Note A: How the BBC's accounts are prepared

This section includes the BBC’s policies on how the financial statements have been prepared and what standards have been adopted and applied during the year. Other accounting policies are captured in each of the following sections alongside the relevant notes.

Incorporation

The BBC is incorporated in the United Kingdom by Royal Charter as a body corporate.

Statement of accounting policies

The BBC is required to select and apply accounting policies for each type of transaction entered into throughout the year and in the preceding year. An accounting policy sets out the framework for how assets, liabilities, income and expenditure should be accounted for in the financial statements, in accordance with the applicable standard, how those items will be measured and where they are presented in the consolidated expenditure statement, balance sheet and statement of cash flows.

Basis of preparation

These consolidated financial statements for the BBC have been prepared in accordance with UK adopted IFRS. Additional analysis is also presented to meet regulatory requirements including those prescribed by DCMS, Ofcom and the Charter.

The financial statements are principally prepared on the historical cost basis. Exceptions are noted within the relevant section of the notes.

Where items are sufficiently significant by virtue of their size or nature, they are disclosed separately in the financial statements in order to aid the reader’s understanding of the BBC’s financial position and performance.

Use of estimates and judgements

The preparation of financial statements requires the use of certain critical accounting estimates that affect the reported performance and position of the BBC, or areas where assumptions or estimates are significant to the consolidated financial statements.

It also requires management to exercise judgement in applying the BBC’s accounting policies. These areas involve a higher degree of judgement or complexity and are therefore drawn out at the front of each note.

In summary, the most significant estimate and judgement areas are:

Risks relevant to the disclosures made are also highlighted at the start of each section and cross-referenced across the Annual Report and Accounts accordingly.

In addition to the consolidation risk mentioned above, the significant risk areas identified are:

• Income recognition (Note B);
• Acquisitions (Note C);
• Valuation of defined benefit pension scheme (Note D);
• Complex property transactions (Notes E and F);
• Valuation of derivatives (Note G);
• Programme accounting (Note E).

Going concern

The annual financial statements for the period 31 March 2026 have been prepared on a going concern basis. In reaching this conclusion, the Board considered the challenging funding and market environment in which the BBC operates, together with the stability provided by the Royal Charter and Agreement (which runs to 31 December 2027) and the well‑established regulatory framework. Whilst pressures remain, the BBC has a clear plan and a strong record of adapting to deliver within its financial constraints for a period of at least 12 months from the date at which these financial statements were issued for approval.

Principal risks and stress testing

The BBC continues to face significant financial challenges, including sustained pressure on licence fee income, tougher commercial markets and persistent inflation in content costs. The UK Government confirmation that the licence fee will be maintained and uprated to £180 from April 2026 provides some near‑term certainty, but the overall environment remains demanding.

Against this backdrop, the BBC’s refreshed Value for All strategy and continued programme of transformation are essential to ensuring we deliver for audiences. Although 2026 brings several senior leadership changes, the organisation remains focused on delivery. Progress towards our £700 million savings programme and a 94% weekly reach demonstrates our ability to deliver through periods of transition.

As part of the Going Concern review there has been a thorough review of the risks facing the BBC, and appropriate mitigations are available if required. As the PSB and Commercial Group have separate borrowing limits (see next section), the going concern review for the Group has been completed through two sub-assessments.

We’ve extrapolated expected cash flows for 12 months from the date of issue of these financial statements, based on the budget approved by the Board. This shows that we will continue to operate within our borrowing limits, and with sufficient headroom over this period.

We have stress tested these projections for the identified risks including the impact of changes in licence fee income, risk to savings delivery and commercial performance. In all modelled scenarios, sufficient mitigations exist to remain operating within our approved debt limits throughout the period under review. These include non-audience facing activity such as restricting and/or delaying capital and project expenditure, and exploring additional commercial or financing proposals.

The risks have been taken into consideration over a longer period within the Viability Statement modelling and further information on this approach is in the Viability Statement. This shows a robust assessment of the principal risks facing the Corporation, including those that would threaten its business model, future performance, solvency or liquidity. In particular, the Directors have applied assumptions relating to the changing risk profile arising as described under principal risk 1, “Our Finances” to cash flow and budgetary modelling.

We have undertaken a reverse stress testing exercise to test the limits of the BBC’s resilience under a combination of extreme events deemed to be of remote likelihood. The results of the reverse stress test support the approach taken in assessing the key financial risks that we face.

Funding and liquidity position

The Charter and licence fee give the BBC a secure source of income over the period under assessment, however the timing of cash flows is an important factor in the consideration of going concern given the borrowing restrictions agreed with the DCMS for both the Public Service Broadcasting (PSB) Group (£2,200 million of which £2,000 million is available to fund leases) and the Commercial Group (£(850) million in 2025/26, rising to £950 million by 2026/27, of which £200 million is specifically for leases).

The Board considers the BBC’s funding and liquidity position to be sufficient to support delivery of the plan, whilst recognising that continued careful management will be required. The BBC PSB has external funding available comprising a £200 million revolving credit facility which expires in March 2029. This was extended in the year with a further one-year extension available (requiring lender consent) and is currently unutilised. Including leases, PSB net debt as at 31 March 2026 was £1,381 million, which equates to headroom of £819 million against the borrowing limit available (£323 million headroom including cash and cash equivalents and excluding leases).

There are separate facilities available to the BBC Commercial Group. At the balance sheet date, the primary sources of funding to the Commercial Group was a combined £490 million revolving credit and term loan facility from several international banks, comprising £348 million of the former and £142 million of the latter (maturing in January 2029 with a further one-year extension option requiring lender consent) and two private placements with an insurance company of £150 million each (maturing in February 2039 and July 2041). The financial covenants associated with the facilities are unchanged.

As at the year-end the BBC Commercial Group had drawn down £585 million (2025: £444 million). The BBC Commercial Group had headroom against its lease borrowing limit of £77 million (2025: £89 million) at 31 March 2026.

Summary

The Board of the BBC has reviewed the cash flow forecasts, projections and available external borrowing facilities. Together with the sensitivities and mitigating factors in the context of available funds, they expect the BBC to be able to meet its debts as they fall due for the 12-month period from the date on which these financial statements are authorised for issue.

As a result, the Board is satisfied that the going concern basis is appropriate for the preparation of these financial statements.

Basis of consolidation

The BBC’s financial statements include the results of the BBC and all businesses controlled by the BBC (subsidiaries) together with the BBC’s share of the results of businesses over which the BBC has significant influence but not control (associates) and those which the BBC jointly controls (joint ventures).

At the point of acquisition, and wherever relevant circumstances change thereafter, the BBC has assessed whether its economic interest should be considered to be subsidiaries, associates or joint ventures. In such circumstances, the assessment performed is on the BBC’s ability to control or influence those entities. The BBC controls an investee if, and only if, it has power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns. Where such policies are reserved such that an economic partner has the power to veto key strategic financial and operating decisions, the entity is considered to be an associate or joint venture undertaking.

The BBC consolidates its subsidiaries on a line-by-line basis, recognising separately any share of results held by non-controlling interests. A non-controlling interest is the interest in a subsidiary that is not owned, directly or indirectly, by the BBC. The non-controlling interest reflects the amount of the net result for the year and the net assets/(liabilities) which are not attributable to the BBC.

Changes in the BBC’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions, being movements between reserves attributable to the BBC and non-controlling interests. The carrying amounts of non-controlling interests are adjusted to reflect any changes in their and the BBC’s relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the BBC.

When the BBC loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the net assets of the subsidiary (including attributable goodwill) and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to the consolidated expenditure statement or transferred directly to retained earnings as appropriate. The fair value of any interest retained in the former subsidiary at the date when control is lost is regarded as the cost on initial recognition of an investment in an associate or joint venture.

The BBC accounts for its interests in associates and joint ventures using the equity method. Using the equity method, the BBC presents its interest in associates or joint ventures as a single line item in the balance sheet, measured at the cost of the investment plus the share of the net result, less dividends received. The equity-accounted result for the year is presented as a single line item in the consolidated expenditure statement.

Where necessary, adjustments are made to the financial statements of subsidiaries, associates and joint ventures to bring the accounting policies used into line with those used by the BBC. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Unrealised gains from transactions with associates and joint ventures are eliminated to the extent of the BBC’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Foreign currency transactions

Transactions in foreign currencies are translated into the functional currency of each entity of the BBC at an average exchange rate.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the rate of exchange ruling at that date. Foreign currency gains or losses arising from the translation of assets and liabilities at these rates of exchange, together with exchange differences arising from transactions settled during the year, are included in the consolidated expenditure statement within operating costs. Non-monetary assets and liabilities measured at historical cost are translated into sterling at the rate of exchange on the date of initial recognition.

Financial statements of foreign operations

The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the balance sheet date. The income and expenses of foreign operations are translated into sterling at average rates of exchange ruling during the financial period, which is a good approximation for the actual rate. Exchange differences arising on translation are recognised directly in the translation reserve.

On disposal of an investment in a foreign operation, the associated translation reserve balance is released to the consolidated expenditure statement.

Adoption of new and revised accounting standards

The following new and revised standards and interpretations have been adopted for the first time, as they became effective for this financial year:

Lack of exchangeability (amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates). This amendment provides guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not.

This change has been applied since 1 April 2025 and has not had a significant impact on the results or financial position of the BBC

New standards and interpretations not yet adopted

At the date of authorisation of these financial statements, the following standards and interpretations that have been endorsed by the UK, which have not been applied as not yet effective are:

• IFRS 18 Presentation and Disclosure in Financial Statements sets out presentation and disclosure requirements that apply across the primary financial statements and notes. This standard does not however change how entities recognise and measure items in the financial statements.
• Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures regarding the classification and measurement of financial instruments. The amendment addresses matters identified during the post-implementation review of the classification and measurement requirements of IFRS 9 Financial Instruments.
• Annual improvements to IFRS accounting standards - Volume 11. Includes amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards (clarity around hedge accounting by a first-time adopter), IFRS 7 Financial Instruments: Disclosures (clarity around certain disclosures), IFRS 9 Financial Instruments (clarity around derecognition of lease liabilities and transaction prices), IFRS 10 Consolidated Financial Statements (clarity around the determination of a de facto agent) and IAS 7 Statement of Cash Flows (clarity around the use of the cost method for cash flow statements).
• Contracts referencing nature-dependent electricity (Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures). This amendment addresses how IFRS 9 Financial Instruments should be applied to power purchase agreements with specific characteristics and their related disclosures under IFRS 7 Financial Instruments: Disclosures.

With the exception of IFRS 18 Presentation and Disclosure in Financial Statements the directors do not expect that the adoption of the standards and interpretations above would have a material impact on the financial statements of the BBC in future periods. IFRS 18 Presentation and Disclosure in Financial Statements will affect presentation, not recognition and measurement, and is expected to be adopted within the 2027/28 financial year.