loans to fixed rate loans for the whole term of the loans). 

As at 31 March 2005 the Group’s financial assets, excluding short-term debtors, amounted to £80.2million, 
all of which were subject to floating rate interest. 

23d Financial liabilities 

The Group arranges its borrowings to meet forecast cash flows such that it has access to sufficient funds 
to meet its commitments. Short-term flexibility is achieved by overdraft facilities.The maturity profile of the 
Group’s financial liabilities at 31 March 2006 was: 

Greater 

Effective Within 1-2 2-3 3-4 4-5 than 5 Total 

interest rate 1 year years years years years years 2006 

% £m £m £m £m£m £m £m 

2006 
Trade creditors – 252.8 – – – – – 252.8 
Programme acquisitions – 36.6 3.6 – – – – 40.2 
Obligations under 
finance lease 4.7 4.8 3.3 1.1 – – 24.1 33.3 
Derivative financial 
instruments 0.1 3.2 1.7 0.6 0.7 0.9 0.1 7.2 
Loans 4.9 5.372.0 – – – – 77.3 
Provisions 3.5 – – 3.4 – – – 3.4 

302.7 80.6 5.1 0.7 0.9 24.2 414.2 
The above includes contractual liabilities, including those held within provisions. 

134 BBC Annual Report and Accounts 2005/2006 

Defeasance deposits are 
amounts deposited with 
banks by Centre House 
Productions Limited which 
earn the exact amount 
of interest needed to cover 
the capital repayment and 
interest element of each 
of the finance leases.The 
defeasance deposits are ‘ringfenced’ and therefore cannot 
be used for any transactions 
apart from the agreed capital 
and interest payments. 

As permitted under FRS 25 
and FRS 26 the comparatives 
have not been restated and 
continue to be presented 
under previously applicable 
accounting standards (FRS 4 
and FRS 13). 

The Group’s financial liabilities are subject to fixed rate interest, except for the interest rate swaps included 
within derivatives which fix the interest rate of the Group’s commercial loans. All interest rates are unchanged 
for the term of the liabilities, except for a £350million multicurrency revolving credit facility agreement where 
interest is payable at LIBOR plus 0.375%, rising to LIBOR plus 0.45% once the facility is more than 50% 
utilised. Included within the loan balance above is £47million against this facility (see Note 23f). 

The finance leases include £24.1million (2005 £27.1million) relating to Centre House Productions Limited. 
Centre House Productions Limited enters into finance leases as a means of financing drama productions 
which result in lower production costs for the BBC.These finance leases are matched by defeasance deposits 
which may only be used to settle the finance lease liabilities and therefore do not represent separate assets 
and liabilities. Consequently they are netted off the finance lease creditor to show the net unmatched 
liability at the year end. These defeasance deposits, £250.4million at 31 March 2006 (2005 £263.0million), 
are structured such that the principal on deposit and the interest earned will be sufficient to cover the rental 
obligations on the finance leases until the end of the lease. Accordingly it is not included as borrowing for the 
purposes of compliance with the BBC’s borrowing limits. 

The maturity profile of the Group’s financial liabilities at 31 March 2005 was: 

Unsecured 

Bank loan Finance Total 
Overdraft loans notes leases Creditors Provisions 2005 
£m £m £m £m £m £m £m 

2005 
Within one year 36.9 – 1.5 – – 2.7 41.1 
Between one and two years – – – – 7.5 2.5 10.0 
Between two and five years – 150.0 – – 1.3 6.8 158.1 
Greater than five years – – – 27.1 1.7 12.4 41.2 

36.9 150.0 1.5 27.1 10.5 24.4 250.4 
After taking account of the various interest rate swaps and forward foreign currency contracts entered into 
by the Group, the interest rate profile (ie maturity or re-pricing date) of the Group’s interest-bearing financial 
liabilities at 31 March 2005 was: 

Fixed rate liabilities 

Financial 
liabilities on Floating rate Weighted Weighted 
which no financial average average period 
Total interest is paid liabilities Amount interest rate until maturity 
£m £m £m £m % Years 

2005 
Sterling 250.4 34.2 – 216.2 4.6 3 
Total 250.4 34.2 – 216.2 

BBC Annual Report and Accounts 2005/2006 135 

Financial statements 

Notes to the financial statements 

23e Derivative financial instruments 
Assets Liabilities 
2006 2006 
£m £m 
Greater than one year 
Forward foreign currency contracts 1.3 (3.4) 
Interest rate swaps 1.2 (0.2) 
Embedded derivatives 0.7 (0.4) 
3.2 (4.0) 

Less than one year 
Forward foreign currency contracts 1.6 (3.0)
Interest rate swaps ––
Embedded derivatives 1.9 (0.2)


3.5 (3.2) 
Money market lines are 
short-term borrowings. 

At 31 March 2006 the Group had entered into a net commitment to purchase foreign currencies amounting 
to £90.0million (2005 £95.0million) that mature in the period through to 2012 in order to fix the sterling 
cost of commitments through this period (mainly Euros and US dollars). After taking into account the effects 
of these forward foreign exchange contracts, the Group had no significant currency exposures. 

Sterling fixed rate borrowings are achieved by entering into interest rate swap transactions; all outstanding 
swaps mature in March 2008. 

In total, £246.0million of swaps were entered into to cover all facilities, which is £174.0million (2005 £58.0million) 
more than the current level of borrowings of £72.0million (2005 £188.0million). 

In accordance with FRS 26, the Group has reviewed contracts for embedded derivatives that are required 
to be separately accounted for if they do not meet certain requirements set out in the standard.Any such 
embedded derivatives have been recognised at fair value. 

23f Borrowing facilities 

As at 31 March 2006 the UK Public Service Broadcasting had available a £100million loan facility which is 
available as either a revolving LIBOR-based loan or an overdraft to May 2006 with an option to extend the 
facility to May 2007.The loan facility bears interest at a margin of 0.2% and the overdraft facility bears 
interest at bank base rates plus 1%. 

In addition to this loan facility UK Public Service Broadcasting has access to uncommitted money market 
lines, from individual banks, totalling £24million (2005 £24million) with interest payable at a margin of 
between 0.125% and 0.5% over LIBOR. 

BBC Commercial Holdings Limited’s liabilities comprise a £350million multicurrency revolving credit facility 
agreement repayable in full in March 2008. At 31 March 2006 £47.0million (2005 £125.0million) was drawn 
down by way of advances. Interest is payable at LIBOR plus 0.375%, rising to LIBOR plus 0.45% once the 
facility is more than 50% utilised. Of the total amount £100million is available in the form of letters of credit 
to be issued in favour of the European Investment Bank to support their lending under the facilities detailed 
immediately below.As at 31 March 2006 a further £25.0million (2005 £41million) was utilised by way of 
letters of credit issued to support the borrowing under these facilities. 

The European Investment Bank has made a loan facility available to BBC Commercial Holdings Limited, for 
an amount of £25.0million.This loan is repayable in one single instalment by June 2007. £25.0million was 
drawn under this facility at 31 March 2006 (2005 £25.0million).The interest rate applicable on the facility 
is determined with reference to the European Investment Bank’s own funding cost and carries no margin 
above this funding rate.The lending under the facility is supported by a letter of credit issued by the 
commercial banks under the £350million revolving credit facility referred to above. 

In addition BBC Commercial Holdings Limited had a facility of £20.0million which was available as an 
overdraft at 1% over the Bank’s base rate, or a money market line, with a margin of 0.3%.The facility is due 
for review in January 2007. 

136 BBC Annual Report and Accounts 2005/2006 

24 Commitments 
24a Contracts placed for future expenditure 
Group 
2006 
£m 
Group 
2005 
£m 
UK Public 
Service 
Broadcasting 
2006 
£m 
UK Public 
Service 
Broadcasting 
2005 
£m 
Fixed asset additions 79.9 27.7 67.5 21.5 
Programme acquisitions and sports rights 
Independent programmes 
918.3 
96.3 
987.7 
85.3 
861.9 
85.7 
945.1 
76.2 
1,094.5 1,100.7 1,015.1 1,042.8 

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

Fixed asset additions includes a commitment of £43.3million for the design, build and installation of the full 
technology solution for BBCScotland’s new broadcasting headquarters at Pacific Quay.Of this amount 
£29.6million is expected to be paid within one year. 

24b Operating leases 

Operating lease commitments payable in the following year, analysed according to the period in which the 
lease expires: 

Land and Land and 
buildings buildings Other Other 
2006 2005 2006 2005 
£m £m £m £m 

Group 
Within one year 2.7 2.9 1.4 3.3 
In two to five years 8.3 6.3 8.5 5.9 
After five years 41.4 35.9 3.2 2.6 

52.4 45.1 13.1 11.8 
UK Public Service Broadcasting 
Within one year 2.1 1.8 0.5 1.7 
In two to five years 6.1 3.8 2.6 2.8 
After five years 40.9 35.7 1.0 0.8 

49.1 41.3 4.1 5.3 
24c Other financial commitments 

In the ordinary course of business the BBC enters into a large number of contracts with artists and writers 
and with providers of other services including licence fee collection and channel distribution. 

BBC Annual Report and Accounts 2005/2006 137 

Financial statements 

Notes to the financial statements 

25 Contingent assets and liabilities 

At 31 March 2006 the Group had unprovided contingent liabilities estimated to be £6.3million (2005 £5.4million) 
in respect of guarantees and indemnities. Of this, £1.6million relates to UK Public Service Broadcasting. 
The remainder relates to BBC Worldwide’s joint venture,Worldwide Media Limited.BBC Worldwide Limited 
has guaranteed bank loans in respect of this joint venture which were 366million rupees (£4.7million) on 
31 March 2006.This debt may rise to 400million rupees (£5.2million) over the next two years. 

In January 2006 the BBCreceived a reminder of a claim originally made in 2000 by the contractor engaged 
to build and install gas turbines at TVC for an additional £3.1million. Given the length of time that has elapsed 
since the original claim and the sporadic pursuit by the contractor of this claim, the BBC considers the 
likelihood of the claim succeeding as remote and therefore has not provided for this claim in the accounts. 

The Group also has a number of contingent liabilities arising from litigation.The BBC makes specific provision 
(see Note 17) for its best estimate of any damages and costs which may be awarded. 

26 Post balance sheet events 

On 3 May 2006 BBC Worldwide completed the disposal of 61% of its interest in Origin Publishing Limited to a 
management buyout team. BBC Worldwide retains a 39% interest which will be accounted for as an associate. 

On 30 April 2004, BBC Worldwide exercised a put option to require Discovery to purchase the Group’s 
entire 25% shareholding in Animal Planet LLC.The net book value of the Group’s investment in this associate 
at 31 March 2006 is £nil (2005 £nil). On 3 April 2006 consideration of $80million (£45.8million) was received 
by BBC Worldwide in respect of its 25% holding in Animal Planet LLC. 

27 Related party transactions 

The related party transactions of the Group have been presented in accordance with FRS 8 Related party 
disclosures. Under the provisions of FRS 8 the BBC has not disclosed transactions between Group entities 
where more than 90% of those entities’ voting rights are controlled within the Group. UK Public Service 
Broadcasting does not underwrite any of the activities or liabilities of the subsidiaries. 

In all transactions, the terms of trade were negotiated on an arm’s length basis. 

27a Transactions with joint ventures and associated undertakings 

Included in the statement of income and expenditure is income from UKTV of £45.8million (2005 £51.8million) 
relating to the sale of programmes and dividends. Also included is income of £27.9million (2005 £30.5million) 
relating to the sale of programmes to JV Programmes LLC. Net income from 2|entertain Limited of 
£23.5million (2005 £15.6million) was received for licensing of programmes, other commissions and dividends. 
There is also £5.9million (2005 £6.3million) of income from various other joint ventures and associates 
relating to the sale of programmes. Included in the statement of income and expenditure is income of 
£0.8million (2005 £0.8million) from BBC Haymarket Exhibitions Limited relating to management fees and 
dividends. In addition, Frontline Limited charged £2.0million (2005 £3.1million) for the distribution of BBC 
Worldwide Limited’s magazines and paid a dividend of £0.4million (2005 £0.6million). Also included is a 
charge for £0.3million (2005 £0.4million) from Parliamentary Broadcast Unit Limited, for the purchase of 
broadcast licences. 

The BBC, Crown Castle UK Limited and British Sky Broadcasting Limited are partners in DTV Services 
Limited. In the year the BBC paid DTV Services Limited £1.3million (2005 £0.9million) for marketing services. 

The BBC and Land Securities Trillium Limited are partners in the Insight Property Partnership and the White 
City Development Partnership.The partnerships charged the BBC £104.8million for property services during 
the year (2005 £153.2million). 

In July 2003, the BBC granted a head lease on Broadcasting House to Daunus Limited (a company in which 
the BBC holds a 10% interest (see Note 13b) and Morgan Stanley Gamma Investments. During the year 
the BBC has paid rent of £11.5million to Daunus Limited and received £1.0million (2005 £14.9million) 
for reimbursement of Broadcasting House development costs. 

Amounts owed by/to joint ventures and associated undertakings at the year end are disclosed within 
Notes 15 and 16. In all transactions the terms of trade were negotiated on an arm’s length basis. 

138 BBC Annual Report and Accounts 2005/2006 

Related parties include 
Governors, the Executive 
Board and other senior 
managers, their immediate 
families and external entities 
controlled by them 

Transactions between the 
BBC and these related 
parties are explained in 
this note. 

27b Other transactions 

In the normal course of business the BBC transacts with other parties which are related to it by virtue of its 
senior employees being married or closely related to employees of the BBC or individuals who own or are 
employed at other media, production and broadcasting companies. 

The BBC has set procedures for dealing with situations to avoid any conflict of interest.Where transactions 
have arisen between connected parties, the BBC Governor or employee is not a party to the approval process. 

Baroness Deech, Governor, has a daughter who is a journalist in BBC News. Her remuneration is based 
on the BBC’s standard terms and conditions applicable to other staff employed in this capacity. 

Professor Merfyn Jones, Governor, has a son who is a researcher in BBC News. His remuneration is based 
on the BBC’s standard terms and conditions applicable to other staff employed in this capacity. 

Ranjit Sondhi, Governor, is married to Anita Bhalla, who has been employed by the BBC since 1987 in 
various production and broadcasting roles. Her current role is Head of Political Community Affairs for the 
English Regions. Her remuneration is based on the BBC’s standard terms and conditions applicable to other 
staff employed in this capacity. His daughter is an actress and works occasionally on BBC Radio and Television 
programmes. Her fees are based on the BBC’s standard artists and contributor terms and conditions. 

Deborah Bull, Governor, is sole Director of Deborah Bull Limited. Subsequent to her appointment, Deborah 
received, through Deborah Bull Limited, payments totalling £2,853 (2005 £8,650) for contributions to various 
BBC programmes. No amounts were outstanding at the year end (2005 £nil). 

The wife of Richard Tait, Governor, is a BBC Radio 4 commissioning editor. Her remuneration is based on the 
BBC’s standard terms and conditions applicable to other staff employed in this capacity. 

Michael Grade, Chairman, is non-executive Chairman of Pinewood Shepperton and non-executive Chairman 
of Hemscott plc. In the year ended 31 March 2006 the BBC paid £2,494,051 (2005 £2,148,763) to 
Pinewood Shepperton for the use of studios and related facilities.At the year end £16,105 was outstanding 
(2005 £5,554). 

Menna Richards is controller of BBC Wales. Her sister has a controlling interest in Torpedo Limited. BBC Wales 
made payments on contracts to the value of £323,895 with Torpedo Limited for the provision of independent 
radio and television programmes in the year.These amounts had been paid in full by 31 March 2006.Also, 
BBC Wales entered into artists’contracts worth £56,267 with her husband Patrick Hannan.These amounts 
had been paid in full by 31 March 2006. 

BBC Annual Report and Accounts 2005/2006 139