BBC Group has published its 2024-25 accounts. Gareth Davies, the Comptroller and Auditor General (C&AG), has issued a clean audit opinion, providing assurance to Parliament on the financial statements.
Here we share highlights from his audit certificate. You can read the full certificate and report on the accounts, as well as the C&AG’s assurance opinion on pay disclosures, in context in the BBC Group’s annual report and accounts.
See also the Television Licence Fee Trust Statement 2024-25
Opinion on financial statements
In my opinion, the financial statements:
- give a true and fair view of the state of the BBC Group’s affairs as at 31 March 2025 and of the deficit for the year then ended;
- have been properly prepared in accordance with UK adopted international accounting standards; and
- have been prepared in accordance with the Royal Charter for the continuance of the British Broadcasting Corporation and Secretary of State directions issued thereunder.
Opinion on regularity
In my opinion, in all material respects the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Key Audit Matters
Consolidation processes and scope
Description of risk
The production of BBC Group financial statements requires multiple levels of consolidation of entities within the Group, identification of consolidation adjustments and elimination of intra-group transactions. The complexity of the group structure, the volume and value of required adjustments and the manual interventions in the consolidation processes increase the risk of material misstatement.
There is also a risk around the scope of consolidation as management judgement is often required in determining which entities are required to be consolidated into the Group, rather than treated as joint ventures, associates or investments. This applies to the BBC’s investment in Daunus Ltd, which was set up as part of the refinancing of the London Broadcasting House refurbishment and sale and lease back arrangement. Management have assessed that the investment represents a joint venture and that it is not a subsidiary controlled by the BBC. This is a significant judgement.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Revenue recognition – Commercial
Commercial revenue from contracts with customers – £2,152 million (2023/24: £1,859 million) – refer to note B1
Description of risk
There are several sources of revenue within the BBC’s commercial subsidiaries where I deem the recognition of revenue to be complex and involve management judgement and therefore to present a higher risk of fraud or misreporting, including revenue recognition being managed to achieve particular results or to meet stakeholder expectations.
The revenue streams I have considered subject to the most risk comprise:
- Content and format licensing income: this income is derived from complex contracts that require significant judgement around revenue recognition.
- Advertising revenue: these contracts are managed externally by third parties and not billed in line with the financial year. Therefore, accrued advertising revenues are subject to a degree of estimation.
- Revenue associated with productions: although most production revenue is generated from within the BBC Group, a material amount is derived from external commissions. Large production contracts are complex with multiple performance obligations which require a degree of judgement around revenue recognition.
I consider that there may be an incentive to manage and report commercial revenue in ways that meet stakeholders’ expectations. This might involve revenue collection and reporting processes. As the BBC Commercial Group uses EBITDA to measure its performance, and revenue is a key enabler of its activities, I consider there is a heightened risk around the occurrence and cut-off of revenue recorded in the current period, and thereby EBITDA reported. This has been a key focus of my testing in this area.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Revenue recognition – Licence fee
Licence fee revenue – £3,843 million (2023/24: £3,660 million) – refer to note B2
Description of risk
The BBC’s primary source of revenue is derived from the Television Licence Fee (the licence fee). The licence fee is set by the Secretary of State for Culture, Media and Sport in accordance with the 2016 Royal Charter for the Continuance of the BBC; the current Charter ends in 2027/28.
I consider that there may be an incentive to manage and report licence fee revenue in ways that meet stakeholders’ expectations. This might involve the BBC or other parties involved in the licence fee revenue collection and reporting process. I consider that there is a heightened risk around the year end of revenue recognition being managed to achieve particular results and this has been a key focus of my testing in this area.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Accounting for Corporate Transactions
Goodwill adjustment £4 million, Disposal proceeds £33 million – refer to notes C1 and E7
Description of risk
The Commercial Group has undertaken a number of corporate transactions within the calendar year. As these are non-routine and may involve judgement and estimates, there is an increased risk of material misstatement.
I am aware of the below listed significant corporate transactions:
- Adjustments arising from the prior year acquisition of BritBox
- Disposal of the BBC’s stake in NVCA in November 2024
- Acquisitions of Brutal Media and Werner Film Group in April 2024
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Valuation of defined benefit pension scheme assets
Defined benefit pension scheme asset: £12,558 million (2023/24: £13,776 million) – refer to note D6
Description of risk
The valuation of the defined benefit pension scheme assets reported in the accounts is highly judgemental, and changes to market assumptions can result in material changes to the valuation. Pension assets include equities, bonds, repurchase agreements, property, alternative investments and other assets. There is also a longevity swap contract in place for this pension scheme which is held at fair value. The valuations for some of these assets are inherently subjective and require a significant level of estimation in selecting appropriate valuation methodologies and assumptions. Given these factors, and the quantum of the assets, I have assessed the valuation of the pension scheme assets as a significant risk of material misstatement to my audit.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Valuation of defined benefit pension scheme liabilities
Defined benefit pension scheme liability: £11,684 million (2023/24: £13,890 million) – refer to note D6
Description of risk
The valuation of the defined benefit pension scheme liabilities reported in the accounts is highly judgemental, and changes to actuarial assumptions, such as discount rate, inflation and mortality rates, can result in material changes to the valuation. The IAS 19 valuation of the pension scheme liability was carried out by external actuarial experts commissioned by the BBC. Given these factors, and the quantum of pension scheme liabilities, I have assessed the valuation of the pension scheme liabilities as a significant risk of material misstatement to my audit.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Programme asset accounting
Programme-related assets and other inventory: £1,207 million (2023/24: £1,196 million) – refer to note E1
Description of risk
The BBC Group recognises assets in respect of costs associated with making or acquiring a programme. These assets are then released to cost of sales in the Consolidated Income Statement as programmes are delivered (BBC Studios) or transmitted (Public Service Broadcaster).
The valuation of programme assets is a highly material estimate in the accounts, and there is a significant amount of judgement over the initial value, release to cost of sales and the impairment of these assets.
There is a risk that the approach to valuation (judgment over initial value and consumption of these assets) could result in material misstatement, or that the processes to identify impairment of programme assets are not sufficient to identify material overstatement. As this process is manual, there is also a risk of human error, which given the size of these balances, could have a material impact on the financial statements.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Valuation of lease liabilities
Obligations under leases: £1,649 million (2023/24: £1,678 million) – refer to note F2
Description of risk
BBC has a significant number of leases that often require judgment around the method, model, data and assumptions used in calculating the value of the lease liabilities. These judgments include a consideration of repurchase options at the end of the lease term and the treatment of contingent rent arrangements. Therefore, I have identified a risk of material misstatement in respect of the valuation of lease liabilities.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Valuation of derivatives
Cash flow swaps financial assets: £310 million (2023/24: £343 million) – refer to note G4
Cash flow swaps financial liabilities: £461 million (2023/24: £482 million) – refer to note G4
Description of risk
The BBC entered into an agreement involving cash flow swaps as part of the 2016-17 refinancing of the London Broadcasting House sale and lease back arrangement. The valuation of the Fontus cash flow swap assets and liabilities requires significant management judgements, and changes to assumptions can result in material changes to the valuation.
We have identified risks around the method, model, data and assumptions used in estimating the fair value of the derivative assets and liabilities related to the Fontus cash flow swaps, as well as the sufficiency and accuracy of the related disclosures.
Key observations
The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.
Application of materiality
Materiality: £50 million (2023/24: £50 million)
Basis for determining materiality: Approximately 1% of revenue (2023/24: approximately 1% of revenue)
Rationale for the benchmark applied: I chose Group revenue as the materiality benchmark because, in my professional judgement, revenue is the key driver of the BBC Group’s business; in particular licence fee revenue and commercial revenue generated by the BBC Group are key drivers of stakeholder interest. Parliament and the public have an interest in the way in which the BBC Group is funded and how it spends its funds. The level of licence fee revenue and commercial revenue determines the resources available to the BBC Group and drives strategic decisions around spending and investment.
Links to accounts
BBC Group Annual Report and Accounts 2024-25
- Audit certificate and report (pages 129 to 139)
- C&AG’s assurance opinion on pay disclosures (page 103)