Rolls-Royce Group plc Statement re: IFRS (part 2)
ROLLS-ROYCE GROUP plc
TRANSITION FROM UK GAAP TO IFRS
Introduction
In accordance with European Union regulations, Rolls-Royce is required to adopt
International Financial Reporting Standards (IFRS) in its consolidated accounts
for accounting periods commencing on or after January 1, 2005. Consequently,
the Group's first IFRS results will be for the six month period ending June 30,
2005. These results and the financial statements for the year ended December
31, 2005 will include comparative information for 2004.
The major changes required by the introduction of IFRS are:
recognition of intangible assets, whereby certain qualifying costs, in
particular related to research and development and engine costs, which were
written off under UK GAAP, are required to be capitalised and amortised over a
future period of time;
treatment of financial instruments, whereby the majority of financial assets
and derivatives, employed by the Group to provide stability for long-term
business planning, for example in respect of foreign exchange rates, will be
fair-valued on the balance sheet with subsequent changes in fair values
recorded in the income statement, unless hedge accounting is applied;
financial risk and revenue sharing partners, whereby a balance sheet liability
is required to be established to reflect the expected future present value of
payments to partners;
pensions and other post retirement costs, whereby pension scheme deficits are
required to be recorded on the balance sheet;
the cessation of amortisation of goodwill; and
the recording of share-based payments at fair value.
The Group achieves hedge accounting under UK GAAP. However the strict
methodology to achieve hedge accounting under IAS 39 will limit its application
for use by the Group unless there are significant changes to the way in which
the Group operates its economic hedging policies. The Group has determined
that its existing hedging strategy is in the best interests of the business and
its shareholders. It will not, therefore, be altering its hedging activities
in order to achieve a particular accounting presentation under the new rules.
The Group will apply hedge accounting to its interest rate derivative hedge
book, but will not be applying hedge accounting to its foreign exchange and
commodity derivative hedge books.
To explain how the Group's reported performance and financial position are
affected by IFRS, this document presents the restatement of information
previously reported under UK Generally Accepted Accounting Principles (GAAP).
Further information is included in the appendices, which are available on the
Group's website, as follows:
Appendix
1. Accounting policies revised under IFRS
2. Restatement of the transition net assets at January 1, 2004
3. Restatement of the financial statements for the year ended December 31, 2004
4. Restatement of the interim financial statements for the six months ended
June 30, 2004.
5. Restatement of the net assets on adoption of IAS 39 at January 1, 2005
6. Reformat of 2004 UK GAAP financial statements in accordance with IAS 1
A webcast of the presentation to financial analysts is also available on the
Group's website, www.rolls-royce.com
2. Basis of preparation
The financial information has been prepared in accordance with the IFRS
expected to be adopted by the EU at December 31, 2005. These standards are
still subject to change. The accounting policies applied are set out in
Appendix 1.
The Group has adopted the exemption granted by IFRS 1 First-time Adoption of
International Financial Reporting Standards that IAS 32 and IAS 39 Financial
Instruments need not be applied to the comparative period. Consequently the
restated results for the year ended December 31, 2004 and the six months ended
June 30, 2004 are prepared using the accounting policies for financial
instruments previously adopted under UK GAAP. The net assets at January 1,
2005 have been prepared including the impact of the adoption of IAS 32 and IAS
39 in 2005.
3. Implementation process
An implementation team was established in 2002 to manage the internal
assessment and the programme of transition to IFRS. This programme utilised
industry and accounting practice professionals, including KPMG Audit plc, our
own auditors, and other external accounting professionals. All UK GAAP
accounting policies were examined to assess any impact from IFRS.
The Group also participated in industry forums to identify standard practice
during the implementation phase.
4. Overview of impact
4.1. Income statement
Reconciliation of profit for the year ended December 31, 2004
Before After
tax tax
Ref £m £m
Profit - UK GAAP 306 205
Re-formatted into IFRS format 6.2 (9) -
Profit - UK GAAP re-formatted 297 205
IFRS Adjustments
IAS 38 Development costs 6.3 (6) (4)
Recoverable engine costs 6.4 (10) (7)
IFRS 3 Goodwill 6.5 48 47
IAS 19 Pensions and other post-retirement benefits 6.6 41 27
IFRS 2 Share-based payments 6.7 (6) (5)
IAS 12 Tax 6.9 n/a 1
Profit - IFRS 364 264
4.2 Earnings per share
Earnings per share - 2004 pence
UK GAAP
Basic 12.07
Underlying 14.50
IFRS
Basic 15.56
Underlying 15.56
4.3 Net assets
Reconciliation of net assets Ref £m
Net assets - UK GAAP at December 31, 2004 2,307
IFRS adjustments (net of deferred tax)
IAS 38
Research and development 6.3 108
Recoverable engine costs 6.4 87
IFRS 3 Goodwill 6.5 47
IAS 19 Pensions and post retirement benefits 6.6 (1,076)
IFRS 2 Share-based payments 6.7 9
IAS 12 Tax 6.9 (44)
Other 8
Net assets - IFRS at December 31, 2004 1,446
IAS 32/39 6.10
Foreign exchange instruments 719
Consequential impact of IAS 39 (110)
Interest rate instruments (11)
Commodity instruments 6
Risk and revenue sharing partnerships (325)
Own share total return swaps (123)
Net assets - IFRS at January 1, 2005 1,602
5.Underlying profit
Under UK GAAP the Group has presented a measure of its underlying performance
that excluded exceptional and non-trading items.
In implementing IFRS, it is necessary to revise the definition of underlying
profit. Through the presentation of underlying profit, the Group will seek to
continue to present a measure of its underlying performance. In consequence,
it is appropriate to exclude the unrealised amounts arising from revaluations
required by IAS 32 and 39 and to include the realised amounts arising from
settled transactions.
In 2004, as the Group is not restating its results in respect of IAS 32 and 39,
there are no adjustments required to derive underlying profit from reported
profit.
The reconciliation of underlying profit before tax between the UK GAAP and IFRS
basis is as follows:
Underlying profit before tax: £m
Reconciliation of UK GAAP to IFRS
Underlying profit before tax (UK GAAP 345
basis included in the 2004 Annual Report)
Non-trading items 8
Amortisation of goodwill on joint ventures 1
Reallocation of share of joint ventures' (9)
tax to profit before tax
Development costs (6)
Recoverable engine costs (10)
Share-based payments (6)
Pensions and other post-retirement 41
benefits
Underlying profit before tax (IFRS basis) 364
6. Changes in accounting policies
Significant changes in accounting policy, required by the implementation of
IFRS, together with the associated transitional arrangements are set out below.
6.1 Presentation of financial statements
The Group's primary financial statements have been presented in accordance with
IAS 1 Presentation of Financial Statements.
The principal impact on the income statement is the presentation of the Group's
share of the results of joint ventures (which are accounted for using the
equity method) as a single line. Under UK GAAP, the Group's shares of
operating profit, interest and taxation were reported separately. As a
consequence, the Group's share of joint venture taxation is included in profit
before tax. There is no impact on reported profit after tax.
The format of the balance sheet has been amended to include the items required
by IAS 1 to be presented on the face of the balance sheet.
Appendix 6 includes reconciliations from the UK GAAP format to the IFRS
format. The adjustments below are then applied to these revised formats.
6.2 Transitional arrangements
The rules for the first-time adoption of IFRS are set out in IFRS 1. In
general, a company is required to determine its IFRS policies and apply those
retrospectively to determine its opening balance sheet under IFRS. These IFRS
policies are based on the standards expected to be effective at December 31,
2005. The 'carve-outs' from IAS 39 (relating to the full fair value option and
certain aspects of hedge accounting), endorsed by the EU do not have any impact
on the Group. IFRS 1 allows a number of exemptions to this general
requirement. Where Rolls-Royce has applied these exemptions, they are noted in
the relevant section below.
6.3 Research and development
IAS 38 requires that all development costs meeting specified criteria be
capitalised as intangible assets.
As part of its IFRS transition project, Rolls-Royce has reviewed all
development projects, whether the costs were previously recognised under UK
GAAP or not, to determine whether the criteria in IAS 38 were met. The key
eligibility criteria for capitalisation relate to:
i) Identification of development costs. In general, research and development
activities are closely interrelated and it is not until the technical
feasibility of the project can be determined with reasonable certainty that
development costs can be separately identified; and
ii) The generation of future economic benefit. Intangible assets are not
recognised unless the project is expected to generate future economic benefit
exceeding the amount capitalised.
Certain expenditures on internal product development meet all the criteria of
IAS 38 and have therefore been capitalised.
Development costs capitalised are amortised on a straight-line basis over a
period not exceeding 15 years. The impact arising from this change is
summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Capitalisation of development expenditure 11
Amortisation of intangible asset (17)
Adjustment to profit before taxation (6)
Related taxation effect 2
Adjustment to profit after taxation (4)
Net assets
Intangible asset - cost 246 257
Intangible asset - accumulated (86) (103)
amortisation
160 154
Related taxation effect (48) (46)
Adjustment to net assets 112 108
6.4 Recoverable engine costs
On occasions, the Group may sell original equipment to customers at a cash
amount below its cost of manufacture, with the expectation that this deficit
will be recovered from future aftermarket sales, generally the sale of spare
parts. Where the Group is contractually required to supply aftermarket
requirements to the customer and has a reasonable degree of control over these
sales, these costs represent an investment in the aftermarket that meets the
definition of an intangible asset. Under UK GAAP, these intangible assets were
required to be written-off as they arose; under IAS 38 such intangible assets
are required to be capitalised. The resulting intangible asset will be
amortised over a maximum of ten years, subject to any specific contractual
circumstances.
The impact arising from this change is summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Capitalisation of intangible 21
assets previously written
off in 2004
Amortisation of intangible asset (26)
Elimination of related inventory (5)
provision recognised under
UK GAAP
Adjustment to profit before taxation (10)
Related taxation effect 3
Adjustment to profit after taxation (7)
Net assets
Intangible asset - cost 208 229
Intangible asset - cumulative (88) (114)
amortisation
120 115
Elimination of related inventory 14 9
provision recognised under
UK GAAP
134 124
Related taxation effect (40) (37)
Adjustment to net assets 94 87
6.5 Goodwill and business combinations
IFRS 3 prohibits the amortisation of goodwill. Instead, it requires goodwill
to be carried at cost. Annual impairment tests are required to be performed.
The Group has applied the exemption granted by IFRS 1 to apply IFRS 3
prospectively from the date of transition to IFRS. This has the following
impact:
All prior business combination accounting is frozen at the transition date; and
The value of goodwill is frozen at the transition date and amortisation
previously reported under UK GAAP for the year ended December 31, 2004 is
reversed for the IFRS restatement.
The impact arising from this change is summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Reversal of goodwill amortisation 47
relating to subsidiaries
Reversal of goodwill amortisation 1
relating to joint ventures
Adjustment to profit before taxation 48
Related taxation effect (1)
Adjustment to profit after taxation 47
Net assets
Reversal of goodwill amortisation - 48
- 48
Related taxation effect - (1)
Adjustment to net assets - 47
6.6 Pensions and other post retirement benefits
IAS 19 requires separate recognition of the operating and financing costs of
defined benefit pension schemes (and similarly funded employee benefits) in the
income statement. The standard permits a number of options for the recognition
of actuarial gains and losses. The Group's policy is to recognise immediately
any variations in full in a statement of recognised income and expense, as
permitted in the IASB's amendment to IAS 19 entitled Actuarial Gains and
Losses, Group Plans and Disclosures. The EU has not yet endorsed this
amendment and the above policy is subject to change, depending on the outcome
of the endorsement process.
The cash funding of the plans is designed, in consultation with independent
qualified actuaries, to ensure that present and future contributions should be
sufficient to meet future liabilities.
The impact arising from this change is summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Adjustments to operating profit 42
Adjustments to financing costs (1)
Adjustment to profit before taxation 41
Related taxation effect (14)
Adjustment to profit after taxation 27
Net assets
Eliminate amounts recognised
under SSAP 24
Prepaid pension contributions (239) (263)
Provision for pension costs 160 159
Include IAS 19 pension liability (1,466) (1,409)
(1,545) (1,513)
Related taxation effect 447 437
Adjustment to net assets (1,098) (1,076)
6.7 Share-based payments
IFRS 2 requires the fair value of share-based payments granted to employees
since November 7, 2002 (the date of publication of the exposure draft of IFRS
2) to be charged to the income statement. The fair value is calculated using
an option-pricing model and is charged to income over the relevant vesting
periods, adjusted to reflect actual and expected levels of vesting.
The basis of calculation for deferred taxation is in respect of all schemes
(including pre November 7, 2002 grants) and is the difference between the
market price at the date of the financial statements and the option exercise
price. This will not necessarily correlate to the fair value charge.
The impact arising from this change is summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Fair value of share options (6)
charged to operating profit
Adjustment to profit before (6)
taxation
Related taxation effect 1
Adjustment to profit after taxation (5)
Net assets
Related taxation effect 2 9
Adjustment to net assets 2 9
6.8 Scope of consolidation
On transition to IFRS, IAS 27 Consolidated Separate Financial Statements
requires the consolidation of all subsidiaries and special purpose entities
that the Group controls at January 1, 2004. Based on the IAS 27 definitions of
control, and after taking into account the facts and circumstances relevant at
the transition date, the Group has determined that it controls one arrangement
(Pembroke 717 Holdings Limited) that was not required to be consolidated under
UK GAAP. The consolidation of this company does not have any net impact on the
reported results for 2004.
The impact arising from this change is summarised as follows:
At 1 January Year ended
2004 31
December
2004
£m £m
Income statement
Operating profit 4
Finance costs (4)
Adjustment to profit before taxation -
Related taxation effect -
Adjustment to profit after taxation -
Net assets
Property plant and equipment 69 46
Current liabilities (1) (1)
Borrowings (77) (69)
Elimination of provision recognised 9 24
under UK GAAP
Adjustment to net assets - -
6.9 Income taxes
The net deferred tax impact of the changes above is shown as part of the
relevant adjustment.
In addition, under IAS 12 Income Taxes, certain temporary differences, for
example in respect of capital losses and unremitted earnings from joint
ventures, which previously were not recognised under UK GAAP, will be
recognised.
The impact arising from this change is summarised as follows:
At January Year ended
1, 2004 December
31, 2004
£m £m
Changes to deferred tax charge 1
resulting from differences in the
basis of recognition
Adjustment to profit after taxation 1
Changes to deferred tax balance (45) (44)
resulting from differences in the
basis of recognition
Adjustment to net assets (45) (44)
6.10 Financial instruments (applicable from 1 January 2005)
IAS 32 and IAS 39 address the accounting for, and financial reporting of,
financial instruments. IAS 32 covers disclosure and presentation, while IAS 39
covers recognition and measurement including detailed rules for hedge
accounting. These include the requirements to match the hedged item to the
hedging instrument and to measure hedge effectiveness. Under IAS 39 many
financial assets are recognised at fair value and many financial liabilities
are recognised at amortised cost. Accounting for movements in fair value is
dependent on the designation of the relevant financial instrument and whether
hedge accounting is adopted.
The Group has applied the exemption, granted by IFRS 1, not to apply IAS 32 and
IAS 39 to its comparative figures for 2004. On January 1, 2005, the fair value
of foreign exchange and commodity derivatives will be included in a hedging
reserve. As the Group has not adopted hedge accounting for future foreign
exchange transactions under IAS 39 from January 1, 2005, the reserve is frozen
and will be released to the income statement based on the designated maturities
on that date.
6.10.1 Risk and revenue sharing partnerships
Risk and revenue sharing partnership (RRSP) agreements are a standard form of
co-operation in the civil aero-engine industry. In general, partners share:
investment in the programme; market risk as they receive their return from
future sales; currency risk as their returns are denominated in US dollars;
sales financing obligations; warranty costs; and, where they are manufacturing
or development partners, technical and cost risk.
As part of the IFRS transition project, RRSP arrangements have been reviewed to
assess whether they are financial instruments as defined by IAS 32. Following
this review, certain partnerships, where the arrangement is not part of an
overall supplier arrangement, will be reclassified as financial instruments on
transition to IFRS.
Reclassified RRSP arrangements are accounted for using the amortised cost
method. The amortised cost method requires that the financial liability
recognised at any point is the present value of expected future payments. The
evaluation is performed using the effective interest rate at the inception of
the transaction. The charge to the income statement will be the change in the
value recognised over the period and will comprise: (i) a finance cost, being
the unwinding of the discount; and (ii) a credit/charge reflecting changes in
forecast payments.
6.10.2 Government investment
In the past, Rolls-Royce has received investment in certain projects from the
UK Government. Under UK GAAP, these amounts were recognised as income when
they were receivable with the levies being recognised as they became due on
engine delivery. A similar review to that for RRSPs concluded that these
arrangements were not financial instruments and that no changes are required to
the accounting treatment.
6.10.3 Foreign exchange derivatives
A large element of the Group's trading is denominated in US dollars and a
significant portion of its costs is incurred in Sterling and Euros. In order
to protect itself from the associated currency volatility, the Group takes
significant levels of forward cover relating to its net exposure. Under UK
GAAP, gains or losses on this cover are not recognised in the income statement
until realised, matching them with the underlying transactions. Contracts may
be signed several years in advance of delivery and forecasts of aftermarket
sales have to be made. Delivery dates may change and timing of spares sales
may vary. Therefore meeting the strict criteria for hedge accounting in IAS 39
is not considered to be practicable within the current risk management
practices. Rolls-Royce believes that its current risk management practices are
in the best economic interests of shareholders and should not be amended purely
to achieve a particular accounting treatment. Accordingly, Rolls-Royce has
decided not to adopt hedge accounting for forecast foreign exchange
transactions. Rolls-Royce will continue to hedge its future forecast US dollar
income on a portfolio basis, which it considers is the most efficient economic
basis for doing so.
As a result of not hedge accounting for forecast foreign exchange transactions,
the movements on the fair value of derivative contracts held for the purpose of
hedging these transactions will be recognised in the income statement. The
size of this movement in fair values will be largely dependent on movements in
spot exchange rates as is indicated by the disclosures required by FRS 13 and
included in the notes to accounts under UK GAAP.
Under UK GAAP, as part of its hedging policy, Rolls-Royce:
recognised profits at the average exchange rate achieved in the year;
recognised monetary assets and liabilities at the rate expected to be achieved
in settling these items, taking account of the foreign exchange cover in place;
incorporated rates achieved on forward cover in its assessment of the
profitability of service and long-term contracts.
Under IFRS, Rolls-Royce will:
recognise profits at the exchange rate at the time of the transaction;
recognise monetary assets and liabilities at the spot exchange rate on the
reporting date; and
assess the profitability of service and long-term contracts without including
the impact of forward exchange rate contracts.
6.10.4 Interest rate derivatives
Rolls-Royce will adopt hedge accounting for hedges entered into for the
purposes of managing its exposure to movements in interest rates. Fair value
hedge accounting will be used for the hedging of fixed rate borrowings and cash
flow hedge accounting will be used where the underlying borrowing is a floating
rate instrument. Where fair value hedge accounting is used, the debt being
hedged will be measured at fair value in respect of the interest rate risk
being hedged, with movements in the fair values of both the derivative and the
debt being included in the income statement. Where cash flow hedge accounting
is used, the effective element of the fair value of the derivative will be
included in a hedging reserve in equity. This hedging reserve will be released
to the income statement to offset changes in interest rates on the hedged
floating rate borrowings.
6.10.5 Other financial derivatives
The Group has an ongoing exposure to the price of jet fuel from business
operations. For reasons similar to those described for foreign exchange above,
Rolls-Royce will not adopt hedge accounting for its exposures to changes in the
price of jet fuel. These are hedged using commodity swaps.
The Group has entered into forward contracts to purchase its own shares for the
purposes of meeting obligations to issue shares under employee share schemes.
Under UK GAAP, these contracts were not recognised until the shares were
purchased and issued to employees. Under IAS 32, these contracts are
categorised as financial liabilities and accounted for on the amortised cost
basis, based on the present value of forecast obligations.
The impact of the transition to IFRS on the net assets in respect of financial
instruments as at January 1, 2005 is summarised as follows:
£m £m
Net assets
Amortised cost value of (455)
risk and revenue sharing
partnerships
Related taxation effect 130
(325)
Fair value of foreign exchange 996
derivatives
Revaluation of monetary (91)
assets and liabilities to
spot rate
Foreign exchange effects (54)
within service and other
long-term contracts
Related taxation effect (242)
609
Fair value of interest rate (15)
derivatives
Related taxation effect 4
(11)
Fair value of commodity 9
derivatives
Related taxation effect (3)
6
Amortised cost value of (115)
contracts to purchase own
shares
Related taxation effect (8)
(123)
Adjustment to net assets 156
6.10.6 Contingent Liabilities
The Group's customer financing arrangements fall into two categories that need
to be considered separately for IFRS purposes:
Credit based guarantees
Credit based guarantees are specifically exempt from being treated as financial
derivatives under IAS 39. They are required to be treated as insurance
contracts in accordance with IFRS 4.
Asset value guarantees (AVGs)
The Group has treated AVGs as insurance contracts in accordance with IFRS 4, as
it considers that this treatment best reflects the underlying nature of the
arrangements, being other than purely financial.
There are no material changes to the treatment of contingent liabilities upon
transitioning from UK GAAP to IFRS.
7. Other
The Group's banking covenants are not affected by the transition to IFRS as
they are based on UK GAAP prevailing at the time the relevant borrowing
facility was entered into ('frozen UK GAAP').
The Group's borrowing powers under its Articles of Association were amended at
the 2004 AGM to a fixed limit in anticipation of the transition to IFRS.
The Scheme of Arrangement and the reduction in share capital undertaken in 2003
provides the Group with a buffer in respect of reserves available for making
returns to shareholders.
8. Conclusion
The IFRS information in this release is subject to any changes in standards
endorsed by the EU in the period to December 31, 2005.
The most significant impacts arising from the transition to IFRS upon the
restated financial information relate to the timing of profit recognition in
the results. Net assets are impacted as a result of this timing, but there is
no impact upon the underlying cash flows within the business.
Restated income statement for the year ended December 31, 2004
Restated in
accordance
with IFRS
Unaudited
£m
Group revenues 5,947
Cost of sales (4,744)
Gross profit 1,203
Other operating income 73
Commercial and administrative
costs (599)
Research and development
(self funded) (288)
Share of profit of joint ventures 19
Group operating profit 408
Profit on sale or termination of
businesses 9
Profit on ordinary activities before
finance costs 417
Net finance costs (53)
Profit on ordinary activities before
taxation 364
Taxation (100)
Profit for the year 264
Attributable to:
Ordinary shareholders 263
Equity minority interests in subsidiary
undertakings 1
264
Restated statement of recognised income and expense for the year ended December
31, 2004
Restated in
accordance
with IFRS
Unaudited
£m
Profit attributable to ordinary
shareholders 263
Exchange adjustments on foreign
currency net investments (38)
Actuarial loss (5)
Total recognised gains for the year 220
Restated net assets at January 1, 2005
Restated in
accordance
with IFRS
Unaudited
£m
Non current assets
Intangible assets 1,227
Property, plant and equipment 1,672
Investments in joint ventures 211
Other investments 57
Deferred tax assets 203
3,370
Current assets
Inventory 1,090
Trade and other receivables 1,775
Taxation recoverable 2
Short-term investments 36
Other financial assets 1,230
Cash and cash equivalents 1,277
5,410
Current liabilities
Borrowings (107)
Financial liabilities (216)
Trade and other payables (2,177)
Current tax liabilities (176)
Provisions (173)
(2,849)
Net current assets 2,561
Total assets less current liabilities 5,931
Non current liabilities
Borrowings (1,544)
Financial liabilities (496)
Other payables (541)
Deferred tax liabilities (119)
Pensions and post-retirement benefits (1,409)
Provisions (220)
(4,329)
Net assets 1,602
Restated cash flow statement for the year ended December 31, 2004
Restated in
accordance
with IFRS
Unaudited
£m
Net cash inflow from operating activities 610
Cash flows from investing activities (237)
Cash flows from financing activities 189
Increase in cash and cash equivalents 562
Cash and cash equivalents at January 1 909
Exchange adjustments (32)
Cash and cash equivalents at December 31 1,439
Reconciliation of increase in cash and
cash equivalents to movements in net
debt
Increase in cash and cash equivalents 562
Cash inflow from decrease in investments (3)
Cash inflow from increase in borrowings (296)
Change in net debt resulting from cash
flows 263
Zero-coupon bonds 2005/2007 (9%
interest accretion) (4)
Exchange adjustments (8)
Movement in net debt 251
Net debt at January 1 (400)
Net debt at December 31 (149)
Restated cash flow statement for the year ended December 31, 2004 continued
Restated in
accordance
with IFRS
Unaudited
£m
Net profit before taxation 364
Share of joint ventures' profit before
taxation (19)
Gain on sale or termination of
businesses (9)
Loss on sale of fixed assets 2
Net finance costs 53
Share-based payments 6
Taxation paid (84)
Amortisation of intangible assets 58
Depreciation of property, plant and
equipment 241
Increase in provisions (9)
Decrease in liabilities for pensions (17)
Decrease in inventory (116)
Increase in trade and other
receivables 156
Decrease in trade and other
payables (31)
Dividends received from joint ventures 15
Net cash inflow from operating
activities 610
Additions to intangible assets (142)
Purchases of property, plant and
equipment (175)
Disposals of property, plant and
equipment 66
Disposals of businesses 16
Investments in joint ventures (2)
Cash flows from investing activities (237)
Restated cash flow statement for the year ended December 31, 2004 continued
Restated in
accordance
with IFRS
Unaudited
£m
Decrease in government securities
and corporate bonds 3
Borrowings due within one year
- repayment of loans (57)
Borrowings due after one year
- repayment of loans (95)
- increase in loans 500
Capital element of finance lease
payments (52)
Interest received 58
Interest paid (107)
Interest element of finance lease
payments (3)
Equity dividends paid (33)
Issue of ordinary shares 4
Purchase of own shares (2)
Redemption of B Shares (27)
Cash flows from financing activities 189
Restated summarised segmental analysis for the six-months ended June 30, 2004
Restated in
accordance
UK GAAP with IFRS
As Unaudited
published
£m £m
Revenues
Civil aerospace 1,453 1,453
Defence 638 638
Marine 443 443
Energy 186 186
Financial services 26 30
2,746 2,750
Profit before finance costs and
tax
Civil aerospace 74 83
Defence 66 82
Marine 17 35
Energy (2) 1
Financial services 8 (2)
Central costs - (24)
163 175
Underlying profit before finance
costs and tax
Civil aerospace 67 83
Defence 66 82
Marine 28 35
Energy 1 1
Financial services 8 (2)
Central costs - (4)
170 175
Segment net assets*
Civil aerospace 1,122 1,317
Defence 47 54
Marine 567 551
Energy 376 303
Financial services 342 417
Unallocated pension liabilities - (1,034)
2,454 1,608
* net assets exclude net debt.
Restated summarised segmental analysis for the year ended December 31, 2004
Restated in
accordance
UK GAAP with IFRS
As Unaudited
published
£m £m
Revenues
Civil aerospace 3,040 3,040
Defence 1,374 1,374
Marine 963 963
Energy 489 489
Financial services 73 81
5,939 5,947
Profit before finance costs and
tax
Civil aerospace 165 194
Defence 155 179
Marine 40 78
Energy 8 14
Financial services 8 (7)
Central costs - (41)
376 417
Underlying profit before finance
costs and tax
Civil aerospace 170 194
Defence 155 179
Marine 67 78
Energy 14 14
Financial services 9 (7)
Central costs - (41)
415 417
Segment net assets* Pre IAS 39 Post IAS 39
Civil aerospace 1,142 1,343 1,595
Defence 47 51 27
Marine 567 565 561
Energy 387 324 325
Financial services 244 314 313
Unallocated pension liabilities - (1,002) (1002)
2,387 1,595 1,819
*net assets exclude net debt
Appendices - available from the Group's website
1. Accounting policies revised under IFRS.
2. Restatement of the transition net assets at January 1, 2004.
3. Restatements of the financial statements for the year ended December 31,
2004.
Income statement
Net assets
Cash flow statement
Restatement of the interim financial statements for the six months ended June
30, 2004.
Income statement
Net assets
Cash flow statement
5. Restatement of the net assets on adoption of IAS 39 at January 1, 2005.
6. Reformat of the 2004 UK GAAP financial statements in accordance with IAS 1.
Net assets at January 1, 2004
Income statement for the year ended December 31, 2004
Income statement for the six months ended June 30, 2004
Net assets at December 31, 2004
Net assets at June 30, 2004
Cash flow statement for the year ended December 31, 2004
Cash flow statement for the six months ended June 30, 2004
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