Accounting Methodology Document 2017 Relating to the Regulatory Financial Statements Contents 1. INTRODUCTION ...................................................................................................................................... 5 1.1 REGULATORY REPORTING REQUIREMENTS ......................................................................................................... 5 1.2 INTRODUCTION TO THE AMD ........................................................................................................................ 5 1.3 STRUCTURE AND PURPOSE OF THE AMD .......................................................................................................... 5 1.4 SCOPE OF DOCUMENT ................................................................................................................................... 7 2. BUSINESS AND SYSTEM OVERVIEW ...................................................................................................... 10 2.1 BT GROUP AND REGULATORY REPORTING ....................................................................................................... 10 2.2 THE REPORTING HIERARCHY FOR USE IN THE AS SYSTEM .................................................................................... 11 2.2.1 FINANCIAL AND MANAGEMENT REPORTING ROUTE .......................................................................................... 11 2.2.2 REGULATORY REPORTING ROUTE (AS SYSTEM) ................................................................................................ 11 2.2.3 ATTRIBUTION OF FINANCIAL INFORMATION TO MARKETS AND SERVICES ............................................................... 12 2.3 THE AS SYSTEM, REFINE ........................................................................................................................... 13 2.3.1 SYSTEM OVERVIEW ..................................................................................................................................... 13 2.3.2 SYSTEM PROCESS AND PROCESSING LEVELS ...................................................................................................... 14 2.3.3 CONTROLS ................................................................................................................................................ 15 3. ATTRIBUTION METHODOLOGIES OVERVIEW ........................................................................................ 17 3.1 INTRODUCTION ......................................................................................................................................... 17 3.2 INTRODUCTION TO THE SEQUENCING OF ATTRIBUTIONS AT THE FIRST PROCESSING LEVEL, LEVEL 101 .......................... 18 4. ACCOUNTING POLICIES .............................................................................................................................. 23 4.1 BASIS OF PREPARATION OF THE RFS .............................................................................................................. 23 4.2 PRINCIPLES OF VALUATION OF NON-CURRENT ASSETS. ..................................................................................... 24 4.3 PROPERTY, PLANT AND EQUIPMENT AND SOFTWARE INTANGIBLE ASSETS ............................................................. 24 4.3.1 CURRENT COST OF PROPERTY, PLANT AND EQUIPMENT AND SOFTWARE INTANGIBLE ASSETS ................................... 24 4.3.2 DEPRECIATION .......................................................................................................................................... 25 5. CCA VALUATION METHODS .................................................................................................................. 26 5.1 INTRODUCTION ......................................................................................................................................... 26 5.1.1 CHOICE OF VALUATION METHOD .................................................................................................................. 27 5.1.2 NEW TECHNOLOGY AND ITS USE AS MEA ....................................................................................................... 29 5.1.3 UNIT COSTS .............................................................................................................................................. 29 5.1.4 CHOICE AND APPLICATION OF INDICES FOR INDEXATION METHOD........................................................................ 29 5.1.5 DEPRECIATION .......................................................................................................................................... 30 5.1.6 DISPOSALS, WRITE-OUTS AND WRITE-OFFS ...................................................................................................... 30 5.2 DETAILED VALUATION METHODOLOGY .......................................................................................................... 30 5.2.1 INTRODUCTION ......................................................................................................................................... 30 5.2.2 LAND & BUILDINGS .................................................................................................................................... 30 5.2.3 ACCESS – COPPER ...................................................................................................................................... 31 5.2.4 ACCESS – FIBRE ......................................................................................................................................... 31 5.2.5 DUCT ...................................................................................................................................................... 32 5.2.6 VOICE SWITCH .......................................................................................................................................... 33 5.2.7 TRANSMISSION .......................................................................................................................................... 34 5.2.8 OTHER ..................................................................................................................................................... 36 6. DIRECT ALLOCATIONS ........................................................................................................................... 38 7. APPORTIONMENT MODELS .................................................................................................................. 39 7.1 INTRODUCTION TO APPORTIONMENT MODEL BASES AT LEVEL 101 ..................................................................... 39 7.2 APPORTIONMENT MODEL DICTIONARY – RULE TYPE 3 BASES ............................................................................ 39 8. OUC DRIVEN BASES .............................................................................................................................. 90 2 8.1 INTRODUCTION ......................................................................................................................................... 90 8.2 DETAIL FOR EACH LOB’S OUC-DRIVEN BASES .................................................................................................. 90 8.2.1 OPENREACH (OUC B) ................................................................................................................................ 90 8.2.2 GROUP (OUC C) ....................................................................................................................................... 92 8.2.3 CORPORATE ADJUSTMENTS (OUC E) ............................................................................................................. 92 8.2.4 BT FACILITIES MANAGEMENT (OUC F) ......................................................................................................... 92 8.2.5 EE (OUC G) ............................................................................................................................................. 93 8.2.6 BT BUSINESS & PUBLIC SECTOR (OUC H) ...................................................................................................... 93 8.2.7 WHOLESALE & VENTURES (OUC K) .............................................................................................................. 93 8.2.8 TSO (OUC T) ........................................................................................................................................... 94 8.2.9 SECURITY (OUC V) .................................................................................................................................... 98 8.2.10 PROPERTY (OUC W) .................................................................................................................................. 98 8.2.12 GROUP CONSOLIDATION UNITS (OUC Z) ....................................................................................................... 99 9. SYSTEM GENERATED BASES AT PROCESSING LEVEL 101 ..................................................................... 100 9.1 INTRODUCTION TO SYSTEM GENERATED BASES ............................................................................................... 100 9.2 BASES THAT USE MULTIPLE RULE TYPES (4, 6, AND 12) ................................................................................... 101 9.3 BASES APPORTIONED ON THE BASIS OF PAY (RULE TYPES 4 AND 6) .................................................................... 101 9.4 TRANSFER CHARGES (RULE TYPE 28) ..........................................................................................................