Statement of Accounting Policies

The following accounting policies have been applied consistently, except for the accounting policy on pensions and post retirement benefits which has been changed to adopt FRS 17 ‘Retirement Benefits’, in dealing with items which are considered material in relation to the Group’s financial statements.

Basis of preparation
The financial statements have been prepared in accordance with generally accepted accounting principles under the historical cost convention and comply with financial reporting standards of the Accounting Standards Board, as promulgated by the Institute of Chartered Accountants in Ireland. The financial statements are laid out in the form approved by the Minister for Communications, Marine and Natural Resources, after consultation with the Minister for Finance, under broadcasting legislation.

Changes in accounting policies
The Group financial statements have been prepared using the same accounting policies as set out in the financial statements for the year ended 31 December 2004, with the exception of the accounting policy on retirement benefits following the adoption of FRS 17 ‘Retirement Benefits’. In prior years, the Group complied with the transitional disclosure requirements of this standard. The adoption of FRS 17 represents a change in accounting policy and the comparative figures have been restated accordingly.

The effect of the change in accounting policy on retirement benefits was to increase the Group surplus for the year by €7,176,000 (2004: €11,899,000), comprising an increase in staff costs of €5,009,000 (2004: €3,831,000) and an increase in other finance income of €12,185,000 (2004: €15,730,000), and to recognise an actuarial loss in the statement of total recognised gains and losses of €7,140,000 (2004: €60,228,000). The effect of this change in accounting policy on the Group balance sheet was to increase the pension asset by €36,000 (2004: reduce by €48,329,000), with a corresponding increase (2004: reduction) in the income and expenditure account reserve.

Basis of consolidation
The Group financial statements include the financial statements of RTÉ and all of its subsidiaries drawn up to 31 December each year.

Seirbhísí Theilifís na Gaeilge Teoranta
Expenditure incurred by RTÉ’s wholly owned subsidiary, Seirbhísí Theilifís na Gaeilge Teoranta, comprises capital and operational costs in relation to TG4, the Irish language television channel which has been established in accordance with Government broadcasting policy.

Seirbhísí Theilifís na Gaeilge Teoranta’s capital expenditure is primarily funded by the Exchequer by way of capital grants (non-repayable Exchequer advances). These grant amounts are amortised on the same basis as the related assets are depreciated.

Seirbhísí Theilifís na Gaeilge Teoranta’s direct operational costs, which comprise significant programming and administrative expenditure, net of advertising and other revenue, are part-funded by way of grants-in-aid received from the Exchequer. This expenditure has been offset, in the statement of income and expenditure, against the related grants-in-aid.

Prepaid grant-in-aid originally received from the Exchequer as capital grants in relation to transmission assets is amortised in the statement of income and expenditure on the same basis as the original assets are being depreciated.

Additional costs are separately incurred and reported by RTÉ in respect of the provision of further support to TG4 in the form of programmes, broadcast network transmission, engineering support and other services to TG4 in accordance with Government broadcasting policy.

Revenue
Revenue, which excludes VAT and transactions between companies in the Group, comprises income arising from Licence Fees, advertising sales, sponsorship, the use of the Group’s facilities and transmission network, circulation and events income, and content, merchandising and related income. Revenue is stated net of any settlement and volume discounts.

Licence Fee revenue
Licence Fee revenue payable by the Department of Social and Family Affairs (DSFA) on behalf of individuals eligible for a “free” Television Licence is paid directly by that Department to the Department of Communications, Marine and Natural Resources (DCMNR). All other Licence Fee revenue is collected by An Post and paid over to DCMNR, net of collection costs. DCMNR makes a non-repayable “grant-in-aid” to RTÉ, as provided in Section 8 of the Broadcasting Authority (Amendment) Act, 1976, in lieu of the amounts collected by An Post, net of collection costs and the 5% levy to the Special Broadcasting Fund, together with the amounts paid to it by DSFA.

Advertising and sponsorship income
Television advertising income is recognised when agreed advertising ratings are delivered. All other advertising income is recognised on transmission/publication. Advertising income is stated net of agency commissions. Sponsorship income is recognised evenly over the life of the sponsored programme, publication etc.

Network and facilities income
Network and facilities income arises from the use of, and access to, the Group’s transmission network and studio facilities provided to third parties. Amounts are recognised as the facilities are made available to third parties.

Circulation and events income
Circulation income arises from the publication and circulation of the RTÉ Guide and is stated net of fees due to the distributor and end-retailer. Revenue is recognised on the basis of the net copies sold at the end of the sales cut-off period for each issue.

Events income arises from public events organised by RTÉ Performing Groups. It is recognised as the events are held and amounts fall due.

Content, merchandising and related income
Content, merchandising and related income represents amounts generated from RTÉ content and services provided to third parties through a range of means, including the Group’s internet facilities, Aertel teletext, the external sale of RTÉ content and amounts earned through other commercial services provided by the Group. Revenue is recognised as the service is provided or upon delivery of goods to the third party.

Programme expenditure
The costs of in-house productions, rights, commissioned programmes and acquired (non-commissioned) programmes (acquisitions) are all charged to the statement of income and expenditure as incurred.

Pension costs
The Group, through the RTÉ Superannuation Scheme, the RTÉ Defined Contribution Pension Scheme and other defined contribution schemes, makes pension contributions for a substantial number of employees.

In relation to the defined contribution schemes, contributions are accrued and recognised in operating surplus or loss in the period in which they are earned by the relevant employees.

For the RTÉ Superannuation Scheme, a defined benefit scheme, the difference between the market value of the scheme’s assets and the actuarially assessed present value of the scheme’s liabilities, calculated using the projected unit credit method, is disclosed as an asset/liability in the balance sheet, net of deferred tax (to the extent that it is recoverable). The amount charged to operating surplus is the actuarially determined cost of pension benefits promised to employees earned during the year plus any benefit improvements granted to members during the year.

The expected return on the Superannuation Scheme’s assets during the year and the increase in the scheme’s liabilities due to the unwinding of the discount during the year are shown as financing costs in the statement of income and expenditure. Any difference between the expected return on assets and that actually achieved, and any changes in the liabilities due to changes in assumptions or because actual experience during the year was different to that assumed, are recognised as actuarial gains and losses in the statement of total recognised gains and losses.

Restructuring costs
The Group provides for the full cost of restructuring programmes, even if the restructuring programmes extend beyond the current year. Such amounts may include immediate staff reduction costs, including payments (lump sums) and future payment of a reduced salary until the persons involved qualify for pension entitlements, together with other relevant costs. The total cost to the Group is charged to the statement of income and expenditure in the year in which the restructuring programme is announced and commenced.

Taxation
Irish and overseas corporation tax payable is provided on taxable profits at current rates. The Group’s Licence Fee revenue earned prior to 31 December 2005 is exempt from corporation tax.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax assets are recognised to the extent they are regarded as recoverable. They are regarded as recoverable to the extent that, on the basis of all available evidence, it is regarded as more likely than not that there will be suitable taxable profits against which the future reversal of the underlying timing differences can be offset.

Tangible fixed assets
Tangible fixed assets are shown at original cost, net of accumulated depreciation and any provision for impairment.

Depreciation is provided on all tangible fixed assets, except freehold land, at rates calculated to write off the cost, less estimated residual value, of each asset on a straight line basis over its expected useful life. The principal rates used are as follows:

Capital projects in progress represent the cost of purchasing and installing tangible fixed assets ahead of their commission into use. Depreciation is charged on assets from the date of commissioning.

Financial fixed assets
Financial asset investments are stated at cost less any provision for impairment.

In RTÉ’s own balance sheet, interests in subsidiary companies are stated at cost less any provision for impairment.

Provisions
Provisions are accounted for in accordance with FRS 12 ‘Provisions, contingent liabilities and contingent assets’. The costs of a present obligation are provided for when a transfer of economic value is likely to be required to settle the obligation and the Group is able to make a reliable estimate thereof. If the Group is able to avoid this expenditure by altering its future actions, then no provision for the obligation is recognised.

Obligations to be incurred in future years are discounted to their present values by applying an appropriate discount rate. Payments are deducted from the provision as they are made and related interest is charged annually to the statement of income and expenditure.

Liquid resources
Liquid resources comprise short-term deposits and current asset investments which are either readily convertible into known amounts of cash at or close to their carrying values or are traded in an active market.

For the purposes of cash flow reporting, and in accordance with FRS 1 ‘Cash flow statements’, all deposits classified as ‘Cash at hand and at bank’ in the balance sheet, with the exception of current accounts and demand deposits, are treated as ‘Liquid resources’ in the Group cash flow statement.

Leases
Rentals under operating leases are charged on a straight-line basis over the lease term.

Foreign currency
Transactions denominated in foreign currencies are recorded at actual exchange rates at the date of the transaction or, where appropriate, at the rate of exchange in related forward exchange contracts. Monetary assets and liabilities denominated in foreign currencies are translated using the rates of exchange prevailing at the balance sheet date or, where appropriate, the rates of exchange in related forward exchange contracts. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the statement of income and expenditure.

Related party transactions
The Group has availed of the exemptions under FRS 8 ‘Related party disclosures’ and therefore does not disclose transactions between Group undertakings.