IFRS adoption update

BT Group PLC
21 March 2005


March 21, 2005

BT updates on the adoption of International Financial Reporting Standards (IFRS)

BT Group plc ('BT') will be adopting International Financial Reporting Standards
(IFRS) as the basis of accounting for the year ending 31 March 2006. As part of
the transition to IFRS, BT is presenting today its latest view of the pro-forma
financial effect of adopting IFRS for the year ended 31 March 2004.

BT will continue to report under UK Generally Accepted Accounting Principles (UK
GAAP) for the year ended 31 March 2005 and will subsequently present financial
information in accordance with IFRS.

Whilst some of the changes required by IFRS will impact BT's reported profits
and net assets this has no impact on the cash flows generated by the business or
the cash resources available for investment or distribution to shareholders.
Furthermore the adoption of IFRS does not affect BT's strategy or underlying
business performance.

The main areas of impact for BT on adoption of IFRS include:

   • Recognition of defined benefit pension scheme assets and liabilities on
     balance sheet and finance charges associated with those assets and
     liabilities

   • Recognition of the fair value of share based payments

   • Amendment to the timing of recognition of certain property operating
     lease charges

   • Requirement to no longer amortise goodwill and to separately identify
     and amortise any other intangible assets on business combinations

   • Recognition of fair value movements on certain financial instruments
     from 1 April 2005

Hanif Lalani, Group Finance Director, commented:

"The information provided today shows the latest view of the main IFRS effects
on BT in advance of their adoption next year. IFRS requires more items to be
marked to market, which may make future reported results more volatile, in
particular through the net interest line. Our current view of the pro-forma
effect of adopting IFRS for 2003/04 is to reduce EPS* by approximately 1.5
pence, compared to UK GAAP, and a minimal increase in net debt. For 2004/05 the
EPS* effect is expected to be broadly neutral, compared to UK GAAP.

It is important to note that these accounting changes do not affect our cash
generation or our investment and shareholder distribution policy."

*before goodwill amortisation and exceptional items

Full details of the main expected IFRS changes and their adoption by BT will be
provided in a presentation hosted by Hanif Lalani, Group Finance Director. The
presentation will commence at 12.00pm (UK time) and is accessible at:

Call details: 0870 608 1510 (UK)/[phone] (European)/ [phone] 1175
(US). Password: IFRS

Contact details: Investor Relations - [phone]

The slide pack for the presentation will be accessible from 11.30am (UK time)
at:

http://www.btplc.com/news/presentations/generalpresentations/index.htm


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