This follows a year of change in governance and regulation at the BBC which culminates in the transfer of the audit to the NAO for the 2017/18 financial year, fro statutory auditors, Ernst & Young LLP, who have been in post since their appointment in 2014 following an external tender process.

In the last year, EY earned £2m in audit and non-audit fees (2016: £2.1m), of which £1.6m was for audit and audit-related audit assurance services, £200,000 for tax compliance services and a further £200,000 for other non-audit services. The main tax costs relate to activities of the global business of selling rights overseas and non-UK activity, primarily driven by the results of the commercial businesses.

In terms of tax, the PSB Group is liable to taxation on those activities carried out with a view to making a profit and on rent from buildings and properties, royalties and interest receivable and does not receive relief for all its expenditure. The commercial subsidiaries in the BBC Group are taxed in accordance with tax legislation but public sector ‘free-to-air’ broadcasting activities are not subject to taxation.

Risks around changes to tax rules including OECD recommendations are earmarked as issues to keep under review.

The BBC Annual Report and Accounts 2016/17 states: ‘There are many future changes to worldwide taxation systems as a result of the potential adoption by the UK and individual territories of measures relating to the OECD Base Erosion and Profit Shifting Actions. The Group continues to actively monitor any developments and evaluate their potential impact.

'The Group does not expect the future tax rate to be materially impacted by these changes to the international tax landscape.’

The current tax assets totalling £40m in 2016/17 includes £15m (2015/16: £26.1m) due in respect of film tax credits outstanding on high-end drama and comedy productions following prudent overprovisions made in 2016/17. 

The Audit Committee report highlighted specific areas of risk, including the a need to focus on developing and implementing the BBC’s tax management strategy, as well as risk around data protection and cyber security, and BBC Worldwide’s trading and operational risks.

The Committee also reviewed the arrangements to transition the BBC’s external audit from EY to the National Audit Office for the upcoming financial year, as well as providing input and oversight to a number of key financial transactions relating to the BBC’s property portfolio.

Non-audit services

To meet audit regulations, the incumbent auditor EY was not considered for work which could compromise its ability to give independent opinion on the BBC’s financial statements.

‘As one of the safeguards over the independence of the external auditors, the Committee developed and oversaw the BBC’s policy on the commissioning of the auditors to provide non-audit services.

The BBC audit and risk committee chair is Simon Burke, who has been in post since 2011 and was appointed as a senior independent director of the BBC this June.

In line with conflict of interest rules, recruitment from EY into any senior management position in the BBC requires the prior approval of the audit committee, and there were no appointments during the year.

IFRS accounting changes

Despite the imminent introduction of a number of new International Financial Reporting Standards (IFRS) from 2018, the Group has not completed any detailed analysis of the potential impact.

The report states that it is reviewing the potential impact of the new revenue recognition standard, IFRS 15 Revenue from Contracts with Customers, stating: ‘An initial assessment of the impact on the Group has been undertaken, however, further detailed analysis is required on specific revenue streams to determine if contracts include dynamic or static performance obligations’.

It concludes that ‘it is not practicable to provide a reasonable estimate of the effect of IFRS 9, IFRS 16 and IFRS 15 until a full and detailed review has been completed’.

The report also states that the BBC is assessing the impact of IFRS 16 Leases, the new lease accounting standard effective 1 January 2019, which is set to replace IAS 17, and will impact the accounting for operating leases.

Such agreements will require the recognition of lease assets, representing the right to use the leased item, and a respective liabilities, representing the future lease payments. The potential impact on the Group is currently being assessed. It is also reviewing the impact of IFRS 9 Financial Instruments, the new standard due to come into force from 1 January 2018.

Stars' pay disclosure

For the first time this year, the BBC has been forced to disclose the salaries of staff and presenters paid over £150,000. The list was topped by celebrity hosts like Chris Evans, Gary Lineker and Graham Norton. Big name presenters on the Today programme, the World at One and PM also featured in the list.

The gender pay gap was highlighted with only a third of women paid over £150,000, compared with men, while no women were paid more than £500,000 a year.

The total spend on top presenters and actors was down £5m on 2016, when the BBC shelled out £31.9m for stars paid over £150,000. 

Staff numbers at the BBC stayed more or less static over the period with 21,271 staff (2016: 21,265).

BBC Pay Disclosures July 2017 Report from the BBC Remuneration Committee of people paid more than £150,000 of licence fee revenue in the financial year 2016/17 is available here

The BBC Annual Report and Accounts 2016/17 is available here