Adoption of IFRS
YOOMEDIA PLC
UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
YooMedia plc ('YooMedia') is preparing for the adoption of International
Financial Reporting Standards as adopted by the European Union ('adopted IFRS')
as its primary accounting basis for the year ending 31 December 2007. As part
of this transition, YooMedia is today presenting unaudited financial
information prepared in accordance with adopted IFRS for the year ended 31
December 2006 and for the six months ended 30 June 2006. The purpose of this
statement is to present the effects of adopted IFRS on the Group for 2006
full-year and half-year comparative periods.
The principal changes to the Group's reported financial information under UK
GAAP* arising from the adoption of IFRS are as a result of the following:
* the requirement to charge the income statement with the fair value of any
share options and warrants issued;
* the requirement not to amortise goodwill but to conduct annual impairment
reviews; and
* the requirement to apportion the convertible loans into both liability and
equity components by assessing the fair value of the debt component and to
calculate the interest expense by applying a rate that would have been
payable on a similar debt without any equity conversion option.
*throughout this statement 'UK GAAP' means the accounting standards and
framework in issue at 31 December 2006, which were applied to the financial
statements of the Group for the year ended 31 December 2006.
Details of adjustments arising from the transition to adopted IFRS are outlined
in the Key Impact Analysis section below. For the year ended 31 December 2006
the expected impact of the adjustments is a reduction in the retained loss of £
0.1 million, and an increase in net assets of £1.5 million.
28 September 2007
Enquiries:
YooMedia PLC +44 (0) 207 462 0870
Neil MacDonald, Managing Director
Nexus Financial Ltd +44 (0) 207 451 7068
Nicholas Nelson/Kathy Boate Nicholas.nelson@nexusgroup.co.uk
Seymour Pierce Limited +44 (0) 207 107 8000
Mark Percy
BASIS OF PREPARATION
The financial information presented in this document has been prepared on the
basis of the recognition and measurement requirements of adopted IFRSs in
issue. Based on these adopted IFRSs, the directors have made assumptions about
the accounting policies expected to be applied when the first annual IFRS
financial statements are prepared for the year ending 31 December 2007. The
significant effects of these accounting policies are set out below.
In addition, the adopted IFRSs that will be effective (or available for early
adoption) in the annual financial statements for the year ending 31 December
2007 are still subject to change and to additional interpretations and
therefore cannot be determined with certainty. Accordingly, the accounting
policies for that annual period will be determined finally only when the annual
financial statements for the Group are prepared for the year ending 31 December
2007. The Group's financial results for the six month period ending 30 June
2007 will be prepared on the basis of the principles of adopted IFRS, and will
be presented together with details of the accounting policies expected to be
applied for the year ending 31 December 2007.
IFRS 1 exemptions
IFRS 1, `First-time Adoption of International Financial Reporting Standards'
sets out the procedures that the Group must follow when it adopts IFRS for the
first time as the basis for preparing its consolidated financial statements. As
explained above, the Group is required to establish what its adopted IFRS
accounting policies are expected to be as at 31 December 2007 and, in general,
apply these retrospectively to determine the IFRS opening balance sheet at its
date of transition, 1 January 2006 (the "transition date").
This standard provides a number of optional exceptions to this general
principle. The most significant of these for the Group relates to business
combinations that occurred before the opening IFRS balance sheet date (IFRS 3,
`Business Combinations'). The Group has elected not to apply IFRS 3
retrospectively to business combinations prior to 1 January 2006.
KEY IMPACT ANALYSIS
The analysis below sets out the most significant adjustments to be made to the
previously reported UK GAAP numbers arising from transition to adopted IFRS.
The effects of these adjustments are then presented in the restated balance
sheets as at 1 January 2006, 30 June 2006 and 31 December 2006, and in the
restated income statements for the 6 months ended 30 June 2006 and the year
ended 31 December 2006.
Adjustment (a) Share based payments
As at 1 January 2006 the company held a provision of £862,000 in relation to a
charge on unapproved share options under UITF 17. IFRS 2 requires the company
to charge the income statement with the fair value of the options issued and
this charge is spread over the vesting period of the option (which is typically
2 years), the company has calculated the fair value using the Black-Scholes
method. The result of the adjustments to reflect the change from UITF 17 to
IFRS 2 is an increase in net assets of £862,000 as at 31 December 2006 and an
increase in the loss for the year ended 31 December 2006 of £539,000.
Adjustment (b) Employee Benefits
Under IAS 19, short-term benefits such as annual leave and sick leave, falling
due within 12 months are required to be accrued at nominal value. A review of
unused holiday pay at each period end (including interim) and any other short
term compensated absences (ie. sick leave) has resulted in a net decrease in
net assets as at 31 December 2006 of £23,000 and an increase in retained profit
for the year ended 31 December 2006 of £44,000.
Adjustment (c)Goodwill and Intangible Assets
IFRS 3 'Business Combinations' requires that, when businesses are acquired, any
intangible assets acquired with the business are valued separately and
capitalised as an intangible asset. Any residual difference between the
consideration paid or payable and the net fair value of the identifiable
assets, liabilities and contingent liabilities acquired is recognised as
goodwill. IFRS 3 also requires that goodwill is not amortised but is instead
subject to an annual impairment review, whereas intangible assets are amortised
over their useful lives. As the Group has elected not to apply IFRS 3
retrospectively to business combinations prior to 1 January 2006 under IFRS,
the goodwill arising from combinations before that date therefore remain at the
amount shown within goodwill under UK GAAP at 1 January 2006 so there is no
impact from those acquisitions on the 2006 opening balance sheet.
As IFRS 3 requires that goodwill is not amortised, amounts previously amortised
in the 31 December 2006 accounts under UK GAAP of £2,624,000 have been written
back. Subject to IAS 36 the directors have identified cash generating units
within the business and reviewed for any possible impairment that may be
required. Following this review a goodwill amount of £1.871m has been impaired
in the year ended 31 December 2006. The net result of these two adjustments is
an increase in net assets as at 31 December 2006 of £753,000.
Adjustment (d)Financial Instruments
Under IAS 32, financial instruments are classified as financial liabilities and
equity instruments. Compound financial instruments may contain both a liability
and an equity component. YooMedia's convertible debt in the balance sheet as at
31 December 2006 has been split into debt and equity components using fair
value accounting principles. Interest is calculated by applying a rate that
would have been payable on a similar debt without any equity conversion option.
The effect of this adjustment has been a decrease in net assets of £81,000 as
at 31 December 2006 and an increase in the interest charge in the year ended 31
December 2006 of £152,000.
YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32 Restated
Consolidated balance sheet stated IAS 36 under
1 January 2006 UK GAAP (a) (b) (c) (d) adopted
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill 43,980 43,980
Intangible assets 1,925 1,925
Property, plant & equipment 2,737 2,737
Investments 13 13
Non-current assets 48,655 - - - - 48,655
Trade & other receivables 7,634 7,634
Cash & cash equivalents 117 117
Current assets 7,751 - - - - 7,751
Trade & other payables 11,588 11,588
Short term borrowings 3,488 3,488
Provisions for liabilities & - 67 67
charges
Creditors < 1 year 15,076 - 67 - - 15,143
Net current assets/ ( 7,325) - ( 67) - - ( 7,392)
(liabilities)
Total assets less current 41,330 - ( 67) - - 41,263
liabilites
Non current liabilities
Interest bearings loans & 1,000 1,000
borrowings
Long term provisions 1,834 (862) 972
Other non current 1,697 1,697
liabilities
Net assets 36,799 862 ( 67) - - 37,594
Capital & reserves
Issued capital 12,060 12,060
Shares to be issued 281 281
Share premium 75,521 75,521
Other reserves 455 508 963
Retained earnings ( 51,875) 354 ( 67) ( 51,588)
36,442 862 ( 67) - - 37,237
Minority interest 357 357
Total equity 36,799 862 ( 67) - - 37,594
YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32 Restated
Consolidated balance sheet stated IAS 36 under
30 June 2006 UK GAAP (a) (b) (c) (d) adopted
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill 42,594 1,336 43,930
Intangible assets 1,886 1,886
Property, plant & equipment 3,014 3,014
Investments 1,493 1,493
Non-current assets 48,987 - - 1,336 - 50,323
Trade & other receivables 7,767 7,767
Cash & cash equivalents 401 401
Current assets 8,168 - - - - 8,168
Trade & other payables 14,763 14,763
Short term borrowings - -
Provisions for liabilities & - 52 52
charges
Creditors < 1 year 14,763 - 52 - - 14,815
Net current assets/ ( 6,595) - (52) - - ( 6,647)
(liabilities)
Total assets less current 42,392 - ( 52) 1,336 - 43,676
liabilites
Non current liabilities
Interest bearings loans & 6,522 ( 39) 6,483
borrowings
Long term provisions 1,731 (862) 869
Other non current liabilities 1,977 1,977
Net assets 32,162 862 ( 52) 1,336 39 34,347
Capital & reserves
Issued capital 12,482 12,482
Shares to be issued 281 281
Share premium 76,490 76,490
Other reserves 759 762 71 1,592
Retained earnings ( 57,850) 100 ( 52) 1,336 ( 32) ( 56,498)
32,162 862 ( 52) 1,336 39 34,347
Minority interest - -
Total equity 32,162 862 ( 52) 1,336 39 34,347
YOOMEDIA PLC Previously IFRS2 IAS19 IFRS3 IAS32 Restated
Consolidated income statement stated IAS 36 under
6 months ended 30 June 2006 UK GAAP (a) (b) (c) (d) adopted
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 31,233 31,233
Cost of sales ( 28,352) ( 28,352)
Gross profit 2,881 - - - - 2,881
Administrative expenses ( 5,088) 15 ( 5,073)
Loss before interest, tax, ( 2,207) - 15 - - ( 2,192)
depreciation, amortisation and
exceptionals
Depreciation ( 817) ( 817)
Amortisation of deferred ( 625) ( 625)
development costs
Amortisation of goodwill ( 1,336) 1,336 -
Share based payment charge - (254) (254)
Total depreciation, ( 2,778) (254) - 1,336 - ( 1,696)
amortisation & exceptionals
Total administrative costs ( 7,866) (254) 15 1,336 - ( 6,769)
Operating loss ( 4,985) (254) 15 1,336 - ( 3,888)
Finance income 1 1
Finance expense ( 991) ( 32) (1,023)
Loss on ordinary activities ( 5,975) (254) 15 1,336 ( 32) (4,910)
before taxation
Taxation - -
Loss for period ( 5,975) (254) 15 1,336 ( 32) ( 4,910)
YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32 Restated
Consolidated balance sheet stated IAS 36 under
31 December 2006 UK GAAP (a) (b) (c) (d) adopted
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill 24,768 753 25,521
Intangible assets 1,378 1,378
Property, plant & equipment 2,123 2,123
Investments 18 18
Non-current assets 28,287 - - 753 - 29,040
Trade & other receivables 6,591 6,591
Cash & cash equivalents 139 139
Current assets 6,730 - - - - 6,730
Trade & other payables 9,536 9,536
Short term borrowings - -
Provisions for liabilities & - 23 23
charges
Creditors < 1 year 9,536 - 23 - - 9,559
Net current assets/ ( 2,806) - ( 23) - - ( 2,829)
(liabilities)
Total assets less current 25,481 - ( 23) 753 - 26,211
liabilites
Non current liabilities
Interest bearings loans & 5,437 81 5,518
borrowings
Long term provisions 1,210 ( 862) 348
Other non current liabilities 2,512 2,512
Net assets 16,322 862 ( 23) 753 ( 81) 17,833
Capital & reserves
Issued capital 13,878 13,878
Shares to be issued 281 281
Share premium 78,755 78,755
Other reserves 759 1,047 71 1,877
Retained earnings ( 77,351) ( 185) ( 23) 753 ( 152) ( 76,958)
16,322 862 ( 23) 753 ( 81) 17,833
Minority interest - -
Total equity 16,322 862 ( 23) 753 ( 81) 17,833
YOOMEDIA PLC Previously IFRS2 IAS19 IFRS 3 IAS32 Restated
Consolidated income statement stated IAS 36 under
Year ended 31 December 2006 UK GAAP (a) (b) (c) (d) adopted
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 62,586 62,586
Cost of sales ( 54,171) ( 54,171)
Gross profit 8,415 - - - - 8,415
Administrative expenses ( 9,302) 44 ( 9,258)
Loss before interest, tax, ( 887) - 44 - - ( 843)
depreciation, amortisation and
exceptionals
Depreciation ( 1,276) ( 1,276)
Amortisation of deferred ( 1,252) ( 44) ( 1,296)
development costs
Amortisation of goodwill ( 2,668) 2,668 -
Impairment of goodwill ( 14,512) (1,871) ( 16,383)
Provision for bad debts ( 637) ( 637)
Share based payment charge - (539) ( 539)
Restructuring costs ( 2,988) ( 2,988)
Total depreciation, ( 23,333) (539) - 753 - ( 23,119)
amortisation & exceptionals
Total administrative costs ( 32,635) (539) 44 753 - ( 32,377)
Operating loss ( 24,220) (539) 44 753 - ( 23,962)
Finance income 3 3
Finance expense ( 1,259) (152) ( 1,411)
Loss on ordinary activities ( 25,476) (539) 44 753 (152) ( 25,370)
before taxation
Taxation - -
Loss for financial year ( 25,476) (539) 44 753 (152) ( 25,370)
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