III. EXPLANATORY MEMORANDUM ON THE FOLLOWING ACCOUNTS. GENERAL. The accounts published in this volume are prepared on the income and expenditure basis, i.e., they represent the revenue earned and the expenditure incurred in the period to which they relate and not the actual cash transactions of the period, which will be found in the Finance Accounts and Appropriation Accounts. Where, however, the cash transactions of the Post Office practically coincide with the true revenue or expenditure, it is not thought worth while to apply adjustments of a relatively unimportant character to the cash transactions. The following points should, however, be specially mentioned :— (a) in the case of postal and telegraph transactions with Foreign and Colonial Administrations the cash debits and credits are taken as representing the transactions proper to the year of account; in normal years these practically coincide, but at the present time some discrepancies are liable to arise, owing to the delay in the rendering of accounts: (b) the Post Office, covering as it does a large field, carries its own fire and similar risks, and actual losses, instead of hypothetical insurance premiums, are charged in the accounts year by year as incurred; but in the case of the Blackfriars Power Station the accounts are debited with a hypothetical fire insurance charge. The value of services rendered to other Government Departments is charged at public rates where such rates exist, and where they do not, at cost. INTEREST. As a general rule, interest is calculated at 3 per cent. on all capital expenditure prior to 1 April 1912; and, for all subsequent expenditure, at the average Bank rate appropriate to the year in which it was incurred. The capital of the TELEPHONE Service has been raised mainly by means of Loans, under the Telegraph Acts, Exchequer Bonds and Exchequer Advances. On the loans the interest actually paid is the amount included in the account, on the Bonds the charge is calculated at 3 per cent., the rate at which the Bonds were issued; and on the Exchequer Advances the charge is at the average Bank rates for the years in which the Advances were respectively made. In the LAND AND BUILDINGS Account, interest on capital expenditure for every year up to 31 March 1892 is calculated at a rate equivalent to the average yield of Consols for the year; and, on expenditure after that date, at the rate at which loans were obtained by the Post Office from the National Debt Commissioners. In all the accounts interest on outstanding capital is charged before the balance of profit or loss is determined. DEPRECIATION. On Telegraph, Telephone, and Electric Generating plant depreciation is calculated on the straight line method, on the cost to 1914, or post 1914, as the case may be of the plant in situ, except in the case of trans-Atlantic cables. The calculation is based on lives as estimated by the Engineer-in-Chief for the respective classes of plant. The calculation in respect of Savings Bank Printing and Bookbinding plant is on the straight-line method and is based on lives assigned after consultation with representatives of the Stationery Office and the Printing Trade. In order to make some provision in respect of the increased cost of replacement of pre-war plant, special appropriations are made in certain cases as follow :— (1) On Trans-Atlantic Cables.-The amounts for depreciation included in the main Telegraph Account and the Imperial Cable Service Account are calculated on the basis of current replacement cost and not on that of the original cost. (2) On Telephone Plant. In addition to the ordinary charge, a special provision of 200,000l. is made in the main Telephone Accounts. (3) On Savings Bank Printing and Bookbinding Plant.The normal charge for depreciation, based on pre-war cost, is doubled. Depreciation on Buildings is calculated on the sinking fund method according to the average lives assigned by the Office of Works. PENSION LIABILITY. The basis of the calculation of the annual pension liability is an actuarial investigation made in 1916 modified (1) as to rate of interest at which the funds are accumulated, and (2) by allowance for bonus addition. A fresh calculation is now being made, and it is anticipated that the result of this investigation will be available before the accounts of the following year are published. VALUATION OF STOCKS. Engineering Stocks have been valued at Rate Book prices, viz., at the average buying prices at which the stores were actually purchased. It is estimated that at the date of valuation (31 March 1922) the stock, if valued at the then current buying prices would have been worth in the aggregate (after excluding pre-war apparatus held in reserve for replacements but not now purchased) from 5 per cent. to 10 per cent. below the book value. As the Stores are not trading stocks but are held for use or for issue to works, it has not been thought necessary to go through the expensive process of re-valuing them. Paper and materials held by the Savings Bank for Printing and Bookbinding purposes, and the stocks of fuel at the Blackfriars Power Station and the Savings Bank Generating Station, are shown in their respective accounts at cost price. CHANGES IN ACCOUNTS. Unified Stamps.-The basis of assessment of the proportion of receipts from the sale of Unified Stamps, which is proper to be regarded as due to the Inland Revenue Department, has been revised as from 1 April, 1920. The amount of £2,795,320 for 1921-22, shewn on page 13, includes arrears, amounting to £547,000, in respect of 1920-21. Engineering Supervision. The expenditure on supervision in respect of Telegraph and Telephone Construction and Renewals has this year been charged against Plant and Depreciation respectively, instead of against Maintenance as hitherto. Imperial Cable.-A second cable purchased during 1920-21 is now included in the accounts. The figures for the previous year have accordingly been modified. Wireless Services.-Owing to the difficulty of earmarking the expenditure and revenue on the separate services one combined account has been prepared. Continental Telephone Services.-The service is being extended to other countries than France and Belgium, and it is found convenient to deal with it as a whole. A combined account has therefore been prepared for this year. |