Pearson

Annual Report and Accounts 2010

Notes to the consolidated financial statements

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4. Operating expenses

All figures in £ millions 2010 2009
By function:
Cost of goods sold 2,588 2,382
Operating expenses
Distribution costs 298 275
Administrative and other expenses 2,190 2,014
Other income (115) (120)
Total operating expenses 2,373 2,169
Total 4,961 4,551
All figures in £ millions Notes 2010 2009
By nature:
Utilisation of inventory 21 836 843
Depreciation of property, plant and equipment 10 69 64
Amortisation of intangible assets – Pre-publication 20 350 307
Amortisation of intangible assets – Other 11 152 131
Employee benefit expense 5 1,849 1,725
Operating lease rentals 166 157
Other property costs 64 70
Royalties expensed 524 479
Advertising, promotion and marketing 250 219
Information technology costs 78 72
Other costs 738 604
Other income (115) (120)
Total 4,961 4,551

During the year the Group obtained the following services from the Group’s auditors:

All figures in £ millions 2010 2009
Fees payable to the company’s auditors for the audit of parent company and consolidated financial statements 4 4
The audit of the company’s subsidiaries pursuant to legislation 2 2
Tax services 2 2
Other services 2 1
Total 10 9

Reconciliation between audit and non-audit service fees is shown below:

All figures in £ millions 2010 2009
Group audit fees including fees for attestation under section 404 of the Sarbanes-Oxley Act 6 6
Non-audit fees 4 3
Total 10 9

Fees for attestation under section 404 of the Sarbanes-Oxley Act are allocated between fees payable for the audits of consolidated and subsidiary accounts.

Tax services include services related to tax planning and various other tax advisory matters. Other services is mainly due diligence on acquisitions, notably our Brazilian acquisition, Sistema Educacional Brasiliero (SEB), where we assessed that our auditors were best qualified and cost effective in taking on this role.