IFRS Report - Part 2
British Airways PLC
04 July 2005
Appendix I
Basis of Preparation
This summary financial information has been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS) and International Accounting Standards (IAS) issued by the
International Accounting Standards Board (IASB) and with those of the Standing
Interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC) of the IASB as adopted by the European Union (EU).
The accounting policies and basis of preparation differ from those set out in
the Report and Accounts for the year ended March 31, 2005 which were prepared in
accordance with United Kingdom accounting standards and the Companies Act 1985
(UK GAAP).
A summary of the significant accounting policies used in the preparation of this
financial information under IFRS is provided below.
IFRS 1 - 'First time adoption of International Financial Reporting Standards'
sets out the requirements for companies preparing financial statements under
IFRS for the first time and requires the accounting policies to be applied
retrospectively. IFRS 1 contains the option to take advantage of certain
exemptions to the retrospective application. The Group has applied optional
exemptions as follows:
- The accumulated actuarial gains and losses in relation to employee
defined benefit plans have been recognised in full at April 1, 2004.
- The provisions of IFRS 3 - 'Business Combinations' have been applied
prospectively from April 1, 1999.
- The carrying value of revalued assets at April 1, 2004 has been taken
as the deemed cost.
- The cumulative translation difference on foreign operations at April
1, 2004 is deemed to be zero.
- The provisions of IFRS 2 - 'Share based payment' are applied only to
awards made after November 7, 2002
- Comparative information for IAS 32 - 'Financial Instruments - Disclosure and
Presentation' and IAS 39 - 'Financial Instruments - Recognition and
Measurement' is not restated for 2004/05. The provisions of the two
standards will be adopted from April 1, 2005 and comparative information for
2004/05 in the 2005/06 financial statements will be presented on the
existing UK GAAP basis.
Appendix 2
Accounting Policies
This summary financial information has been prepared using the following
accounting policies that differ in certain respects from those previously
applied under UK GAAP.
IFRS 1 requires companies preparing financial statements under IFRS for the
first time to provide certain reconciliations between financial statements
prepared under the Group's prior reporting under UK GAAP and the figures under
IFRS. These reconciliations are attached as Appendix 3.
Basis of consolidation
The Group accounts include the accounts of the company and its subsidiary
undertakings, each made up to March 31, together with the attributable share of
results and reserves of associated undertakings, adjusted where appropriate to
conform with British Airways' accounting policies.
The Group's share of the profits less losses of associated undertakings is
included in the Group income statement and its share of the post-acquisition
results of these companies is included in interests in associated undertakings
in the Group balance sheet. Certain associated undertakings make up their annual
audited accounts to dates other than March 31. In the cases of Qantas and Iberia
published results up to the periods ending June and December are included in the
Group results for the periods ending September and March respectively as it is
impractical to prepare financial statements as of the same date because they are
listed entities. In other cases, results disclosed by subsequent unaudited
management accounts are included.
The attributable results of those companies acquired or disposed of during the
period are included for the periods of ownership, except in the case of the
disposal of the Group's interest in Qantas, in which case the results included
comprise the latest published results prior to the disposal.
In addition to those subsidiary undertakings in which the Group controls a
majority of the voting rights, the Group also consolidates those entities in
which it has an interest that gives rise to benefits and risks that are in
substance no different from those that would arise were that entity a subsidiary
undertaking. Therefore in accordance with the requirements of SIC 12, the Group
consolidates the results of The London Eye Company Limited on this basis.
Revenue recognition
Passenger ticket and cargo waybill sales, net of discounts, are recorded as
current liabilities in the 'sales in advance of carriage' account until
recognised as revenue when the transportation service is provided. Commission
costs are recognised at the same time as the revenue to which they relate and
are charged to cost of sales. Unused tickets are recognised as revenue using
estimates regarding the timing of recognition based on the terms and conditions
of the ticket and historical trends. Other revenue is recognised at the time the
service is provided.
Revenue recognition - mileage programmes
The Group operates two principal loyalty programmes. The airline frequent flyer
programme operates through the airline's 'Executive Club' and allows frequent
travellers to accumulate BA Miles mileage credits which entitle them to a choice
of various awards, primarily free travel. The estimated direct incremental cost
of providing free redemption services, including British Airways' flights, in
exchange for redemption of miles earned by members of the Group's 'Executive
Club' is accrued as members of the scheme accumulate mileage. These costs are
charged to cost of sales.
In addition, 'BA Miles' are sold to participating partners to use in promotional
activity. The fair value of the miles sold is deferred and recognised on
redemption of the miles by the participants to whom the miles are issued. The
cost of providing free redemption services is recognised when the miles are
redeemed.
The Group also operates the Airmiles scheme, operated by the company's
wholly-owned subsidiary Airmiles Travel Promotions Limited. The scheme allows
companies to purchase miles for use in their own promotional activities. Miles
can be redeemed for a range of benefits, including flights on British Airways
and other carriers. The fair value of the miles sold is deferred and recognised
on redemption of the miles by the participants to whom the miles are issued. The
cost of providing free redemption services is recognised when the miles are
redeemed.
Employee benefits
Employee benefits, including pensions and other post-retirement benefits
(principally post--retirement healthcare benefits) are presented in these
financial statements in accordance with IAS 19 - 'Employee Benefits'. For the
Group's defined benefit plans, post-retirement obligations are measured at
discounted present value whilst plan assets are measured at fair value at the
balance sheet date. The cost of current service costs are recognised in the
income statement so as to spread the cost of providing the benefit
systematically over the service lives of the employees using the projected unit
credit method. Past service costs are recognised over the period they vest. The
financing cost and expected return on plan assets are recognised within
financing costs in the periods in which they arise. Actuarial gains and losses
are recognised over the remaining average service lives of the employees to the
extent that such gains and losses exceed 10 per cent of the greater of the
scheme assets or liabilities.
Amounts paid to defined contribution post-retirement schemes are recognised
within the income statement when the costs are incurred.
Intangible assets
a Goodwill
Where the cost of acquisition exceeds the fair values attributable to the net
assets acquired, the resulting goodwill is capitalized. Goodwill is tested for
impairment annually and where indicators exist that the carrying value may not
be recoverable. Prior to the adoption of IFRS, goodwill was amortised over a
period not exceeding 20 years. Prior to March 31, 1998, goodwill was set off
against reserves on the acquisition of a business, including an equity interest
in an associated undertaking. Under IFRS 1, such goodwill is not recognised on
transition to IFRS nor is the goodwill transferred to the income statement on
disposal of the investment or if the investment becomes impaired.
b Landing rights
Landing rights acquired from other airlines either directly or as a result of a
business combination are capitalised at cost (or at fair value if acquired
through a business combination) and amortised over a period not exceeding 20
years. The carrying value is reviewed for impairment if events or changes in
circumstances indicate the carrying value may not be recoverable.
Property, plant and equipment
Property, plant and equipment are held at cost, subject to the property
revaluations carried out at March 31, 1995 which are elected to be the deemed
cost under IFRS 1. The Group has a policy of not revaluing property, plant and
equipment. Depreciation is calculated to write off the cost, less estimated
residual value, on a straight line basis. Residual values, where applicable, are
reviewed annually against prevailing market values for equivalently aged assets
and depreciation rates adjusted accordingly on a prospective basis. The carrying
value is reviewed for impairment if events or changes in circumstances indicate
the carrying value may not be recoverable.
a Capitalisation of interest on progress payments
Interest attributed to progress payments, and related exchange movements on
foreign currency amounts, made on account of aircraft and other significant
assets under construction is capitalised and added to the cost of the asset
concerned
b Fleet
All aircraft are stated at cost. Fleet assets owned, or held on finance lease or
hire purchase arrangements, are depreciated at rates calculated to write down
the cost to the estimated residual value at the end of their planned operational
lives.
Cabin interior modifications, including those required for brand changes and
re-launches, are depreciated over the lower of five years and the remaining life
of the aircraft.
Aircraft and engine spares acquired on the introduction or expansion of a fleet,
as well as rotable spares purchased separately, are carried as tangible fixed
assets and generally depreciated in line with the fleet to which they relate.
Major overhaul expenditure, including replacement spares and labour costs, is
capitalised and amortised over the average expected life between major
overhauls. All other replacement spares and other costs relating to maintenance
of fleet assets are charged to the income statement on consumption or as
incurred respectively.
c Property and equipment
Freehold properties and certain leasehold properties, professionally valued at
March 31, 1995, are included in these accounts on the basis of that valuation as
deemed cost. Subsequent additions are included at cost. Provision is made for
the depreciation of all property and equipment, apart from freehold land, based
upon expected useful lives or in the case of additions to leasehold properties,
over the duration of the leases if shorter.
d Leased and hire purchase assets
Finance leases or hire purchase arrangements which transfer to the Group
substantially all the risks and benefits incidental to ownership of the leased
item, are recognized at the inception of the lease at the fair value of the
lease property or, if lower, at the present value of the minimum lease payments.
Assets held under finance leases or hire purchase arrangements are depreciated
as described above. Lease payments are apportioned between the finance charges
and the reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged
directly against income. Payments under all other lease arrangements, known as
operating leases, are charged to the income statement in equal annual amounts
over the period of the lease. In respect of aircraft, operating lease
arrangements allow the Group to terminate the leases after a limited initial
period, normally 5 to 7 years, without material financial obligations. In
certain cases the Group is entitled to extend the initial lease period on
pre-determined terms; such leases are described as extendible operating leases.
Expendable spares and other inventories
Inventories, including aircraft expendables, are valued at the lower of cost and
net realisable value.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits repayable on demand
or maturing within three months of the balance sheet date with any qualifying
financial institution, less any overdrafts repayable on demand.
Share-based payment
The fair value of employee share option plans is measured at the date of grant
of the option using a binomial valuation model. The resulting cost, as adjusted
for the expected and actual level of vesting of the options is charged to income
over the period in which the options vest. The fair value of options granted
prior to November 2002 are not charged to income.
Provisions
Provisions are made when an obligation exists for a future liability in respect
of a past event and where the amount of the obligation can be reliably
estimated. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of the money and, where
appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised as a
borrowing cost.
Foreign currency translation
Foreign currency balances are translated into sterling at the rates ruling at
the balance sheet date. Exchange differences arising on the translation of
foreign operations are taken to reserves until all or part of the interest is
sold when the relevant portion of the exchange is recognised in income. Under
IFRS 1 exchange differences arising prior to April 1, 2004 are deemed to be
zero. Profits and losses of such undertakings are translated into sterling at
average rates of exchange during the year. All other profits or losses arising
on translation are dealt with through the income statement.
From April 1, 2005 certain loan repayments denominated in US dollars and
Japanese yen have been designated as hedges of highly probable future foreign
currency revenues. The effective element of exchange differences arising from
the retranslation of these loan repayment instalments are taken to reserves
until the future revenue occurs when the cumulative exchange difference is
recognised in income. The hedging relationship is tested for effectiveness in
accordance with IAS 39 - 'Financial Instruments: Recognition and Measurement' in
accordance with the policy set out below.
Financial Instruments (UK GAAP accounting policy applicable to March 31, 2005)
The Group's accounting policy for derivatives is to defer and only recognise in
the Group profit and loss account gains and losses on hedges of revenues or
operating payments as they crystallize.
Accounts payable or receivable in respect of interest rate swap agreements are
recognized in the net interest payable charge over the period of the contracts
on an accruals basis. Cross currency swap agreements and forward foreign
exchange contracts taken out to hedge borrowings are brought into account in
establishing the carrying values of the relevant loans, leases or hire purchase
arrangements in the balance sheet. Gains or losses on forward foreign exchange
contracts to hedge capital expenditure commitments are recognized as part of the
total sterling carrying cost of the relevant tangible asset as the contracts
mature or are closed out.
Short term debtors and creditors are held at fair value.
Taxation
Full provision is made for deferred tax on all temporary differences relating to
the carrying amount of assets and liabilities where it is probable that recovery
or settlement will result in an obligation to pay more, or a right to pay less,
tax in the future. Deferred tax assets in respect of losses and tax credits are
recognised where it is probable that there will be suitable taxable profits from
which they can be deducted. Deferred tax is measured at the tax rates that are
expected to apply in the periods in which recovery of assets and settlement of
liabilities are expected to take place, based on tax rates or laws enacted or
substantively enacted at the balance sheet date.
Appendix 3
Quarterly Reconciliations of Income and Equity
Appendix 3
Balance Sheet at 01/04/04
IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12 Other
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
£M UK IFRS
NON-CURRENT ASSETS GAAP
PROPERTY, PLANT & EQUIPMENT
- Fleet 7,104 - - (34) - 197 - (53) - - - - 7,214
- Property 1,042 - - - - 38 - - - - - - 1,080
- Equipment 491 - - - - - (12) - - - - - 479
8,637 - - (34) - 235 (12) (53) - - - - 8,773
INTANGIBLE ASSETS
- Goodwill 93 - - - - - (22) - - - - - 71
- Landing Rights 75 - - - - - 22 - - - - - 97
- Other - - - - - - 12 - - - - - 12
168 - - - - - 12 - - - - - 180
Investment in associates 501 - - - - - - - (58) - - - 443
Long term investments (trade 30 - - - - - - - - - - - 30
investments)
Employee benefit assets - 134 - - - - - - - - - - 134
Deferred tax receivable - - - - - - - - - - - - -
Other financial assets - - - - - - - - - - - 22 22
-
TOTAL NON-CURRENT ASSETS 9,336 134 - (34) - 235 - (53) (58) - - 22 9,582
ASSETS HELD FOR SALE - - - - - - - 49 - - - - 49
CURRENT ASSETS AND RECEIVABLES
- Expendable spares and other 76 - - - - - - - - - - - 76
inventories
- Trade receivables and other 2,625 - - - - - - - - - - (985) 1,640
debtors
- Cash and cash equivalents 64 - - - - - - - - - - 963 1,027
TOTAL CURRENT ASSETS AND 2,765 - - - - - - - - - - (22) 2,743
RECEIVABLES
TOTAL ASSETS 12,101 134 - (34) - 235 - (4) (58) - - - 12,374
SHAREHOLDERS' FUNDS, MINORITY INTERESTS &
LIABILITIES
SHAREHOLDERS' EQUITY
- Issued share capital 271 - - - - - - - - - - - 271
- Treasury shares (31) - - - - - - - - - - - (31)
- Other reserves 1,947 (1,187) (167) (27) - 152 (6) (3) (58) - (94) - 557
TOTAL SHAREHOLDERS' EQUITY 2,187 (1,187) (167) (27) - 152 (6) (3) (58) - (94) - 797
Equity minority interest 10 - - - - - - - - - - - 10
Non-equity minority interest 200 - - - - - - - - - - - 200
MINORITY INTERESTS 210 - - - - - - - - - - 210
PROVISIONS
- Employee benefit - 1,901 - - - - - - - - - - 1,901
obligations
- Provisions for deferred tax 1,137 (508) (72) (10) - 71 6 (1) - - 94 - 717
- Other provisions 85 (45) - - - - - - - - - - 40
1,222 1,348 (72) (10) - 71 6 (1) - - 94 - 2,658
LONG TERM LIABILITIES
- Interest bearing long term 5,034 - - - - - - - - - - - 5,034
borrowings
- Convertible long term 112 - - - - - - - - - - - 112
borrowings
- Other long term liabilities 340 (9) - - - 12 - - - - - - 343
5,486 (9) - - - 12 - - - - - - 5,489
CURRENT LIABILITIES
- Current portion of long 682 - - - - - - - - - - - 682
term borrowings
- Trade and other payables 2,308 (18) 239 3 - - - - - - - - 2,532
- Current tax payable 6 - - - - - - - - - - - 6
- Convertible long term - - - - - - - - - - - -
borrowings
2,996 (18) 239 3 - - - - - - - - 3,220
TOTAL SHAREHOLDERS' FUNDS, 12,101 134 - (34) - 235 - (4) (58) - - - 12,374
MINORITY INTERESTS &
LIABILITIES
Memo - Net Assets 2,397 1,007
Appendix 3
Balance Sheet at 30/06/04
IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12 Other
£M UK (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
GAAP IFRS
NON-CURRENT ASSETS
PROPERTY, PLANT & EQUIPMENT
- Fleet 6,953 - - (28) - 183 - - - - - - 7,108
- Property 1,039 - - - - 36 - (1) - - - - 1,074
- Equipment 480 - - - - - (12) - - - - - 468
8,472 - - (28) - 219 (12) (1) - - - - 8,650
INTANGIBLE ASSETS
- Goodwill 92 - - - - - (20) - - - - - 72
- Landing Rights 73 - - - - - 21 - - - - - 94
- Other - - - - - - 12 - - - - - 12
165 - - - - - 13 - - - - - 178
Investment in associates 474 - - - - - - - (53) - - - 421
Long term investments (trade 30 - - - - - - - - - - - 30
investments)
Employee benefit assets - 131 - - - - - - - - - - 131
Deferred tax receivable - - - - - - - - - - - - -
Other financial assets - - - - - - - - - - - 42 42
-
TOTAL NON-CURRENT ASSETS 9,141 131 - (28) - 219 1 (1) (53) - - 42 9,452
ASSETS HELD FOR SALE - - - - - - - 1 - - - - 1
CURRENT ASSETS AND RECEIVABLES
- Expendable spares and other 73 - - - - - - - - - - - 73
inventories
- Trade receivables and other 2,739 - - - - - - - - - - (359) 2,380
debtors
- Cash and cash equivalents 62 - - - - - - - - - - 317 379
TOTAL CURRENT ASSETS AND 2,874 - - - - - - - - - - (42) 2,832
RECEIVABLES
TOTAL ASSETS 12,015 131 - (28) - 219 1 - (53) - - - 12,285
SHAREHOLDERS' FUNDS, MINORITY INTERESTS &
LIABILITIES
SHAREHOLDERS' EQUITY
- Issued share capital 271 - - - - - - - - - - - 271
- Treasury shares (30) - - - - - - - - - - - (30)
- Other reserves 1,978 (1,186) (187) (23) 1 146 (5) - (53) - (94) - 577
TOTAL SHAREHOLDERS' EQUITY 2,219 (1,186) (187) (23) 1 146 (5) - (53) - (94) - 818
Equity minority interest 10 - - - - - - - - - - - 10
Non-equity minority interest 201 - - - - (1) - - - - - - 200
MINORITY INTERESTS 211 - - - - (1) - - - - - - 210
PROVISIONS
- Employee benefit - 1,891 - - - - - - - - - - 1,891
obligations
- Provisions for deferred tax 1,178 (507) (80) (8) (1) 63 6 - - - 94 - 745
- Other provisions 96 (57) - - - - - - - - - - 39
1,274 1,327 (80) (8) (1) 63 6 - - - 94 - 2,675
LONG TERM LIABILITIES
- Interest bearing long term 4,758 - - - - - - - - - - - 4,758
borrowings
- Convertible long term 112 - - - - - - - - - - - 112
borrowings
- Other long term liabilities 325 (9) - - - 11 - - - - - - 327
5,195 (9) - - - 11 - - - - - - 5,197
CURRENT LIABILITIES
- Current portion of long 689 - - - - - - - - - - - 689
term borrowings
- Trade and other payables 2,419 (1) 267 3 - - - - - - - - 2,688
- Current tax payable 8 - - - - - - - - - - - 8
- Convertible long term - - - - - - - - - - - -
borrowings
3,116 (1) 267 3 - - - - - - - - 3,385
TOTAL SHAREHOLDERS' FUNDS, 12,015 131 - (28) - 219 1 - (53) - - - 12,285
MINORITY INTERESTS &
LIABILITIES
Memo - Net Assets 2,430 1,028
Appendix 3
Balance Sheet at 30/09/04
IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12 Other
£M UK (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
GAAP IFRS
NON-CURRENT ASSETS
PROPERTY, PLANT & EQUIPMENT
- Fleet 6,886 - - (36) - 176 - - - - - - 7,026
- Property 1,000 - - - - 35 - (1) - - - - 1,034
- Equipment 471 - - - - - (50) - - - - - 421
8,357 - - (36) - 211 (50) (1) - - - - 8,481
INTANGIBLE ASSETS
- Goodwill 91 - - - - - (19) - - - - - 72
- Landing Rights 72 - - - - - 21 - - - - - 93
- Other - - - - - - 50 - - - - - 50
163 - - - - - 52 - - - - - 215
Investment in associates 114 - - - - - - - (55) 59 - - 118
Long term investments (trade 29 - - - - - - - - - - - 29
investments)
Employee benefit assets - 128 - - - - - - - - - - 128
Deferred tax receivable - - - - - - - - - - - - -
Other financial assets - - - - - - - - - - - 39 39
-
TOTAL NON-CURRENT ASSETS 8,663 128 - (36) - 211 2 (1) (55) 59 - 39 9,010
ASSETS HELD FOR SALE - - - - - - - 1 - - - - 1
CURRENT ASSETS AND RECEIVABLES
- Expendable spares and other 77 - - - - - - - - - - - 77
inventories
- Trade receivables and other 2,910 (17) - - - - - - - - - (714) 2,179
debtors
- Cash and cash equivalents 115 - - - - - - - - - - 675 790
TOTAL CURRENT ASSETS AND 3,102 (17) - - - - - - - - - (39) 3,046
RECEIVABLES
TOTAL ASSETS 11,765 111 - (36) - 211 2 - (55) 59 - - 12,057
SHAREHOLDERS' FUNDS, MINORITY INTERESTS &
LIABILITIES
SHAREHOLDERS' EQUITY
- Issued share capital 271 - - - - - - - - - - - 271
- Treasury shares (30) - - - - - - - - - - - (30)
- Other reserves 2,167 (1,186) (184) (28) 1 146 (4) - (55) 59 (81) - 835
TOTAL SHAREHOLDERS' EQUITY 2,408 (1,186) (184) (28) 1 146 (4) - (55) 59 (81) - 1,076
Equity minority interest 11 - - - - - - - - - - - 11
Non-equity minority interest 206 - - - - (6) - - - - - - 200
MINORITY INTERESTS 217 - - - - (6) - - - - - - 211
PROVISIONS
- Employee benefit - 1,839 - - - - - - - - - - 1,839
obligations
- Provisions for deferred tax 1,244 (506) (79) (11) (1) 60 6 - - - 81 - 794
- Other provisions 81 (27) - - - - - - - - - - 54
1,325 1,306 (79) (11) (1) 60 6 - - - 81 - 2,687
LONG TERM LIABILITIES
- Interest bearing long term 4,544 - - - - - - - - - - - 4,544
borrowings
- Convertible long term 112 - - - - - - - - - - - 112
borrowings
- Other long term liabilities 306 (9) - - - 11 - - - - - - 308
4,962 (9) - - - 11 - - - - - - 4,964
CURRENT LIABILITIES
- Current portion of long 540 - - - - - - - - - - - 540
term borrowings
- Trade and other payables 2,289 - 263 3 - - - - - - - - 2,555
- Current tax payable 24 - - - - - - - - - - - 24
- Convertible long term - - - - - - - - - - -
borrowings
2,853 - 263 3 - - - - - - - - 3,119
TOTAL SHAREHOLDERS' FUNDS, 11,765 111 - (36) - 211 2 - (55) 59 - - 12,057
MINORITY INTERESTS &
LIABILITIES
Memo - Net Assets 2,625 1,287
Appendix 3
Balance Sheet at 31/12/04
IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12 Other
£M UK (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
GAAP IFRS
NON-CURRENT ASSETS
PROPERTY, PLANT & EQUIPMENT
- Fleet 6,852 - - (21) - 229 - (4) - - - - 7,056
- Property 977 - - - - 45 - (1) - - - - 1,021
- Equipment 461 - - - - - (47) - - - - - 414
8,290 - - (21) - 274 (47) (5) - - - - 8,491
INTANGIBLE ASSETS
- Goodwill 89 - - - - - (17) - - - - - 72
- Landing Rights 84 - - - - - 20 - - - - - 104
- Other - - - - - - 47 - - - - - 47
173 - - - - - 50 - - - - - 223
Investment in associates 117 - - - - - 1 - (55) 59 - - 122
Long term investments (trade 30 - - - - - - - - - - - 30
investments)
Employee benefit assets - 125 - - - - - - - - - - 125
Deferred tax receivable - - - - - - - - - - - - -
Other financial assets - - - - - - - - - - - 44 44
-
TOTAL NON-CURRENT ASSETS 8,610 125 - (21) - 274 4 (5) (55) 59 - 44 9,035
ASSETS HELD FOR SALE - - - - - - - 4 - - - - 4
CURRENT ASSETS AND RECEIVABLES
- Expendable spares and other 95 - - - - - - - - - - - 95
inventories
- Trade receivables and other 2,710 (35) - - - - - - - - - (369) 2,306
debtors
- Cash and cash equivalents 81 - - - - - - - - - - 325 406
TOTAL CURRENT ASSETS AND 2,886 (35) - - - - - - - - - (44) 2,807
RECEIVABLES
TOTAL ASSETS 11,496 90 - (21) - 274 4 (1) (55) 59 - - 11,846
SHAREHOLDERS' FUNDS, MINORITY INTERESTS &
LIABILITIES
SHAREHOLDERS' EQUITY
- Issued share capital 271 - - - - - - - - - - - 271
- Treasury shares (27) - - - - - - - - - - - (27)
- Other reserves 2,207 (1,180) (185) (18) 2 187 (2) (1) (55) 59 (82) - 932
TOTAL SHAREHOLDERS' EQUITY 2,451 (1,180) (185) (18) 2 187 (2) (1) (55) 59 (82) - 1,176
Equity minority interest 11 - - - - - - - - - - - 11
Non-equity minority interest 212 - - - - (12) - - - - - - 200
MINORITY INTERESTS 223 - - - - (12) - - - - - - 211
PROVISIONS
- Employee benefit - 1,828 - - - - - - - - - - 1,828
obligations
- Provisions for deferred tax 1,264 (504) (80) (6) (2) 85 6 - - - 82 - 845
- Other provisions 81 (46) - - - - - - - - - - 35
1,345 1,278 (80) (6) (2) 85 6 - - - 82 - 2,708
LONG TERM LIABILITIES
- Interest bearing long term 4,405 - - - - - - - - - - - 4,405
borrowings
- Convertible long term - - - - - - - - - - - - -
borrowings
- Other long term liabilities 301 (8) - - - 14 - - - - - - 307
4,706 (8) - - - 14 - - - - - - 4,712
CURRENT LIABILITIES
- Current portion of long 491 - - - - - - - - - - - 491
term borrowings
- Trade and other payables 2,141 - 265 3 - - - - - - - - 2,409
- Current tax payable 27 - - - - - - - - - - - 27
- Convertible long term 112 - - - - - - - - - - 112
borrowings
2,771 - 265 3 - - - - - - - - 3,039
TOTAL SHAREHOLDERS' FUNDS, 11,496 90 - (21) - 274 4 (1) (55) 59 - - 11,846
MINORITY INTERESTS &
LIABILITIES
Memo - Net Assets 2,674 1,387
Appendix 3
Balance Sheet at 31/03/05
IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12 Other
£M UK (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
GAAP IFRS
NON-CURRENT ASSETS
PROPERTY, PLANT & EQUIPMENT
- Fleet 6,748 - - (6) - 207 - (5) - - - - 6,944
- Property 959 - - - - 42 - (1) - - - - 1,000
- Equipment 445 - - - - - (60) - - - - - 385
8,152 - - (6) - 249 (60) (6) - - - - 8,329
INTANGIBLE ASSETS
- Goodwill 88 - - - - - (16) - - - - - 72
- Landing Rights 102 - - - - - 20 - - - - - 122
- Other - - - - - - 60 - - - - - 60
190 - - - - - 64 - - - - - 254
Investment in associates 120 - - - - - 1 - (54) 59 - - 126
Long term investments (trade 30 - - - - - - - - - - - 30
investments)
Employee benefit assets - 137 - - - - - - - - - - 137
Deferred tax receivable - - - - - - - - - - - - -
Other financial assets - - - - - - - - - - - 38 38
-
TOTAL NON-CURRENT ASSETS 8,492 137 - (6) - 249 5 (6) (54) 59 - 38 8,914
ASSETS HELD FOR SALE - - - - - - - 5 - - - - 5
CURRENT ASSETS AND RECEIVABLES
- Expendable spares and other 84 - - - - - - - - - - - 84
inventories
- Trade receivables and other 2,683 (54) - - - - - - - - - (509) 2,120
debtors
- Cash and cash equivalents 77 - - - - - - - - - - 471 548
TOTAL CURRENT ASSETS AND 2,844 (54) - - - - - - - - - (38) 2,752
RECEIVABLES
TOTAL ASSETS 11,336 83 - (6) - 249 5 (1) (54) 59 - - 11,671
SHAREHOLDERS' FUNDS, MINORITY INTERESTS &
LIABILITIES
SHAREHOLDERS' EQUITY
- Issued share capital 271 - - - - - - - - - - - 271
- Treasury shares (26) - - - - - - - - - - - (26)
- Other reserves 2,220 (1,177) (189) (7) 2 168 (1) (1) (54) 59 (80) - 940
TOTAL SHAREHOLDERS' EQUITY 2,465 (1,177) (189) (7) 2 168 (1) (1) (54) 59 (80) - 1,185
Equity minority interest 12 - - - - - - - - - - - 12
Non-equity minority interest 207 - - - - (7) - - - - - - 200
MINORITY INTERESTS 219 - - - - (7) - - - - - - 212
PROVISIONS
- Employee benefit - 1,820 - - - - - - - - - - 1,820
obligations
- Provisions for deferred tax 1,243 (503) (81) (2) (2) 75 6 - - - 80 - 816
- Other provisions 83 (49) - - - - - - - - - - 34
1,326 1,268 (81) (2) (2) 75 6 - - - 80 - 2,670
LONG TERM LIABILITIES
- Interest bearing long term 4,045 - - - - - - - - - - - 4,045
borrowings
- Convertible long term - - - - - - - - - - - - -
borrowings
- Other long term liabilities 301 (8) - - - 13 - - - - - - 306
4,346 (8) - - - 13 - - - - - - 4,351
CURRENT LIABILITIES
- Current portion of long 447 - - - - - - - - - - - 447
term borrowings
- Trade and other payables 2,385 - 270 3 - - - - - - - - 2,658
- Current tax payable 36 - - - - - - - - - - - 36
- Convertible long term 112 - - - - - - - - - - 112
borrowings
2,980 - 270 3 - - - - - - - - 3,253
TOTAL SHAREHOLDERS' FUNDS, 11,336 83 - (6) - 249 5 (1) (54) 59 - - 11,671
MINORITY INTERESTS &
LIABILITIES
Memo - Net Assets 2,684 1,397
Appendix 3
Quarter 1 2004/05 Income Statement
£m IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12
UK GAAP (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) IFRS
TOTAL TRAFFIC REVENUE
- Passenger 1,625 - - - - - - - - - - 1,625
- Cargo 118 - - - - - - - - - - 118
OTHER REVENUE 182 - (23) - - - - - - - - 159
TOTAL TURNOVER 1,925 - (23) - - - - - - - - 1,902
Employee costs 551 (12) - - 2 - - - - - - 541
Depreciation and amortisation 165 - - 11 - 3 (1) - - - - 178
Aircraft Leasing 26 - - - - - - - - - - 26
Fuel Cost 258 - - - - - - - - - - 258
Fuel Derivative Gains / (Losses) - - - - - - - - - - - -
Engineering and other aircraft 112 - - (16) - - - - - - - 96
costs
Landing Fees and en route charges 141 - - - - - - - - - - 141
Handling charges, catering and 233 - - - - - - - - - - 233
other operating costs
Selling costs 133 - 5 - - - - - - - - 138
Currency differences - - - - (4) - - - - - (4)
Accommodation and ground 156 - - - - 10 - - - - - 166
equipment
TOTAL OPERATING EXPENDITURE 1,775 (12) 5 (5) 2 9 (1) - - - - 1,773
Interest expense (66) - - - - - - - - - - (66)
Interest income 18 18
Other financing income and - (11) - - - - - - - - - (11)
charges
Retranslation credits and charges 23 - - - - (11) - - - - - 12
on borrowings
Share of Profit of Associates (4) - - - - - - - - - - (4)
Profit or Loss on Disposal (6) - - - - - - 3 - - - (3)
Income and charges relating to - - - - - - - - - - - -
fixed asset investments
PROFIT BEFORE TAX 115 1 (28) 5 (2) (20) 1 3 - - - 75
Taxation (42) - 8 (2) 1 4 - (1) - - - (32)
PROFIT FOR THE PERIOD 73 1 (20) 3 (1) (16) 1 2 - - - 43
Attributable to shareholders 70 1 (20) 3 (1) (16) 1 2 - - - 40
Attributable to minority 3 - - - - - - - - - - 3
interests
Memo
OPERATING PROFIT 150 12 (28) 5 (2) (9) 1 - - - - 129
Operating Margin 7.8% 6.8%
EPS (basic) 6.5 3.7
EPS (diluted) 6.4 3.7
Appendix 3
Quarter 2 2004/05 Income Statement
£m IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12
UK GAAP (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) IFRS
TOTAL TRAFFIC REVENUE
- Passenger 1,705 - - - - - - - - - - 1,705
- Cargo 118 - - - - - - - - - - 118
OTHER REVENUE 203 - 12 - - - - - - - - 215
TOTAL TURNOVER 2,026 - 12 - - - - - - - - 2,038
Employee costs 561 (13) - - 2 - - - - - - 550
Depreciation and amortisation 168 - - 11 - 3 (1) - - - - 181
Aircraft Leasing 27 - - - - - - - - - - 27
Fuel Cost 271 - - - - - - - - - - 271
Fuel Derivative Gains / (Losses) - - - - - - - - - - - -
Engineering and other aircraft 118 - - (3) - - - - - - - 115
costs
Landing Fees and en route charges 145 - - - - - - - - - - 145
Handling charges, catering and 238 - (1) - - - - - - - - 237
other operating costs
Selling costs 126 - 9 - - - - - - - - 135
Currency differences - - - - - (8) - - - - - (8)
Accommodation and ground 132 - - - - 8 - - - - - 140
equipment
TOTAL OPERATING EXPENDITURE 1,786 (13) 8 8 2 3 (1) - - - - 1,793
Interest expense (73) - - - - - - - 5 - - (68)
Interest income 22 - - - - - - - - - - 22
Other financing income and - (11) - - - - - - - - - (11)
charges
Retranslation credits and charges 4 - - - - (5) - - - - - (1)
on borrowings
Share of Profit of Associates 34 - - - - - - - (13) - - 21
Profit or Loss on Disposal (8) - - - - - - - (5) 97 - 84
Income and charges relating to 1 - - - - - - - - - - 1
fixed asset investments
PROFIT BEFORE TAX 220 2 4 (8) (2) (8) 1 - (13) 97 - 293
Taxation (93) (1) (1) 2 - 1 - - 11 - 13 (68)
PROFIT FOR THE PERIOD 127 1 3 (6) (2) (7) 1 - (2) 97 13 225
Attributable to shareholders 123 1 3 (6) (2) (7) 1 - (2) 97 13 221
Attributable to minority 4 - - - - - - - - - - 4
interests
Memo
OPERATING PROFIT 240 13 4 (8) (2) (3) 1 - - - - 245
Operating Margin 11.8% 12.0%
EPS (basic) 11.5 20.6
EPS (diluted) 11.2 19.9
Appendix 3
Quarter 3 2004/05 Income Statement
£m IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12
UK GAAP (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) IFRS
TOTAL TRAFFIC REVENUE
- Passenger 1,613 - - - - - - - - - - 1,613
- Cargo 134 - - - - - - - - - - 134
OTHER REVENUE 226 - (16) - - - - - - - - 210
TOTAL TURNOVER 1,973 - (16) - - - - - - - - 1,957
Employee costs 553 (23) - - 2 - - - - - - 532
Depreciation and amortisation 167 - - 11 - 5 (1) 1 - - - 183
Aircraft Leasing 28 - - - - - - - - - - 28
Fuel Cost 330 - - - - - - - - - - 330
Fuel Derivative Gains / (Losses) - - - - - - - - - - - -
Engineering and other aircraft 123 - - (25) - - - - - - - 98
costs
Landing Fees and en route charges 140 - - - - - - - - - - 140
Handling charges, catering and 232 - (1) - - - - - - - - 231
other operating costs
Selling costs 115 - (13) - - - - - - - - 102
Currency differences - 3 - - - 25 - - - - - 28
Accommodation and ground 175 - - - - (26) - - - - - 149
equipment
TOTAL OPERATING EXPENDITURE 1,863 (20) (14) (14) 2 4 (1) 1 - - - 1,821
Interest expense (58) - - - - - - - - - - (58)
Interest income 15 - - - - - - - - - - 15
Other financing income and 8 (11) - - - - - - - - - (3)
charges
Retranslation credits and charges (1) - - - - 60 - - - - - 59
on borrowings
Share of Profit of Associates - - - - - - 1 - - - - 1
Profit or Loss on Disposal 1 - - - - - - - - - - 1
Income and charges relating to - - - - - - - - - - - -
fixed asset investments
PROFIT BEFORE TAX 75 9 (2) 14 (2) 56 2 (1) - - - 151
Taxation (23) (3) 1 (4) 1 (4) - - - - (1) (33)
PROFIT FOR THE PERIOD 52 6 (1) 10 (1) 52 2 (1) - - (1) 118
Attributable to shareholders 49 6 (1) 10 (1) 52 2 (1) - - (1) 115
Attributable to minority 3 - - - - - - - - - - 3
interests
Memo
OPERATING PROFIT 110 20 (2) 14 (2) (4) 1 (1) - - - 136
Operating Margin 5.6% 6.9%
EPS (basic) 4.6 10.7
EPS (diluted) 4.6 10.4
Appendix 3
Quarter 4 2004/05 Income Statement
£m IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12
UK GAAP (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) IFRS
TOTAL TRAFFIC REVENUE
- Passenger 1,557 - - - - - - - - - - 1,557
- Cargo 112 - - - - - - - - - - 112
OTHER REVENUE 220 - (14) - - - - - - - - 206
TOTAL TURNOVER 1,889 - (14) - - - - - - - - 1,875
Employee costs 608 2 - - 2 - - - - - - 612
Depreciation and amortisation 187 - - 10 - 2 (1) (1) - - - 197
Aircraft Leasing 25 - - - - - - - - - - 25
Fuel Cost 269 - - - - - - - - - - 269
Fuel Derivative Gains / (Losses) - - - - - - - - - - - -
Engineering and other aircraft 149 - - (26) - - - - - - - 123
costs
Landing Fees and en route charges 130 - - - - - - - - - - 130
Handling charges, catering and 227 - (10) - - - - - - - - 217
other operating costs
Selling costs 114 - 1 - - - - - - - - 115
Currency differences - (1) - - - - - - - - - (1)
Accommodation and ground 140 - - - - 2 - - - - - 142
equipment
TOTAL OPERATING EXPENDITURE 1,849 1 (9) (16) 2 4 (1) (1) - - - 1,829
Interest expense (70) - - - - - - - 3 - - (67)
Interest income 22 - - - - - - - - - - 22
Other financing income and 6 4 - - - - - - - - - 10
charges
Retranslation credits and charges 7 - - - - (21) - - - - - (14)
on borrowings
Share of Profit of Associates 11 - - - - - - - (5) - - 6
Profit or Loss on Disposal (13) - - 1 - - - - 1 - - (11)
Income and charges relating to 2 - - - - - - - - - - 2
fixed asset investments
PROFIT BEFORE TAX 5 3 (5) 17 (2) (25) 1 1 (1) - - (6)
Taxation 9 (1) 1 (5) - 3 - - 3 - 2 12
PROFIT FOR THE PERIOD 14 2 (4) 12 (2) (22) 1 1 2 - 2 6
Attributable to shareholders 9 2 (4) 12 (2) (22) 1 1 2 - 2 1
Attributable to minority 5 - - - - - - - - - - 5
interests
Memo
OPERATING PROFIT 40 (1) (5) 16 (2) (4) 1 1 - - - 46
Operating Margin 2.1% 2.5%
EPS (basic) 0.9 0.1
EPS (diluted) 0.9 0.3
Appendix 3
2004/05 Income Statement
£m IAS 19 IAS 18 IAS 16 IFRS 2 IAS 21 IFRS 3 IFRS 5 IAS 28 IFRS 1 IAS 12
UK GAAP (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) IFRS
TOTAL TRAFFIC REVENUE
- Passenger 6,500 - - - - - - - - - - 6,500
- Cargo 482 - - - - - - - - - - 482
OTHER REVENUE 831 - (41) - - - - - - - - 790
TOTAL TURNOVER 7,813 - (41) - - - - - - - - 7,772
Employee costs 2,273 (46) - - 8 - - - - - - 2,235
Depreciation and amortisation 687 - - 43 - 13 (4) - - - - 739
Aircraft Leasing 106 - - - - - - - - - - 106
Fuel Cost 1,128 - - - - - - - - - - 1,128
Fuel Derivatives Gains/Losses -
Engineering and other aircraft 502 - - (70) - - - - - - - 432
costs
Landing Fees and en route 556 - - - - - - - - - - 556
charges
Handling charges, catering and 930 - (12) - - - - - - - - 918
other operating costs
Selling costs 488 - 2 - - - - - - - - 490
Currency differences - 2 - - - 13 - - - - - 15
Accommodation and ground 603 - - - - (6) - - - - - 597
equipment
TOTAL OPERATING EXPENDITURE 7,273 (44) (10) (27) 8 20 (4) - - - - 7,216
Interest expense (267) - - - - - - - 8 - - (259)
Interest income 77 - - - - - - - - - - 77
Other financing income and 14 (29) - - - - - - - - - (15)
charges
Retranslation credits and 33 - - - - 23 - - - - - 56
charges on borrowings
Share of Profit of Associates 41 - - - - - 1 - (18) - - 24
Profit or Loss on Disposal (26) - - 1 - - - 3 (4) 97 - 71
Income and charges relating to 3 - - - - - - - - - - 3
fixed asset investments
PROFIT BEFORE TAX 415 15 (31) 28 (8) 3 5 3 (14) 97 - 513
Taxation (149) (5) 9 (9) 2 4 - (1) 14 - 14 (121)
PROFIT FOR THE PERIOD 266 10 (22) 19 (6) 7 5 2 - 97 14 392
Attributable to shareholders 251 10 (22) 19 (6) 7 5 2 - 97 14 377
Attributable to minority 15 - - - - - - - - - - 15
interests
Memo
OPERATING PROFIT 540 44 (31) 27 (8) (20) 4 - - - - 556
Operating Margin 6.9% 7.2%
EPS (basic) 23.4 35.2
EPS (diluted) 23.0 34.1
Appendix 4
Ernst & Young Audit Report
Independent Auditors' Report to British Airways Plc on the preliminary IFRS
Financial Statements for the year ended 31 March 2005
We have audited the accompanying preliminary International Financial Reporting
Standards ('IFRS') financial statements of British Airways Plc for the year
ended 31 March 2005 which comprise the opening IFRS Balance Sheet as at 1 April
2004, the income statement for the year ended 31 March 2005 and the Balance
Sheet as at 31 March 2005, together with the related accounting policies note
set out in appendix 2.
This report is made solely to the Company in accordance with our engagement
letter dated 20 June 2005. Our audit work has been undertaken so that we might
state to the Company those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility or liability to anyone other than
the Company for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
These preliminary IFRS financial statements are the responsibility of the
Company's directors and have been prepared as part of the Company's conversion
to IFRS. They have been prepared in accordance with the basis set out in
appendix 1, which describes how IFRS have been applied under IFRS 1, including
the assumptions management has made about the standards and interpretations
expected to be effective, and the policies expected to be adopted, when
management prepares its first complete set of IFRS financial statements as at 31
March 2006.
Our responsibility is to express an independent opinion on the preliminary IFRS
financial statements based on our audit. We read the other information
accompanying the preliminary IFRS financial statements and consider whether it
is consistent with the preliminary IFRS financial statements. This other
information comprises the description of significant changes in accounting
polices in appendix 2. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary IFRS financial statements. Our responsibilities do not extend to
any other information.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
preliminary IFRS financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the preliminary IFRS financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the preliminary
IFRS financial statements. We believe that our audit provides a reasonable
basis for our opinion.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that appendix 1
explains why there is a possibility that the preliminary IFRS financial
statements may require adjustment before constituting the final IFRS financial
statements. Moreover, we draw attention to the fact that, under IFRSs only a
complete set of financial statements with comparative financial information and
explanatory notes can provide a fair presentation of the Company's financial
position, results of operations and cash flows in accordance with IFRSs.
Opinion
In our opinion, the preliminary IFRS financial statements for the year ended 31
March 2005 have been prepared, in all material respects, in accordance with the
basis set out in appendix 1, which describes how IFRS have been applied under
IFRS 1, including the assumptions management has made about the standards and
interpretations expected to be effective, and the policies expected to be
adopted, when management prepares its first complete set of IFRS financial
statements as at 31 March 2006.
Ernst & Young LLP
Registered Auditor
London
Independent review report to British Airways plc on the preliminary IFRS
financial information for the 3 months ended 30 June 2004, 30 September 2004, 31
December 2004 and 31 March 2005
Introduction
We have reviewed the preliminary International Financial reporting Standards ('
IFRS') consolidated financial information of British Airways Plc ('the Company')
and its subsidiaries (together, 'the Group') for the 3 months ended 30 June
2004, 30 September 2004, 31 December 2004 and 31 March 2005 which comprises the
consolidated balance sheet and the consolidated income statement.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the Company for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The preliminary IFRS financial information is the responsibility of the
Company's directors and has been prepared as part of the Company's conversion to
IFRS. It has been prepared in accordance with the basis of preparation set out
in the accounting policies note, which describes how IFRS has been applied under
IFRS 1, including the assumptions management has made about the standards and
interpretations expected to be effective, and the policies expected to be
adopted, when management prepares its first complete set of IFRS financial
statements as at 31 March 2006.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an opinion on
the preliminary IFRS financial information.
Emphasis of matter
Without modifying our review conclusion, we draw attention to the fact that the
accounting policies note explains why there is a possibility that the
preliminary IFRS financial information may require adjustment before
constituting the final IFRS financial statements. Moreover, we draw attention
to the fact that, under IFRSs only a complete set of financial statements with
comparative financial information and explanatory notes can provide a fair
presentation of the Company's financial position, results of operations and cash
flows in accordance with IFRSs.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the preliminary IFRS financial information as presented for
the 3 months ended 30 June 2004, 30 September 2004, 31 December 2004 and 31
March 2005.
Ernst & Young LLP
Registered Auditor
London
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