Restatement UK GAAP to IFRS
Cairn Energy PLC
28 February 2006
28 February 2006
CAIRN ENERGY PLC
2005 PRELIMINARY RESULTS REPORTING AND ADOPTION OF INTERNATIONAL FINANCIAL
REPORTING STANDARDS (IFRS)
Cairn Energy PLC intends to publish its preliminary results for the year ended
31 December 2005 under IFRS on Tuesday, 14 March 2006.
Cairn has adopted International Financial Reporting Standards (IFRS) as the
basis for preparation of its financial statements from 1 January 2005, with a
date of transition to IFRS of 1 January 2004. Interim results to 30 June 2005
and associated audited restated financial information were prepared and issued
on this revised basis during 2005. Those financial documents highlighted that
the Group was continuing to apply its existing full cost accounting policy for
oil and gas assets to both the exploration and appraisal activity phase and to
those in the development and production phase, pending receipt of any guidance
or clarification from either the International Financial Reporting
Interpretations Committee (IFRIC) Agenda Committee or IFRIC.
Following the subsequent publication of IFRIC guidance in November 2005, which
noted the limited scope of IFRS 6 'Exploration for and Evaluation of Mineral
Resources', Cairn announced on 17 January 2006 it had updated its oil and gas
accounting policy and as a consequence had decided to adopt a successful efforts
based accounting policy for its financial statements.
As a consequence, Cairn has updated the restatement document issued previously
on 8 September 2005 to reflect changes arising from the implementation of this
revised methodology. Cairn is today providing audited revised year ended 31
December 2004 restated results prepared on the basis of revised accounting
policies under IFRS. This restated financial information and revised accounting
policies are presented in this press release along with reconciliations from UK
Generally Accepted Accounting Practise ('UK GAAP') to IFRS.
These accounting changes do not impact the fundamentals of the business. There
is:
• No impact on the underlying business
• No effect on the Group's trading cash flows or cash available for investment
• No effect on the Group's strategy or management of its business
The key implications for Cairn's financial statements on adopting this policy
are as follows:
•Costs of unsuccessful wells initially capitalised within exploration
assets are expensed in the income statement in the period in which they are
determined unsuccessful;
•Depletion of development/producing assets is now performed on a field by
field basis although fields within development areas can be combined where
appropriate;
•Impairment testing for development/producing assets is now performed on
each individual cash generating unit - this is usually, but not always, the
development area; and
•Cairn has elected to measure certain development/producing assets at the
transition date to IFRS (1 January 2004) at fair value and use this fair
value as their deemed cost, as allowable under IFRS 1- 'First time adoption
of International Financial Reporting Standards'.
Other principle differences between UK GAAP and IFRS disclosed in the
restatement document issued in September 2005 are unaffected by this update and
are detailed in the revised document.
The impact on the Balance Sheet at 2004 on transition to IFRS from UK GAAP is as
follows:
UK GAAP IFRS
£'m £'m
Shareholders' funds / Total equity 431 371
Cairn intends to adopt the US dollar as the reporting currency for the Group's
results for the year ended 31 December 2005. Restated US Dollar balances
prepared from updated accounting policies reflecting a US Dollar reporting
currency have been included in the restatement document for comparative
purposes.
Enquiries to:
Cairn Energy PLC
Tel: 0131 475 3000
Kevin Hart, Finance Director
Kerry Crawford, Senior Group Finance Manager
NOTES TO EDITORS:
• Cairn focuses its activities on the geographic region of South Asia. The
Group holds material exploration and production positions in west India,
east India and Bangladesh along with new exploration rights in northern
India and Nepal.
• This focus on South Asia has already resulted in a significant number of
oil and gas discoveries. In particular, the company made a major oil
discovery (Mangala) in Rajasthan in the north west of India at the beginning
of 2004.
• 'Cairn' where referred to in this release means Cairn Energy PLC and/or
its subsidiaries, as appropriate.
• Cairn has now made 17 oil and gas discoveries on Rajasthan block
RJ-ON-90/1.
• Working interests of Rajasthan block RJ-ON-90/1 development area: Cairn
70% ONGC 30%.
Cairn Energy Live Audio Webcast
The webcast of the 2005 Results presentation will be available at 09:00hrs (UK
time) on Tuesday 14 March, 2005
This will be available on the Cairn Energy PLC website:
www.cairn-energy.plc.uk
An archived version of the webcast will be available in the afternoon
For further information on Cairn see www.cairn-energy.plc.uk
Disclaimer:
Note: There are matters discussed in this Statement that are forward looking.
All such forward-looking statements are based on our management's assumptions
and beliefs in light of information available to them at this time. These
forward-looking statements are, by their nature, subject to significant risks
and uncertainties and actual results, performance or achievements may be
materially different from those expressed in such statements.
Cairn Energy PLC
Restatement of 2004 Results from UK GAAP to IFRS
Updated 28 February 2006
Contents
Introduction.................................................................. 2
Independent Auditors' Report.................................................. 4
Group IFRS Income Statement for the year ended 31 December 2004............... 6
Group IFRS Statement of Changes in Equity for the year ended 31 December 2004. 7
Group IFRS Balance Sheet as at 31 December 2004............................... 8
Group IFRS Balance Sheet as at 31 December 2003............................... 9
Note 1 - Accounting Policies................................................. 10
Reconciliation of Group Equity as at 31 December 2004........................ 16
Reconciliation of Group Equity as at 31 December 2003........................ 17
Reconciliation of Group Income Statement for the year ended 31 December 2004. 18
Note 2 - Reconciling items between UK GAAP and IFRS.......................... 19
Glossary of Terms............................................................ 22
Introduction
Cairn has a mandatory requirement to implement IFRS for accounting periods
commencing 1 January 2005. This requires Cairn to report its financial results
under applicable International Accounting Standards and International Financial
Reporting Standards (hereafter referred to as 'IFRS'), including comparative
information from the Group's interim 2005 results.
Cairn originally released restated IFRS results for prior periods on 8 September
2005 and its interim 2005 results under IFRS on 20 September 2005. Both sets of
results were prepared on the basis of the Group's continued application of its
full cost accounting policy for oil and gas assets to both the exploration and
appraisal activity phase and to those in the development and production phase.
When these results were authorised for issue, the Board were aware that, owing
to a lack of clarity in the authoritative literature, no consensus had been
reached amongst the UK oil industry and the accounting profession on the status
of full cost accounting policies under IFRS beyond the exploration and appraisal
phase. As noted in the restatement document, this point was referred to the
Agenda Committee of the International Financial Reporting Interpretations
Committee ('IFRIC') to request clarification. The Agenda Committee subsequently
issued guidance that the scope of IFRS 6 'Exploration for and Evaluation of
Mineral Resources' is limited to exploration and appraisal activities and that
accounting policies for development and production activities are to be based on
the provisions of other existing IFRS.
Following this clarification from the IFRIC Agenda Committee, Cairn has reviewed
its oil and gas accounting policy for both exploration and appraisal and
development/producing assets. Cairn has decided to adopt a successful efforts
based accounting policy for the Group's 2005 Annual Report and Accounts and has
updated its restatement of prior periods to reflect this change in policy. The
revised accounting policy is detailed in Note 1.
The key implications for Cairn's financial statements on adopting this policy
are as follows:
•Costs of unsuccessful wells initially capitalised within exploration
assets are expensed in the Income Statement in the period in which they are
determined unsuccessful;
•depletion of development/producing assets is now performed on a field by
field basis although fields within development areas can be combined where
appropriate; and
•impairment testing for development/producing assets is now performed on
each cash generating unit - this is usually, but not always, the development
area.
The Group's Balance Sheets as at 31 December 2003 and 31 December 2004 and the
Group Income Statement and the Statement of Changes in Equity for the year ended
31 December 2004 have therefore been restated to comply with IFRS and are
presented with reconciliations from UK GAAP to IFRS and revised accounting
policies.
Cairn also intends to adopt the US dollar as the reporting currency for the
Group's results for the year ended 31 December 2005. On adoption, the Group's
existing foreign currencies accounting policy defined in Note 1 will be updated
to reflect the revised translation policy to US dollars. Restated US dollar
balances prepared under this revised policy have been included in this document
for comparative purposes.
On the first time adoption of IFRS, the general principle for applying IFRS is
one of full retrospective application. IFRS 1 'First time adoption of
International Financial Reporting Standards' does, however, allow the first time
adopter certain exemptions from this principle. IFRS 1 contains both mandatory
and optional exemptions. From the optional exemptions, Cairn has elected:
•Not to restate financial information for business combinations which
occurred prior to 31 December 2003;
•To deem cumulative translation differences arising on consolidation of
subsidiary undertakings to be zero at 31 December 2003; and
•To measure certain development/producing assets at the transition date to
IFRS at fair value and use this fair value as their deemed cost.
In preparing these statements, Cairn has also chosen to adopt IFRS 6 early.
Other principal differences between UK GAAP and IFRS disclosed in the
restatement document issued in September are unaffected by this update and are
set out below for reference:
•Expensing pre-exploration expenditure previously held within exploration
assets and development/producing assets;
•Retranslation of certain assets held by subsidiaries with non-Sterling
functional currencies on consolidation;
•Recognising an expense for the fair value of employee share options
granted post 7 November 2002 and changes in the fair values for LTIP awards
granted post 7 November 2002 including reversing expenses recognised for
awards granted prior to this date;
•Recognising deferred tax liabilities on prior year business acquisitions;
and
•Disclosure and presentational adjustments for certain assets held by the
Group.
The UK GAAP financial information contained in this document does not constitute
statutory accounts as defined by section 240 of the Companies Act 1985. The
Company's auditors have issued unqualified audit opinions on the Group's UK GAAP
financial statements for the years ended 31 December 2003 and 31 December 2004.
Copies of the UK GAAP financial statements for these years have also been
delivered to the Registrar of Companies.
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT TO CAIRN ENERGY PLC ON THE PRELIMINARY IFRS
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
We have audited the accompanying preliminary International Financial Reporting
Standards ('IFRS') financial statements of the Group for the year ended 31
December 2004 which comprise the opening IFRS Balance Sheet as at 31 December
2003, the Income Statement and the Statement of Changes in Equity for the year
ended 31 December 2004 and the Balance Sheet as at 31 December 2004, together
with the related accounting policies note set out on pages 10 to 15.
This report is made solely to the Company in accordance with our engagement
letter dated 7 July 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 Note 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 December 2005.
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 introduction on pages 2 to 3, and the reconciliations
from UK GAAP to IFRS and accompanying explanations on pages 16 to 21. We
consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the preliminary opening Balance
Sheet. 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 Note 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 IFRS 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 IFRS.
Opinion
In our opinion, the preliminary IFRS financial statements for the year ended 31
December 2004 have been prepared, in all material respects, in accordance with
the basis set out in Note 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 December 2005.
Ernst & Young LLP
London
28 February 2006
Group IFRS Income Statement for the year ended 31 December 2004
------------------------------------ -------- -------- -------- --------
UK GAAP IFRS IFRS IFRS
adjustments
2004 £'000 2004 2004
£'000 £'000 US$'000
----------------------------------- -------- -------- -------- --------
Revenue 95,449 - 95,449 172,909
Cost of sales
Production costs (27,689) (37) (27,726) (50,757)
Unsuccessful exploration costs - (19,392) (19,392) (36,325)
DD&A (32,791) (6,569) (39,360) (72,095)
------------------------ -------- -------- -------- --------
Gross profit 34,969 (25,998) 8,971 13,732
------------------------ -------- -------- -------- --------
Administrative expenses (18,200) 3,661 (14,539) (26,516)
------------------------ -------- -------- -------- --------
Operating profit/(loss) 16,769 (22,337) (5,568) (12,784)
Exceptional gain on sale of oil and
gas assets 2,206 (2,206) - -
------------------------ -------- -------- -------- --------
Profit/(loss) on ordinary activities
before interest 18,975 (24,543) (5,568) (12,784)
Interest income 1,811 - 1,811 3,306
Finance costs (4,889) (1,345) (6,234) (10,236)
------------------------ -------- -------- -------- --------
Profit/(loss) on ordinary activities
before taxation 15,897 (25,888) (9,991) (19,714)
Taxation on profit/(loss) on ordinary
activities (5,055) 12,295 7,240 14,736
------------------------ -------- -------- -------- --------
Profit/(loss) for the year
attributable to equity holders 10,842 (13,593) (2,751) (4,978)
------------------------ -------- -------- -------- --------
Earnings per ordinary share - basic 7.11p (1.80p)
Earnings per ordinary share - diluted 7.05p (1.79p)
------------------------ -------- -------- -------- --------
Further details of the IFRS adjustments can be found on pages 16 to 21.
Group IFRS Statement of Changes in Equity for the year ended 31 December 2004
Group Group
2004 2004
£'000 US$'000
Opening equity 298,365 532,223
Currency translation differences (22,575) 5,270
------------------------------------ -------- --------
Total (expense)/income recognised direct in equity (22,575) 5,270
Loss for the year (2,751) (4,978)
------------------------------------ -------- --------
Total expense recognised for the year (2,751) (4,978)
------------------------------------ -------- --------
Total (expense)/income recognised for the year (25,326) 292
------------------------------------ ------- --------
New shares issued for cash 101,889 184,786
New shares issued in respect of employee share options 4,559 8,267
Cost of shares purchased by ESOP trust (9,329) (16,540)
Share based payments charges 1,291 2,169
------------------------------------ -------- --------
Closing equity attributable to the Company's equity
holders 371,449 711,197
------------------------------------ -------- --------
Group IFRS Balance Sheet as at 31 December 2004
UK GAAP IFRS adjustments IFRS 2004 IFRS 2004
2004 £'000 £'000 US$'000
£'000
Non-current assets
Intangible
exploration
assets 235,503 (45,708) 189,795 364,189
PP&E -
development/pr
oducing assets 232,415 (17,096) 215,319 411,737
PP&E - other 1,628 (172) 1,456 2,757
Intangible
assets - other - 724 724 1,347
Investments 50 - 50 96
Deferred tax
assets - 4,554 4,554 8,744
------------------------ -------- -------- -------- --------
469,596 (57,698) 411,898 788,870
------------------------- -------- -------- -------- --------
Current assets
Inventory - 1,125 1,125 2,160
Trade and
other
receivables 69,934 (1,652) 68,282 131,101
Bank deposits - 8,000 8,000 15,361
Cash and cash
equivalents 72,042 (8,000) 64,042 122,961
----------------------- -------- -------- -------- --------
141,976 (527) 141,449 271,583
------------------------- -------- -------- -------- --------
Total assets 611,572 (58,225) 553,347 1,060,453
----------------------- -------- -------- -------- --------
Current liabilities
Trade and
other payables 81,656 (2,826) 78,830 151,362
Income tax
liabilities - 2,930 2,930 5,626
----------------------- -------- -------- -------- --------
81,656 104 81,760 156,988
------------------------- -------- -------- -------- --------
Non-current liabilities
Deferred tax
liabilities 68,148 1,362 69,510 133,463
Provisions 30,628 - 30,628 58,805
----------------------- -------- -------- -------- --------
98,776 1,362 100,138 192,268
------------------------- -------- -------- -------- --------
Total
liabilities 180,432 1,466 181,898 349,256
----------------------- -------- -------- -------- --------
Net assets 431,140 (59,691) 371,449 711,197
----------------------- -------- -------- -------- --------
Equity
Called-up
share capital 15,901 - 15,901 25,635
Share premium 107,278 - 107,278 194,253
Shares held by
the ESOP trust (14,031) - (14,031) (23,624)
Foreign
currency
translation - (22,575) (22,575) 5,270
Other reserves 24,256 - 24,256 37,284
Capital
reserves - non
distributable 26,281 - 26,281 45,331
Capital
reserves -
distributable 109,635 - 109,635 178,429
Retained
earnings 161,820 (37,116) 124,704 248,619
----------------------- -------- -------- -------- --------
Total equity
attributable
to the
Company's
equity holders 431,140 (59,691) 371,449 711,197
----------------------- -------- -------- -------- --------
Further details of the IFRS adjustments can be found on pages 16 to 21.
Group IFRS Balance Sheet as at 31 December 2003
UK GAAP IFRS IFRS IFRS
adjustments 2003 2003
2003** £'000 £'000 US$'000
£'000
Non-current assets
Intangible
exploration
assets 155,046 (24,171) 130,875 234,079
PP&E -
development/pr
oducing assets 236,749 (8,364) 228,385 407,132
PP&E - other 1,546 (122) 1,424 2,580
Intangible
assets - other - 391 391 678
Investments 54 - 54 96
---------------------------- -------- -------- -------- --------
393,395 (32,266) 361,129 644,565
---------------------------- -------- -------- -------- --------
Current assets
Inventory - 2,271 2,271 4,065
Trade and
other
receivables 56,866 (2,553) 54,313 97,224
Cash and cash
equivalents 17,766 - 17,766 31,801
---------------------------- -------- -------- -------- --------
74,632 (282) 74,350 133,090
---------------------------- -------- -------- -------- --------
Total assets 468,027 (32,548) 435,479 777,655
---------------------------- -------- -------- -------- --------
Current liabilities
Trade and
other payables 42,396 (5,634) 36,762 65,829
Income tax
liabilities - 5,689 5,689 10,157
---------------------------- -------- -------- -------- --------
42,396 55 42,451 75,986
---------------------------- -------- -------- -------- --------
Non-current liabilities
Deferred tax
liabilities 71,771 6,810 78,581 140,657
Provisions 16,082 - 16,082 28,789
---------------------------- -------- -------- -------- --------
87,853 6,810 94,663 169,446
---------------------------- -------- -------- -------- --------
Total
liabilities 130,249 6,865 137,114 245,432
----------------------------- -------- -------- -------- --------
Net assets 337,778 (39,413) 298,365 532,223
----------------------------- -------- -------- -------- --------
Equity
Called-up
share capital 15,010 - 15,010 24,021
Share premium 1,721 - 1,721 2,814
Shares held by
the ESOP trust (4,702) - (4,702) (7,084)
Foreign currency - - - -
translation
Other reserves 24,256 - 24,256 37,284
Capital
reserves - non
distributable 26,281 - 26,281 45,331
Capital
reserves -
distributable 109,635 - 109,635 178,429
Retained
earnings 165,577 (39,413) 126,164 251,428
---------------------------- -------- -------- -------- --------
Total equity
attributable
to the
Company's 337,778 (39,413) 298,365 532,223
equity holders
---------------------------- -------- -------- -------- --------
Further details of the IFRS adjustments can be found on pages 16 to 21.
** - restated UK GAAP as disclosed in 2004 annual accounts comparative figures
following change in accounting policy arising from the amendment to UITF 17
following implementation of UITF 38 effective for accounting periods ending on
or after 22 June 2004.
Note 1 - Accounting Policies
a) Accounting convention
Cairn prepares its accounts on a historical cost basis.
b) Accounting standards
Cairn prepares its accounts in accordance with applicable IFRS.
This restatement of financial information for the years ended 31 December 2003
and 2004 has been prepared on the basis of all IFRS and interpretations issued
by the International Accounting Standards Board ('IASB') effective for the
Group's reporting year ended 31 December 2005, on the assumption that they will
be fully endorsed by the European Commission ('EC'). Should the EC fail to
endorse, there may be further changes required to the information presented.
The general principle in adopting IFRS is that all applicable accounting
standards should be applied retrospectively. IFRS 1 'First time adoption of
International Financial Reporting Standards' allows certain exemptions which
companies are allowed to apply. Cairn has elected:
• Not to restate financial information for business combinations which
occurred prior to 31 December 2003;
• To measure certain development/producing assets at the transition date
to IFRS at fair value and used this fair value as their deemed cost; and
• To deem cumulative translation differences arising on consolidation of
subsidiary undertakings to be zero at 31 December 2003.
This Statement has also been prepared in accordance with IFRS 6 'Exploration for
and Evaluation of Mineral Resources' following early adoption of this standard
by Cairn.
c) Basis of consolidation
The consolidated accounts include the results of Cairn Energy PLC and its
subsidiary undertakings to the Balance Sheet date. The consolidated Income
Statement and Cash Flow Statement include the results and cash flows of
subsidiary undertakings up to the date of disposal.
Cairn allocates the purchase consideration of any acquisition to assets and
liabilities on the basis of fair values at the date of acquisition. Any excess
of the cost of acquisition over the fair values of the assets and liabilities is
recognised as goodwill. Any goodwill arising is recognised as an asset and
subject to annual review for impairment.
Business combinations arising prior to the Group's transition date to IFRS (1
January 2004) have not been revisited under the exemption provided by IFRS 1.
Deferred tax liabilities have been recognised on fair value adjustments which
arose from past business combinations in accordance with IAS 12.
d) Joint Ventures
Cairn participates in several joint ventures which involve the joint control of
assets used in the Group's oil and gas exploration and production activities.
Cairn recognises its share of the assets and liabilities of joint ventures in
which the Group holds a participating interest, classified in the appropriate
Balance Sheet heading.
e) Revenue
Revenue represents Cairn's share of oil, gas and condensate production,
recognised on a direct entitlement basis and tariff income received for third
party use of operating facilities and pipelines in accordance with agreements.
Income received as operator from joint ventures is recognised on an accruals
basis in accordance with joint venture agreements and is included as a deduction
from administrative expenses.
Interest income is recognised on an accruals basis and is disclosed separately
on the face of the Income Statement.
f) Oil and gas exploration assets and development/producing assets
Cairn follows a successful efforts based accounting policy for oil and gas
assets.
Costs incurred prior to obtaining the legal rights to explore an area are
expensed immediately to the Income Statement.
Expenditure incurred on the acquisition of a licence interest is initially
capitalised on a licence by licence basis. Costs are held, undepleted, within
exploration assets until such a time as the exploration phase on the licence
area is complete or commercial reserves have been discovered.
Exploration expenditure incurred in the process of determining exploration
targets is capitalised initially within exploration assets and subsequently
allocated to drilling activities. Exploration drilling costs are initially
capitalised on a well by well basis until the success or otherwise of the well
has been established. The success or failure of each exploration effort is
judged on a well by well basis. Drilling costs are written off on completion of
a well unless the results indicate that hydrocarbon reserves exist and there is
a reasonable prospect that these reserves are commercial.
Following appraisal of successful exploration wells, if commercial reserves are
established and technical feasibility for extraction demonstrated, then the
related capitalised exploration and appraisal costs are transferred into a
single field cost centre within development/producing assets after testing for
impairment (see below). Where results of exploration drilling indicate the
presence of hydrocarbons which are ultimately considered not commercially
viable, all related costs are written off to the Income Statement.
All costs incurred after the technical feasibility and commercial viability of
producing hydrocarbons have been demonstrated are capitalised within development/
producing assets on a field by field basis. Subsequent expenditure is
capitalised only where it either enhances the economic benefits of the
development/producing asset or replaces part of the existing development/
producing asset. Any costs remaining associated with the replaced asset part are
expensed.
Net proceeds from any disposal of an exploration asset are initially credited
against the previously capitalised costs. Any surplus proceeds are credited to
the Income Statement. Net proceeds from any disposal of development/producing
assets are credited against the previously capitalised cost. A gain or loss on
disposal of a development/producing asset is recognised in the Income Statement
to the extent that the net proceeds exceed or are less than the appropriate
portion of the net capitalised costs of the asset.
Depletion and amortisation
Cairn depletes separately, where applicable, any significant part within
development/producing assets, such as fields, processing facilities and
pipelines which are significant in relation to the total cost of a development/
producing asset.
Cairn depletes expenditure on oil and gas production and development on a unit
of production basis, based on proved and probable reserves on a field by field
basis. In certain circumstances, fields within a single development area may be
combined for depletion purposes.
Impairment
Exploration assets are reviewed regularly for indicators of impairment and costs
are written off where circumstances indicate that the carrying value might not
be recoverable. In such circumstances the exploration asset is allocated to
development/producing assets within the same geographic segment, as disclosed in
the segmental analysis notes to the financial statements, and tested for
impairment. Any such impairment arising is recognised in the Income Statement
for the period. Where there are no development/producing assets within a
geographic segment, the exploration costs are charged immediately to the Income
Statement.
Impairment reviews on development/producing oil and gas assets are carried out
on each cash-generating unit identified in accordance with IAS 36. Cairn's cash
generating units are those assets which generate largely independent cash flows
and are normally, but not always, single development areas.
At each reporting date, where there are indicators of impairment, the net book
value of the cash generating unit is compared with the associated expected
discounted future cash flows. If the net book value is higher, then the
difference is written off to the Income Statement as impairment.
Where there has been a charge for impairment in an earlier year that charge will
be reversed in a later period where there has been a change in circumstances to
the extent that the discounted cash flows are higher than the net book value at
the time. In reversing impairment losses, the carrying amount of the asset will
be increased to the lower of its original carrying value or the carrying value
that would have been determined (net of depletion) had no impairment loss been
recognised in prior periods.
g) Property, plant and equipment
Tangible assets, other than development/producing assets, are measured at cost
and depreciated over their expected useful economic lives as follows:
Annual Rate (%) Depreciation Method
------------------------------ ------------ -------------------
Tenants' improvements 10 - 33 straight line
Vehicles, fixtures and equipment 25 - 50 straight line
h) Intangible assets
Intangible assets, other than exploration assets, have finite useful lives and
are measured at cost and amortised over their expected useful economic lives as
follows:
Annual Rate (%) Amortisation Method
------------------------- ------------ -------------------
Computer software 25 - 50 straight line
i) Investments
Cairn recognises and measures unlisted investments where there is no quoted
market price available at cost.
j) Inventories
Inventories of oil and condensate held at the Balance Sheet date are valued at
net realisable value based on the estimated selling price at that date.
k) Financial instruments
Trade and other receivables
Trade receivables are recognised and carried at the original invoiced amount
less any allowances for doubtful debts. Other debtors are recognised and
measured at nominal value.
Bank deposits
Bank deposits with a maturity of over three months are held as a separate
category of current asset and presented on the face of the Balance Sheet.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and short-term deposits with a
maturity of three months or less.
Trade payables and other creditors
Trade payables and other creditors are non-interest bearing and are measured at
cost.
Interest bearing bank loans
Interest bearing bank loans represent amounts drawn under the Group's revolving
credit facilities, classified according to the length of time remaining under
the respective facility. Interest payable is accrued in the Income Statement for
the period using the effective interest rate method.
Borrowing costs
Interest payable and exchange differences incurred on borrowings directly
attributable to development projects are capitalised within the development/
producing assets.
All other borrowing costs are recognised in the Income Statement in the period
in which they are incurred.
l) Equity
Equity instruments issued by Cairn are recorded at the proceeds received, net of
direct issue costs, allocated between share capital and share premium.
m) Taxation
The tax expense represents the sum of current tax and deferred tax expense.
The current tax is based on taxable profit for the year. Taxable profit differs
from net profit as reported in the Income Statement because it excludes items of
income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the Balance Sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the Balance Sheet liability method.
Deferred income tax liabilities are recognised for all taxable temporary
differences except in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures where
the timing of the reversal of the temporary difference can be controlled and it
is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible temporary
differences, carry forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which
the deductible temporary differences, carry forward of unused tax assets and
unused tax losses, can be utilised. In respect of taxable temporary differences
associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is
probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred income tax assets is reviewed at each Balance
Sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the periods in which the asset is realised or the liability
is settled, based on tax rates and laws enacted or substantively enacted at the
Balance Sheet date.
n) Decommissioning
At the end of the producing life of a field, costs are incurred in removing and
decommissioning production facilities. Cairn recognises the full discounted cost
of decommissioning as an asset and liability when the obligation to rectify
environmental damage arises. The decommissioning asset is included within fixed
assets with the cost of the related installation. The liability is included
within provisions. Revisions to the estimated costs of decommissioning which
alter the level of the provisions required are also reflected in adjustments to
the decommissioning asset. The amortisation of the asset, calculated on a unit
of production basis based on proved and probable reserves, is shown as the
'decommissioning charge' in the Income Statement, and the unwinding of the
discount on the provision is included within 'finance costs'.
o) Foreign currencies
In the accounts of individual Group companies, Cairn translates foreign currency
transactions into the functional currency at the rate of exchange prevailing at
the transaction date. Monetary assets and liabilities denominated in foreign
currency are translated into the functional currency at the rate of exchange
prevailing at the Balance Sheet date. Exchange differences arising are taken to
the Income Statement except for those incurred on borrowings specifically
allocable to development projects, which are capitalised as part of the cost of
the asset.
Cairn maintains the accounts of all subsidiary undertakings in their functional
currency, which for all material subsidiaries is US$. Cairn translates
subsidiary accounts into Sterling using the closing rate method, whereby assets
and liabilities are translated into Sterling at the rate of exchange prevailing
at the Balance Sheet date and Income Statement accounts are translated into
Sterling at average rates which approximate the exchange rates at the date of
the underlying transactions. Cairn takes exchange differences arising on the
translation of net assets and associated long term borrowings of subsidiary
undertakings and branches whose functional currency is non-Sterling directly to
reserves. On transition to IFRS Cairn has taken advantage of the exemption
offered under IFRS 1 and assumed zero brought forward translation differences on
subsidiary undertakings as at 1 January 2004.
For the year ending 31 December 2005, Cairn will be presenting its financial
statements in US$. This accounting policy will therefore be amended to reflect
the revised presentational currency in these financial statements.
Rates of exchange to £1 were as follows:
31 December Average 31 December
2004 2004 2003
---------- ----------- ----------- -----------
US$ 1.920 1.832 1.790
EUR 1.413 1.473 1.419
p) Pension schemes
Cairn operates defined contribution pension schemes in the UK and India. The
assets of the schemes are held separately from those of Cairn and its
subsidiaries. Cairn also operates an insured benefit scheme for certain Indian
employees as required under Indian legislation. In accordance with IAS 19 this
is treated as a defined contribution scheme. The pension cost charge represents
contributions payable in the year in accordance with the rules of the schemes.
q) Leasing commitments
Cairn charges rental payable under operating leases to the profit and loss
account on a straight line basis over the lease term.
r) Share schemes
The cost of awards to employees under Cairn's LTIP and share option plans are
recognised over the three year period to which the performance relates. The
amount recognised is based on the fair value of the shares as measured at the
date of the award. The shares are valued using a binomial model.
The costs of awards to employees in the form of cash but based on share
performance (phantom options) are recognised over the period to which the
performance relates. The amount recognised is based on the fair value of the
liability arising from the transaction.
Reconciliation of Group Equity as at 31 December 2004
UK IFRS 6 Fair Unsuccessful DD&A Foreign Taxation Other Total IFRS
GAAP adjustments Value exploration adjustments currency IFRS
adjustments costs translation adjustments
£'000 £'000 £'000 £'000 £'00 £'000 £'000 £'000 £'000 £'000
Notes on a b c e f h
reconciling
items
Intangible
exploration
assets 235,503 4,027 - (44,988) - (4,747) - - (45,708) 189,795
PP&E - dev.
/prod. assets 232,415 (22,735) 40,523 (18,362) (12,622) (3,900) - - (17,096) 215,319
PP&E - 1,628 - - - - - (172) (172) 1,456
other
Intangible
assets - - - - - - (14) - 738 724 724
other
Investments 50 - - - - - - - - 50
Deferred tax
assets - - - - - - 4,554 - 4,554 4,554
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total
non-current
assets 469,596 (18,708) 40,523 (63,350) (12,622) (8,661) 4,554 566 (57,698) 411,898
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Inventory - - - - - - - 1,125 1,125 1,125
Trade and
other
receivables 69,934 - - - - - - (1,652) (1,652) 68,282
Bank - - - - - - - 8,000 8,000 8,000
deposits
Cash and cash
equivalents 72,042 - - - - - - (8,000) (8,000) 64,042
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total current
assets 141,976 - - - - - - (527) (527) 141,449
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total 611,572 (18,708) 40,523 (63,350) (12,622) (8,661) 4,554 39 (58,225) 553,347
assets ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
-------------
Trade and
other 81,656 - - - - - - (2,826) (2,826) 78,830
payables
Current tax
liabilities - - - - - - - 2,930 2,930 2,930
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total current
liabilities 81,656 - - - - - - 104 104 81,760
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Deferred tax
liabilities 68,148 - - - - 2,293 (931) - 1,362 69,510
Provisions 30,628 - - - - - - - - 30,628
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total non
current
liabilities 98,776 - - - - 2,293 (931) - 1,362 100,138
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total
liabilities 180,432 - - - - 2,293 (931) 104 1,466 181,898
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Net assets 431,140 (18,708) 40,523 (63,350) (12,622) (10,954) 5,485 (65) (59,691) 71,449
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Share capital
and premium 123,179 - - - - - - - - 123,179
Shares held
by (14,031) - - - - - - - - (14,031)
the ESOP
trust
Foreign
currency
translation - - - - - (22,575) - - (22,575) (22,575)
Reserves 160,172 - - - - - - - - 160,172
Retained
earnings 161,820 (18,708) 40,523 (63,350) (12,622) 11,621 5,485 (65) (37,116) 124,704
------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
Total 431,140 (18,708) 40,523 (63,350) (12,622) (10,954) 5,485 (65) (59,691) 371,449
equity ------ ------- ------- ------- ------- ------- ------ ------ ------- ------
-------------
Reconciliation of Group Equity as at 31 December 2003
UK IFRS 6 Fair Unsuccessful DD&A Foreign Taxation Other Total IFRS
GAAP adjustments Value exploration adjustments currency IFRS
adjustments costs translation adjustments
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes on a b c e f h
reconciling
items
Intangible
exploration
assets 155,046 4,027 - (25,163) - (3,035) - - (24,171) 130,875
PP&E - dev.
/prod. assets 236,749 (22,698) 40,523 (18,795) (6,053) (1,341) - - (8,364) 228,385
PP&E - 1,546 - - - - (13) - (109) (122) 1,424
other
Intangible
assets - - - - - - - - 391 391 391
other
Investments 54 - - - - - - - - 54
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total
non-current
assets 393,395 (18,671) 40,523 (43,958) (6,053) (4,389) - 282 (32,266) 361,129
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Inventory - - - - - - - 2,271 2,271 2,271
Trade and
other
receivables 56,866 - - - - - - (2,553) (2,553) 54,313
Cash and cash
equivalents 17,766 - - - - - - - - 17,766
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total current
assets 74,632 - - - - - - (282) (282) 74,350
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total 468,027 (18,671) 40,523 (43,958) (6,053) (4,389) - - (32,548) 435,479
assets ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
-------------
Trade and
other 42,396 - - - - - - (5,634) (5,634) 36,762
payables
Current tax
liabilities - - - - - - - 5,689 5,689 5,689
------------- ------ ------- ------ ------- ------- - ----- ------ ------ ------- ------
Total current
liabilities 42,396 - - - - - - 55 55 42,451
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Deferred tax
liabilities 71,771 - - - - - 6,810 - 6,810 78,581
Provisions 16,082 - - - - - - - - 16,082
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total non
current
liabilities 87,853 - - - - - 6,810 - 6,810 94,663
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total
liabilities 130,249 - - - - - 6,810 55 6,865 137,114
------------- ------ ------- ------ ------- ------- - ----- ------ ------ ------- ------
Net assets 337,778 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 298,365
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Share capital
and premium 16,731 - - - - - - - - 16,731
Shares held
by (4,702) - - - - - - - - (4,702)
the ESOP
trust
Foreign - - - - - - - - - -
currency
translation
Reserves 160,172 - - - - - - - - 160,172
Retained
earnings 165,577 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 126,164
------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
Total 337,778 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 298,365
equity ------ ------- ------ ------- ------- ------ ------ ------ ------- ------
-------------
Reconciliation of Group Income Statement for the year ended 31 December 2004
UK Fair Value Unsuccessful DD&A Foreign Taxation Share Other Total IFRS IFRS
GAAP adjustment exploration adjustments currency based adjustments
costs translation payments
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes on b c d e f g h
reconciling
items
Revenue 95,449 - - - - - - - - 95,449
Cost of
sales
Production
costs (27,689) - - - - - - (37) (37) (27,726)
Unsuccessful
exploration
costs - - (19,392) - - - - - (19,392) (19,392)
DD&A (32,791) - - (6,569) - - - - (6,569) (39,360)
------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
Gross profit 34,969 - (19,392) (6,569) - - - (37) (25,998) 8,971
Administration
expenses (18,200) - - - - - 3,710 (49) 3,661 (14,539)
------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
Operating
profit/(loss) 16,769 - (19,392) (6,569) - - 3,710 (86) (22,337) (5,568)
Exceptional
gain on sale 2,206 (2,206) - - - - - - (2,206) -
------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
Profit/(loss)
on ordinary
activities
before
interest 18,975 (2,206) (19,392) (6,569) - - 3,710 (86) (24,543) (5,568)
Interest
income 1,811 - - - - - - - - 1,811
Finance (4,889) - - - (1,345) - - - (1,345) (6,234)
costs ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
------------
Profit/(loss)
on ordinary
activities
before tax 15,897 (2,206) (19,392) (6,569) (1,345) - 3,710 (86) (25,888) (9,991)
Taxation (5,055) - - - - 12,295 - - 12,295 7,240
------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
Profit/(loss)
for the year 10,842 (2,206) (19,392) (6,569) (1,345) 12,295 3,710 (86) (13,593) (2,751)
------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------
Note 2 - Reconciling items between UK GAAP and IFRS
a) IFRS 6 adjustments
Pre exploration write-offs
Under IFRS 6, costs incurred prior to the legal rights to explore an area being
obtained may no longer be capitalised within exploration assets. Such costs
incurred by Cairn in prior years totalling £18.7 million, including general
exploration costs not related to a specific licence, have therefore been written
off through retained earnings as at 31 December 2003. During 2004 Cairn incurred
pre-exploration costs of £37,000 which have been expensed through the Income
Statement (see h) below).
Impairment of exploration assets
Previously under UK GAAP and the Statement of Recommended Practice ('SORP')
issued by the Oil Industry Accounting Committee ('OIAC'), where indicators of
impairment existed on an asset held within the exploration cost pool, an
impairment test was performed. Any resulting impairment of an exploration asset
led to a transfer of the impaired amount into the depletable development/
producing cost pool, the latter being subject to a separate impairment test.
Under IFRS 6, where indicators of impairment exist on an exploration asset, an
impairment test is performed by assigning the asset to the associated
development/producing assets within the same geographic segment and testing this
combined cost against future discounted cash flows (including any associated
with the exploration asset). Any impairment arising would be recognised directly
in the Income Statement for the period. Where no development/producing assets
exists, impairment losses arising on the exploration would be written off
immediately to the Income Statement.
As a consequence of this change, previous transfers between Cairn's exploration
and development/producing cost pools of £4.2 million, which arose from the
impairment of exploration assets, have been reversed. Impairment tests have then
been reperformed using the IFRS approach with no impairment losses arising.
b) Fair value adjustments
Cairn has elected to measure certain development/producing assets at the
transition date to IFRS at fair value and use this fair value as their deemed
cost, as allowable under IFRS 1.
As a result of measuring at fair value at transition date, the exceptional gain
on sale under UK GAAP of the sale of the Group's North Sea producing asset in
2004 now results in neither a gain nor a loss being recognised.
c) Unsuccessful exploration costs
Cairn previously followed the full cost method of accounting for oil and gas
assets. Under this method, all expenditure incurred in connection with and
directly attributable to the acquisition, exploration, appraisal and development
of oil and gas assets were capitalised in two geographical cost pools: South
Asia and North Sea. Following guidance from IFRIC in November 2005 it is no
longer permissible to continue this treatment for development/producing assets.
Cairn has therefore decided to change accounting policies for both exploration
and development/producing assets to a successful efforts based policy.
Under the Group's new policy unsuccessful exploration costs previously
capitalised (subject to impairment reviews) are now written off in the period in
which they are determined to be unsuccessful.
The adjustments for unsuccessful costs written off in the period have been made
against the Balance Sheet classifications as used under the UK GAAP full cost
accounting methodology.
d) DD&A
The adjustments to DD&A reflect the revised carrying value of the development/
producing assets as a result of the pre-exploration write offs, fair value
adjustments and the write off of exploration costs (as per notes a) to c) above.
Depletion is now charged on a field by field basis, with certain fields within
development areas being combined where appropriate. It is also now calculated in
the Group's functional currency of US$ rather than in Sterling as was previously
the case under UK GAAP.
e) Foreign currency translation
IAS 21 requires that the functional currency for each subsidiary within the
Group be determined. Where the functional currency is different from the Group's
Sterling presentational currency, all assets and liabilities of those
subsidiaries should be converted to Sterling at closing rates on consolidation.
Given that the Group's income and expenses are mainly received and incurred in
US$, the majority of the Group's subsidiary undertakings have a US$ functional
currency. This includes UK based subsidiaries holding oil and gas exploration
and development/producing assets. These subsidiaries are now fully translated
from US$ to Sterling at the closing rate at the Balance Sheet date on
consolidation (rather than historic Sterling conversions).
In accordance with IAS 21, cumulative exchange differences are now recognised as
a separate component within equity. Cairn has taken advantage of the exemptions
offered under IFRS 1 and deemed cumulative translation differences to be zero at
31 December 2003.
For the year ending 31 December 2005, Cairn is intending to present its
financial results in US$ with the associated accounting policies being updated
accordingly.
f) Taxation
Deferred tax liabilities arising from fair value adjustments made in prior
business combinations have been recognised on transition to IFRS. Such
liabilities were specifically excluded from recognition under UK GAAP. These
deferred tax liabilities are only likely to crystallise on disposal of the
assets concerned and will reduce as the carrying values of the underlying assets
are depleted on a unit of production basis.
A deferred tax asset has been created as at 31 December 2004 due to the lower
net book values arising under the successful efforts based accounting policy and
the associated recognition requirements under IFRS.
g) Share based payments
In accordance with IFRS 2, Cairn has recognised a charge for share awards made
to employees under its LTIP and share option plans since 7 November 2002. This
charge is based on the fair value of these awards. The fair value has been
calculated using a binomial valuation model and is charged to the Income
Statement over the relevant vesting period, adjusted to reflect actual and
expected levels of vesting. In accordance with IFRS, only awards made after 7
November 2002 should be charged through the Income Statement, therefore LTIP
charges relating to awards made prior to this date have been reversed. Share
options awarded prior to this date were not previously charged to the Income
Statement.
The reconciling credit of £3.7 million between the UK GAAP and the IFRS Income
Statement for the year ended 31 December 2004 is a consequence of the differing
fair value methodologies of the binomial valuation model used to fair value LTIP
awards under IFRS 2 from that previously used to fair value such awards under UK
GAAP, the charge relating to share options awarded post 7 November 2002 and the
credit for LTIP charges relating to awards prior to this date.
h) Other adjustments
1) Cairn have introduced an accrual of £55,000 at 31 December 2003,
increasing to £104,000 at 31 December 2004 relating to employees entitlements to
annual leave, as required by IAS 19.
2) Pre-exploration costs of £37,000 have been expensed during 2004 (see
note a) above).
3) The following reclassifications have been made in accordance with IAS 1,
which requires separate disclosure of certain assets and liabilities on the face
of the Balance Sheet:
• Oil and condensate inventory of £2.3 million at 31 December 2003 and
£1.1 million at 31 December 2004 has been reclassified from 'trade and other
receivables';
• Current taxation liabilities of £5.7 million at 31 December 2003 and
£2.9 million at 31 December 2004 have been reclassified from 'trade and
other payables'; and
• Computer software costs previously held as 'tangible fixed assets' and
within prepayments to 'intangible assets' in accordance with IAS 38.
4) In accordance with the Group's revised accounting policy, cash and cash
equivalents include only short-term deposits with a maturity of less than three
months. As a consequence, £8.0 million of long term deposits at 31 December 2004
have been reclassified to 'bank deposits'.
i) Cash flow statements
The IFRS Cash Flow Statement, prepared under IAS 7, presents cash flows in three
categories; cash flows from operating activities, cash flows from investing
activities and cash flows from financing activities. This is fewer than the
previous seven categories under UK GAAP. Other than the reclassification of cash
flow items into the new disclosure categories, there are no significant
differences between the Group's Cash Flow Statement under UK GAAP and IFRS.
Consequently, the revised Cash Flow Statement has not been presented in this
document.
Glossary of Terms
The following are the main terms and abbreviations used in this document:-
Corporate
Board - the Board of Directors of Cairn Energy PLC
Cairn - the Company and/or its subsidiaries as appropriate
Company - Cairn Energy PLC (as the context requires)
Group - the Company and/or its subsidiaries as appropriate
Accounting
DD&A - Depletion, Depreciation and Amortisation
ESOP Trust - Employee Share Ownership Plan Trust
IAS 1 - International Accounting Standard 1 'Presentation of Financial Statements'
IAS 7 - International Accounting Standard 7 'Cash Flow Statements'
IAS 12 - International Accounting Standard 12 'Income Taxes'
IAS 19 - International Accounting Standard 19 'Employee Benefits'
IAS 21 - International Accounting Standard 21 'The Effects of Changes in Foreign Exchange Rates'
IAS 36 - International Accounting Standard 36 'Impairment of Assets'
IAS 38 - International Accounting Standard 38 'Intangible Assets'
IASB the - International Accounting Standards Board
IFRIC the - International Financial Reporting Interpretations Committee
IFRS - International Financial Reporting Standards
IFRS 1 - International Financial Reporting Standard 1 'First-time Adoption of International
Financial Reporting Standards'
IFRS 2 - International Financial Reporting Standard 2 'Share Based Payments'
IFRS 6 - International Financial Reporting Standard 6 'Exploration for and Evaluation of Mineral Resources'
PP&E - Property, Plant and Equipment
LTIP - Long Term Incentive Plan
UITF 17 - Urgent Issues Task Force Abstract number 17 'Employee Share Schemes'
UITF 38 - Urgent Issues Task Force Abstract number 38 'Accounting for ESOP Trusts'
UK GAAP - Generally Accepted Accounting Practise in the United Kingdom
This information is provided by RNS
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