IFRS Restatement
CRH PLC
31 May 2005
31 May 2005
RESTATEMENT OF 2004 RESULTS UNDER IFRS
CRH plc, the international building materials group, today announces the impact
of the transition to International Financial Reporting Standards (IFRS) on its
2004 results previously prepared in accordance with accounting practice
generally accepted in the Republic of Ireland (Irish GAAP). The Group's
financial statements for the six months ended 30 June 2005 and for the year
ended 31 December 2005 will be prepared under IFRS.
The impact on the audited 2004 key financial data is summarised as follows:
Irish IFRS % Change Comments on principal IFRS changes
GAAP
euro m euro m
Turnover 12,820 12,755 -1% Certain joint ventures reclassified as
associates under IFRS - share of sales
no longer reported
Operating profit (EBITA)* 1,247 1,220 -2% Share of associates' EBITA excluded
under IFRS
Profit before tax 1,017 1,104 +9% Non-amortisation of goodwill
Profit after tax 770 872 +13% Non-amortisation of goodwill
Total Equity 5,300 4,979 -6% Pension and deferred tax assets and
liabilities included under IFRS
Net debt ** 2,441 2,758 +13% Inclusion of share of joint ventures'
net debt
euro cent euro cent
Earnings per share
Basic 143.9 163.6 +14 % Non-amortisation of goodwill
Excluding Irish GAAP goodwill amortisation 163.1 163.6 -%
* Operating profit (EBITA) excludes goodwill amortisation and profit on sale
of fixed assets.
** Net debt comprises current and non-current interest-bearing loans and
borrowings less cash and cash equivalents and liquid investments.
________________________________________________________________________________________________________________________
This announcement, together with a slide presentation and accompanying audio
commentary summarising the impact of the transition to IFRS for CRH, has been
filed today on the Group's website at www.crh.com. If you have any questions on
this announcement or on the presentation, please contact the following at Dublin
404 1000 (+353 1 404 1000)
Liam O'Mahony Chief Executive
Myles Lee Finance Director
Maeve Carton Group Controller
INTRODUCTION
Up to and including 31 December 2004, CRH (the Group) prepared its consolidated
financial statements in accordance with Irish GAAP, which are consistent with UK
GAAP.
As part of the European Commission's plan to develop a single European capital
market, the application of IFRS is mandatory for the consolidated financial
statements of all European entities whose securities are listed on a regulated
exchange in the European Union (EU) and applies in respect of accounting periods
commencing on or after 1 January 2005. The Regulation passed by the European
Union requires that IFRS-compliant financial statements be produced by CRH for
the financial periods ending 30 June 2005 and 31 December 2005 and that those
financial statements contain a full set of disclosures for the comparative
periods in 2004. As stipulated under IFRS 1 First-time Adoption of International
Financial Reporting Standards, the transition date to IFRS (being the beginning
of the earliest period for which the Group presents full comparative information
under IFRS in its first IFRS financial statements) is 1 January 2004.
This announcement deals with the transition to IFRS under the following
sections:
1. Impact of transition to IFRS in overview
2. Basis of preparation of financial statements under IFRS
3. Principal exemptions availed of on transition to IFRS
4. Principal changes on transition to IFRS
In order to explain the impact of the transition to IFRS on CRH's reported
performance and financial position, selected financial information previously
reported under Irish GAAP is restated under IFRS in the attached appendices as
follows:
• Appendix 1 - Independent auditors' report to the Directors of CRH plc on
the preliminary IFRS consolidated financial statements for the year ended 31
December 2004.
• Appendix 2 - Group Income Statement and Group Statement of Recognised
Income and Expense for the year ended 31 December 2004 (FY 2004) and Group
Balance Sheet as at that date together with reconciliations of profit and
equity from Irish GAAP to IFRS.
• Appendix 3 - Unaudited Group Income Statement and Group Statement of
Recognised Income and Expense for the six-month period ended 30 June 2004
(H1 2004) and Group Balance Sheet as at that date together with
reconciliations of profit and equity from Irish GAAP to IFRS.
• Appendix 4 - Adjustments required to the Irish GAAP Group Balance Sheet as
at 1 January 2004 (the 'transition date' as defined above) for compliance
with IFRS.
• Appendix 5 - Restatement under IFRS of selected segmental information
published in the 2004 Interim and Annual Reports.
• Appendix 6 - Accounting policies under IFRS.
The restatements of the Group's Income Statement, Statement of Recognised Income
and Expense, Balance Sheet and segmental information for the full year ended 31
December 2004 and the Transition Balance Sheet dated 1 January 2004 have been
audited by the Group's auditors, Ernst & Young, Chartered Accountants.
The financial information in respect of the six months ended 30 June 2004 is
unaudited.
1. IMPACT OF TRANSITION TO IFRS IN OVERVIEW
The standards which give rise to the most significant changes to the
consolidated results of the Group on transition to IFRS are:
IFRS 2 Expensing of share-based payments at fair value
IFRS 3 / IAS 38 Non-amortisation of goodwill; intangible assets on business combinations
IAS 12 Deferred tax computed on the basis of temporary differences
IAS 19 Recognition of defined benefit pension schemes' assets and liabilities
IAS 31 Proportionate consolidation of joint venture undertakings
IAS 37 Discounting of provisions and deferred/contingent consideration on business combinations
IAS 32 / IAS 39 Recognition and measurement of financial instruments - derivatives carried at fair value;
classification of hedges
The impact of the transition to IFRS on the Group financial statements is
summarised as follows:
Interim 2004
euro millions Full-year 2004* (Unaudited)
Irish GAAP IFRS Irish GAAP IFRS
Group Income Statement
Revenue 12,819.7 12,754.5 5,670.4 5,607.9
Operating profit (EBITA) 1,247.0 1,220.2 384.6 370.2
Profit before finance costs 1,156.9 1,231.0 342.3 376.2
Profit before tax (PBT) 1,017.0 1,104.0 274.7 319.4
Profit after tax 769.9 871.8 205.7 255.9
Tax rate (as a % of PBT) 24.3% 21.0% 25.1% 19.9%
Basic EPS (euro cent) 143.9c 163.6c 38.1c 47.7c
Group Balance Sheet
Total assets 11,867.6 13,072.0 12,188.5 13,353.9
Total liabilities 6,567.2 8,092.6 7,022.2 8,601.1
Total equity 5,300.4 4,979.4 5,166.3 4,752.8
Net debt 2,440.7 2,758.1 3,174.7 3,493.2
Reconciliation of net debt Year-end 30 June
2004 2004
As reported under Irish GAAP 2,440.7 3,174.7
Proportionate consolidation of joint ventures 257.0 258.3
Reclassification from miniority interest 54.2 65.0
Fair valuation of derivatives 6.2 (4.8)
Restated under IFRS 2,758.1 3,493.2
* Extracted from audited consolidated financial statements for the year ended 31
December 2004
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS UNDER IFRS
General
As noted above, all publicly quoted European companies in the EU are required to
prepare consolidated financial statements in accordance with IFRS as adopted by
the European Commission in respect of accounting periods commencing on or after
1 January 2005. The financial information presented in this announcement has
been prepared in accordance with International Financial Reporting Standards and
Interpretations issued by the International Accounting Standards Board (IASB)
and with International Accounting Standards (IAS) and Standing Interpretations
Committee Interpretations approved by the predecessor International Accounting
Standards Committee that have been subsequently authorised by the IASB and
remain in effect.
Qualifications to be taken into account
The majority of the IASs/IFRSs have been approved by the European Commission.
However, a number of IASs/IFRSs remain to be approved at the date of publication
of this document, and failure to approve these outstanding standards in time for
2005 financial reporting could lead to changes in the basis of accounting or in
the basis of presentation of certain financial information from that adopted for
the purposes of this announcement.
Furthermore, the restated 2004 financial information provided in this document
is subject to the issuance by the International Accounting Standards Board of
additional Interpretations prior to the end of 2005 which may have retrospective
impact and thus require to be applied in the 2005 financial statements and the
related 2004 comparatives. As a result, it is possible that further changes may
be required to the 2004 financial information contained in this document prior
to its inclusion as comparative data in the published 2005 interim and year-end
consolidated financial statements under IFRS.
The financial instruments accounting policy contained in this announcement takes
full account of the revised version of IAS 39 approved by the European
Commission under which the fair valuation of financial liabilities is
prohibited. In addition, the European Commission has yet to approve the
Amendment to IAS 19 Actuarial Gains and Losses, Group Plans and Disclosures
enabling the recognition of actuarial gains and losses in the Statement of
Recognised Income and Expense in the same manner as FRS 17 under Irish GAAP. As
discussed below in greater detail, CRH has elected to adopt this Amendment in
relation to accounting for actuarial gains and losses arising on the Group's
defined benefit pension schemes and similar arrangements after the transition
date prior to its effective date.
3. PRINCIPAL EXEMPTIONS AVAILED OF ON TRANSITION TO IFRS
Exemptions under IFRS 1 First-time Adoption of International Financial Reporting
Standards
In accordance with IFRS 1, which establishes the framework for transition to
IFRS by a first-time adopter such as CRH, the Group has elected, in common with
the majority of listed companies, to avail of a number of specified exemptions
from the general principle of retrospective restatement as follows:
• Business combinations undertaken prior to the transition date of 1 January
2004 have not been subject to restatement; accordingly, goodwill as at the
transition date is carried forward at its net book value and, together with
goodwill arising on business combinations subsequent to the transition date,
is subject to annual impairment testing in accordance with IAS 36 Impairment
of Assets. As required under IFRS 1, goodwill was assessed for impairment as
at the transition date and no impairment resulted from this exercise.
• The fixed asset revaluation performed as at 31 December 1980 and referred
to in note 11 to the financial statements in the 2004 Annual Report has been
regarded as deemed cost and therefore remains unadjusted on transition to
IFRS.
• The cumulative actuarial gains and losses applicable to the Group's
defined benefit pension schemes at the transition date have been recognised
in full in the Transition Balance Sheet and adjusted against retained
income.
• IFRS require that on disposal of a foreign operation, the cumulative
amount of currency translation differences previously recognised directly in
reserves for that operation be transferred to the income statement as part
of the profit or loss on disposal. CRH has deemed the cumulative currency
translation differences applicable to foreign operations to be zero as at
the transition date. The cumulative currency translation differences arising
after the transition date (i.e. during 2004) have been reclassified from
retained income to a separate component of equity (termed the 'foreign
currency translation reserve' in the attached documentation) with no net
impact on capital and reserves attributable to the Company's equity holders.
As a result of the exemptions described above, financial results and summarised
historical financial information previously published for the Group for periods
prior to 2004 will not be restated under IFRS.
Other options availed of on transition
In compliance with the transitional arrangements set out in IFRS 2 Share-based
Payment, this standard will be applied in respect of share options granted after
7 November 2002. The expense reported in the 2004 interim and full-year income
statements is thus based on share options (including savings-related share
options) issued in April 2003 and April 2004.
The Group has opted to pursue early implementation of the financial instruments
standards (IAS 32 and IAS 39) with effect from the transition date taking
account of the prohibition on the fair valuation of financial liabilities
imposed by the version of IAS 39 approved by the European Commission. Given the
delay encountered in securing European Commission approval, the effective date
of the revised versions of IAS 32 and IAS 39 is 1 January 2005.
On the introduction of FRS 17 Retirement Benefits in 2001, CRH, together with
the majority of publicly-listed entities, elected to continue to account for its
pension obligations under SSAP 24 Accounting for Pension Costs and to disclose
the impact of FRS 17 in the notes to the financial statements. FRS 17 requires
immediate recognition of actuarial gains and losses on defined benefit pension
schemes in the Statement of Total Recognised Gains and Losses (STRGL). The Group
has therefore determined that prospective application of the corridor
methodology under IAS 19 would not be appropriate and has elected to avail of
early application of the Amendment to IAS 19 which enables the recognition of
actuarial gains and losses in retained income via the Statement of Recognised
Income and Expense.
The interest cost associated with pension scheme liabilities under IFRS,
together with the expected return on pension scheme assets, are included within
net finance costs on the face of the Income Statement. Current service costs and
any past service items stemming from benefit enhancements or curtailments are
dealt with as components of operating costs.
4. PRINCIPAL CHANGES ON TRANSITION TO IFRS
The standards which result in significant changes for CRH arising from
transition to IFRS are summarised in the following paragraphs. The accounting
policies which will apply under IFRS are set out in detail in Appendix 6, and a
detailed analysis of the impact of each of these changes on CRH's 2004 full-year
and interim Income Statements and Balance Sheets is shown in Appendices 2 to 3.
(i) IFRS 2 Share-based Payment
The fair value of share-based payments (mainly share options in the case of CRH)
is expensed to the Income Statement on a straight-line basis over the vesting
period of the options. In accordance with the exemption allowed on transition to
IFRS, the fair value calculations have only been applied in respect of CRH share
options granted after 7 November 2002. An expense of euro 9.7 million has been
recognised in respect of the year ended 31 December 2004 (euro 4.1 million for
the six-month period ended 30 June 2004).
In certain jurisdictions in which the Group operates, the cost of share options
is deductible for tax purposes. Accordingly, under IFRS, a deferred tax asset
has been recognised in the Balance Sheet on the deductible temporary difference
arising in respect of share options based on the difference between the CRH
share price as at the balance sheet date and the exercise price of the relevant
outstanding options.
As at the transition date, the deferred tax asset amounted to euro 9.5 million
and increased thereafter to euro 11.0 million as at 30 June 2004 and euro 18.5
million as at 31 December 2004. The increase in the deferred tax asset is
largely attributable to the rise in the CRH share price from euro 16.28 at the
transition date to euro 17.36 as at 30 June 2004 and euro 19.70 as at 31
December 2004.
The fair value of the share options has been arrived at using a trinomial model.
The following are the inputs used in determining the fair value of share
options:
• The exercise price; the market price as at the grant date except in the
case of savings-related share options which are issued at a 15% discount to
the prevailing market price as at the grant date.
• Future share price volatility; the annualised standard deviation of the
continuously compounded rates of return on CRH shares over the expected term
of the option based on monthly share price observations. In determining
future volatility, historical volatility is employed as a guide and is
assessed over a period commensurate with the expected term of the option.
• The risk-free interest rate; the rate applicable to and available on (as
at the grant date) zero-coupon euro-denominated and Sterling-denominated
Government bonds with a remaining term equal to the expected term of the
options being valued.
• Expected dividend payments.
The impact of IFRS 2 on CRH is summarised as follows:
Euro millions Transition H1 2004 FY 2004
Income Statement
Share options expense - operating costs (4.1) (9.7)
Deferred tax credit 1.5 9.0
Net impact - decrease in profit after tax (2.6) (0.7)
Balance Sheet
Deferred income tax asset 9.5 11.0 18.5
Total assets 9.5 11.0 18.5
Other reserves 3.9 8.0 13.6
Retained income 5.6 3.0 4.9
Total equity and liabilities 9.5 11.0 18.5
(ii) IFRS 3 Business Combinations/IAS 38 Intangible Assets
IFRS 3 has been implemented by CRH with effect from the transition date. The
Group has availed of the exemption under IFRS 1 enabling non-restatement of
business combinations undertaken prior to the transition date. The principal
implications of IFRS 3 for the financial information accompanying this
announcement are as follows:
• Cessation of goodwill amortisation in respect of subsidiary, joint venture
and associated undertakings amounting to euro 101.4 million for full-year
2004 (euro 48.7 million for the six months ended 30 June 2004). The analysis
of the goodwill amortisation write-back between subsidiary, joint venture
and associated undertakings is highlighted in the table overleaf and in the
Irish GAAP to IFRS Group Income Statement reconciliations in Appendices 2
and 3.
• The acquisition balance sheets for business combinations completed by CRH
during 2004 have been restated to recognise intangible assets (comprising
primarily customer relationships, non-compete agreements, franchise
agreements and trade marks); this results in a corresponding reduction in
the goodwill figure in the acquisition balance sheets. The amortisation
charge in respect of the intangible assets thus recognised was euro 4.1
million in the full year (euro 1.5 million for the interim period), and the
net intangible asset at 31 December 2004 amounted to euro 17.2 million (euro
12.9 million as at 30 June 2004).
• The acquisition balance sheets of 2004 business combinations have also
been restated to discount provisions and deferred consideration and to take
account of other differences in accounting policies on transition to IFRS,
including the measurement of finished goods and work-in-progress inventory
at adjusted selling prices and the recognition of deferred tax on a
temporary differences basis. In contrast to SSAP 9 Stocks and Long-Term
Contracts, which governed stock/inventory valuation under Irish GAAP, IFRS 3
(in common with US GAAP) stipulates that finished goods and work-in-progress
inventory should be valued on the basis of selling price in acquisition
balance sheets adjusted in respect of (i) costs of disposal; (ii) a
reasonable profit allowance for selling effort; and (iii) costs of
conversion (in relation to work-in-progress inventory only).
• Where an excess arises between the fair value of the identifiable assets,
liabilities and contingent liabilities in the acquisition balance sheet and
the cost of the business combination (i.e. 'negative goodwill' under
previous GAAP), IFRS 3 requires that this excess be credited to the Income
Statement. Negative goodwill of euro 10.9 million has been credited to the
full-year 2004 Group Income Statement (euro 0.9 million for the interim
period) in respect of business combinations completed during 2004.
• In addition to the above, IFRS 3 introduces a number of other changes
which impact accounting for business combinations. In particular, the
standard tightens the window within which the fair values allocated on
acquisition may be restated (twelve months from the date of acquisition) and
requires that contingent liabilities relating to business combinations be
recognised in the acquisition balance sheet subject to fair value being
reliably estimable as at the acquisition date. As dictated by IFRS 3, IAS 38
Intangible Assets and IAS 36 Impairment of Assets have also been applied
with effect from the transition date. In accordance with IAS 36, goodwill
arising on business combinations completed during 2004 has been subjected to
impairment testing and no impairment arose.
The impact on the CRH financial statements of applying the business combinations
and intangible assets standards under IFRS is summarised in the following table:
euro millions H1 2004 FY 2004
Income Statement
Total goodwill amortisation add-back 48.7 101.4
Less: applicable to joint ventures and associates (see (v) below) (3.4) (8.3)
Goodwill amortisation applicable to subsidiaries 45.3 93.1
Amortisation of intangible assets (1.5) (4.1)
Restatement of inventory to fair value for 2004 acquisitions (1.9) (3.3)
Negative goodwill on 2004 acquisitions 0.9 10.9
Current tax charge - (1.9)
Net impact - increase in profit after tax 42.8 94.7
Balance Sheet
Intangible assets 47.4 95.2
Investments in associates (0.2) 0.7
Inventories - 1.3
Total assets 47.2 97.2
Foreign currency translation reserve 0.1 (3.6)
Retained income 46.2 103.0
Minority interest 1.7 1.7
Current income tax liabilities - 1.8
Provisions and trade and other payables - discounting (0.8) (5.7)
Total equity and liabilities 47.2 97.2
(iii) IAS 12 Income Taxes
The requirements of IAS 12 have been retrospectively applied in the attached
restatements of CRH's 2004 results with the cumulative adjustment as at the
transition date reflected in the Transition Balance Sheet.
IAS 12 requires that deferred tax be accounted for on the basis of temporary
differences rather than timing differences which form the basis of the
equivalent standard under Irish GAAP. This difference in methodology results in
an overall increase in the net CRH deferred tax liability under IFRS. The
adjustments made to deferred tax assets and liabilities on transition to IFRS
principally relate to the following issues:
• Under Irish GAAP (FRS 19 Deferred Tax), deferred tax was not provided on
fair value asset uplifts in business combinations if these uplifts did not
give rise to timing differences between the tax base and the book value of
the revalued assets. The recognition under IAS 12 of the deferred tax
liabilities on the differences arising from such revaluations is the
principal reason underlying cumulative adjustments of euro 371.8 million as
at the transition date, euro 392.9 million as at 30 June 2004 and euro 377.1
million as at 31 December 2004. These figures exclude the impact of asset
revaluations in joint venture undertakings which are subject to
proportionate consolidation under IAS 31 and are addressed below.
• The recognition of these additional deferred tax liabilities in the Group
Balance Sheet under IFRS gives rise to a deferred tax credit of euro 7.4
million in the 2004 Group Income Statement (euro 3.8 million for the six
months ended 30 June 2004).
• IAS 12 requires that a deferred tax liability be recognised in respect of
all rolled-over capital gains as opposed to those merely anticipated to
crystallise. The Transition Balance Sheet adjustments include an amount of
euro 31.0 million in this respect with euro 32.6 million being recognised as
at 30 June 2004 and euro 31.0 million as at 31 December 2004.
• Due to the focus of IAS 12 on temporary differences and the fact that
provisions are being discounted under IFRS, deferred tax assets arise which
have previously not been recognised under Irish GAAP. In addition, deferred
tax assets have been recognised in relation to tax losses where it is
probable that taxable profits will be available against which the losses may
be offset in the foreseeable future and in respect of share options and
defined benefit pension schemes as noted in the paragraphs dealing with IFRS
2 above and IAS 19 below.
• As a result of the adoption of proportionate consolidation for joint
venture undertakings and the move to IAS 12 as the basis for deferred tax
computation, the Transition Balance Sheet reflects deferred tax assets and
liabilities of euro 4.1 million and euro 13.2 million respectively. The
significant uplift in the Group's share of the deferred tax liabilities of
joint venture undertakings as at the interim and year-end balance sheet
dates principally reflects the recognition of a temporary difference of
circa euro 154.9 million (CRH share (49%): euro 75.9 million) attributable
to the fair value asset uplift in the Secil joint venture transaction
completed in June 2004.
In addition to the provisions of IAS 12 described above, IAS 1 Presentation of
Financial Statements requires separate disclosure of deferred tax assets and
liabilities on the face of the balance sheet. The Group's restated Balance
Sheets at the transition date and as at 30 June 2004 and 31 December 2004
therefore contain reclassifications of amounts previously netted within the
overall Group deferred tax liability; these amounts were euro 194.7 million,
euro 202.3 million and euro 167.8 million as at the respective balance sheet
dates.
The impact of these standards for CRH is summarised as follows:
euro millions Transition H1 2004 FY 2004
Income Statement
Temporary differences methodology under IAS 12 (0.5) (0.4)
Deferred tax credit arising from recognition of temporary differences 3.8 7.4
Net impact - increase in profit after tax 3.3 7.0
Balance Sheet
Mineral reserves uplift arising on 2004 acquisitions - - 19.4
Increase to goodwill on 2004 acquisitions - 10.8 7.4
Deferred income tax assets:
- Reclassification from deferred tax liabilities 194.7 202.3 167.8
- Temporary differences not previously recognised 36.3 38.6 39.6
Total assets 231.0 251.7 234.2
Foreign currency translation reserve - (12.9) 17.9
Retained income (365.9) (362.6) (358.9)
Minority interest (0.6) (0.6) (0.7)
Deferred income tax liabilities:
- Reclassification to deferred tax assets 194.7 202.3 167.8
- Temporary differences (mainly revaluation uplifts) 371.8 392.9 377.1
- Rollover relief 31.0 32.6 31.0
Total equity and liabilities 231.0 251.7 234.2
Note: the impact on deferred tax of share options (IFRS 2), defined benefit
pension schemes (IAS 19), financial instruments (IAS 39) and proportionate
consolidation of joint venture undertakings (IAS 31) is addressed in the
individual sections dealing with these issues.
Unremitted earnings in subsidiary, joint venture and associated undertakings
IAS 12 requires that deferred tax is recognised in respect of unremitted
earnings in subsidiary, joint venture and associated undertakings except where
specific conditions are satisfied. No provision has been recognised by CRH in
respect of subsidiary and joint venture undertakings as there is no commitment
to remit earnings. A deferred tax liability has been recognised in relation to
unremitted earnings of associated undertakings on the basis that the exercise of
significant influence would not necessarily prevent earnings being remitted by
other shareholders in the undertaking.
Investments in subsidiary, joint venture and associated undertakings
No provision has been made for temporary differences applicable to investments
in subsidiaries and joint ventures as the Group is in a position to control the
timing of reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Due to the
absence of control in the context of associated undertakings (significant
influence by definition), deferred tax liabilities are recognised where
appropriate.
(iv) IAS 19 Employee Benefits
In compliance with IAS 19, the assets and liabilities of the defined benefit
pension schemes operated by various Group companies have been capitalised gross
of deferred tax on the face of the Balance Sheet within retirement benefit
obligations. The amounts reflected in the Transition and end-2004 Balance Sheets
are in accordance with the FRS 17 disclosures previously provided in the 2003
and 2004 CRH Annual Reports save for the recording of assets at bid value as
opposed to mid-market under IAS 19. Deferred tax has been computed in respect of
the various defined benefit pension schemes and the related deferred tax assets
and liabilities are included in the restatements at the various balance sheet
dates. In addition, amounts previously included within provisions in respect of
long-service commitments, post-retirement healthcare obligations and similar
items have been reclassified to retirement benefit obligations in the restated
IFRS balance sheets. These amounts have historically been subject to actuarial
valuation and no restatement arises on transition to IFRS.
In accordance with the exemption afforded by IFRS 1, the Group has elected to
recognise all cumulative actuarial gains and losses attributable to its defined
benefit pension schemes as at the transition date. The alternative of
retrospective application of the corridor methodology under IAS 19 has not been
availed of. In addition, in line with the Amendment to IAS 19 and Irish GAAP,
actuarial gains and losses arising after the transition date are dealt with in
retained income via the Statement of Recognised Income and Expense. This change
in accounting policy has also been applied to the Group's joint venture
undertakings which are proportionately consolidated under IFRS (see section (v)
below).
The impact of IAS 19 on CRH is summarised as follows:
euro millions Transition H1 2004 FY 2004
Income Statement
Operating costs (1.2) (0.1)
Finance costs 4.2 8.5
Tax charge (0.4) (2.0)
Net impact - increase in profit after tax 2.6 6.4
Balance Sheet
Goodwill - arising on 2004 business combinations - - 0.6
Deferred income tax assets 77.9 85.8 101.2
Total assets 77.9 85.8 101.8
Foreign currency translation reserve - (5.1) 2.5
Retained income (131.7) (132.2) (213.2)
Deferred income tax liabilities 4.8 8.0 -
Retirement benefit obligations 230.4 241.1 337.0
Removal of accrual for contributions payable (25.6) (26.0) (25.1)
Current income tax liabilities - - 0.6
Total equity and liabilities 77.9 85.8 101.8
(v) IAS 31 Interests in Joint Ventures and IAS 28 Investments in Associates
Joint Venture Undertakings
In line with the benchmark methodology contained in IAS 31, the Group has opted
to apply proportionate consolidation in accounting for its interests in joint
venture undertakings. The financial asset and share of results (on a gross
equity accounting basis) previously reported under Irish GAAP have accordingly
been reclassified across the appropriate balance sheet and income statement
captions in the accompanying appendices. The balance sheets of joint venture
undertakings at the transition date and at 30 June and 31 December 2004 have
been adjusted to take account of differences between Irish GAAP and IFRS; the
adjustments related principally to the re-computation of deferred tax on a
temporary differences basis, the separate recognition of deferred tax assets and
liabilities, the write-back of goodwill amortisation charged in 2004 and the
inclusion of the assets and liabilities of defined benefit pension schemes in
retirement benefit obligations.
Save for the aforementioned adjustments to the carrying values of assets and
liabilities on transition, the application of proportionate consolidation is
purely presentational with no net impact on results or financial position. Under
proportionate consolidation, the income statements, balance sheets and cash flow
statements of these entities will be included on a line-by-line basis in the
respective CRH consolidated financial statements.
The significant uplift in the asset and liability figures between the transition
date and 30 June 2004 as shown in the table below relates predominantly to the
inclusion of the Secil joint venture deal which closed in June 2004.
The impact of proportionate consolidation of joint ventures is as follows:
euro millions Transition H1 2004 FY 2004
Income Statement
Goodwill amortisation add-back 3.6 7.4
Temporary differences methodology under IAS 12 1.1 (2.6)
Net impact - increase in profit after tax 4.7 4.8
Balance Sheet
Non-current assets* 175.7 291.6 314.7
Current assets 126.6 273.8 252.2
Total assets 302.3 565.4 566.9
Total equity 1.1 4.9 1.1
Non-current liabilities 188.8 384.1 394.7
Current liabilities 112.4 176.4 171.1
Total liabilities 301.2 560.5 565.8
Total equity and liabilities 302.3 565.4 566.9
Net debt 177.6 258.3 257.0
* The non-current assets figures include amounts in respect of entities
classified as joint venture undertakings under previous GAAP which have been
reclassified as associated undertakings under IFRS (as detailed in the paragraph
overleaf).
Associated Undertakings
Under IAS 28, investments in associated undertakings are accounted for on an
equity basis, which is consistent with Irish GAAP. However, under Irish GAAP,
results of associated undertakings were presented in the profit and loss account
on the basis of the reporting entity's share of operating profit, interest and
tax; in contrast, under IAS 28 the Group's share of profit after tax of
associated undertakings is shown as a single line item in the Group Income
Statement.
On adopting IFRS, certain entities accounted for as joint ventures under Irish
GAAP have been reclassified as associated undertakings and consequently fall to
be accounted for under the equity method as opposed to proportionate
consolidation. The presentational impact on the Group Income Statement and
Balance Sheet of these reclassifications (which have no net effect on reported
profit or on net financial position) is separately highlighted in Appendices 2
and 3.
The impact on the Group Income Statements of the application of the equity
accounting rules under IAS 28 and of the reclassification of former joint
ventures as associates are summarised as follows:
euro millions H1 2004 FY 2004
(i) Application of equity accounting under IAS 28
Removal of Group share of:
Operating profit (3.2) (21.7)
Profit on disposal of fixed assets - (0.3)
Finance costs (0.3) 1.1
Tax 1.3 6.0
Profit after tax 2.2 14.9
Goodwill amortisation (0.2) 0.9
Net impact - add-back of goodwill amortisation (0.2) 0.9
(ii) Reclassification of joint ventures to associates
Removal of Group share of:
Revenue (63.1) (66.6)
Operating profit (8.0) (5.4)
Profit on disposal of fixed assets (0.4) (0.2)
Finance costs (net) 1.7 1.1
Tax 1.6 -
Profit after tax 5.1 4.5
Net impact - -
(vi) IAS 32 Financial Instruments: Disclosure and Presentation
As disclosed in the Transition Balance Sheet in Appendix 4, euro 65.7 million of
non-recourse preference capital funding pertaining to the Group's investment in
its associated undertaking in Israel has been reclassified from minority
interest into non-current interest-bearing loans and borrowings. The required
balance sheet reclassifications from minority interest to non-current
interest-bearing loans and borrowings as at 30 June 2004 and 31 December 2004
amounted to euro 65.0 million and euro 54.2 million respectively; in tandem with
the above, the interest costs attaching to the preference capital previously
reported within minority interest (amounting to euro 2.1 million in the full
year and euro 1.0 million at interim 2004) have been reclassified to net finance
costs in the accompanying Income Statements.
(vii) IAS 37 Provisions, Contingent Liabilities and Contingent Assets
Provisions and deferred/contingent acquisition consideration have been
discounted to net present cost on transition to IFRS; the net credit of euro
49.4 million to retained income in the Transition Balance Sheet reflects the
impact of discounting provisions at the transition date and relates
predominantly to long-dated environmental and self-insurance provisions and
deferred/contingent consideration on business combinations. In accordance with
IAS 37, the discount booked to the Transition Balance Sheet will be unwound
through the Income Statement as a component of net finance costs and the net
present cost will be accreted over time to nominal amount.
The following is the summarised impact for CRH of the discounting of provisions:
euro millions Transition H1 2004 FY 2004
Income Statement
Reduction in operating costs 2.5 9.4
Unwinding of provisions - finance costs (5.2) (11.3)
Net impact - decrease in profit after tax (2.7) (1.9)
Balance Sheet
Assets: Trade and other receivables 13.1 19.9 10.4
Foreign currency translation reserve - 1.1 (1.3)
Retained income 49.4 46.7 47.5
Trade and other payables 5.4 (3.7) 1.6
Discounting and reclassifications of provisions (41.7) (24.2) (37.4)
Total equity and liabilities 13.1 19.9 10.4
(viii) IAS 39 Financial Instruments: Recognition and Measurement
The Group uses financial instruments throughout its businesses: borrowings,
cash, cash equivalents and short-dated deposits are used to finance the Group's
operations; trade debtors and trade creditors arise directly from operations;
and derivatives, principally interest rate and currency swaps and forward
foreign exchange contracts, are used to manage interest rate risks and currency
exposures and to achieve the desired profile of borrowings.
The transition to IAS 39, which governs the recognition and measurement of
financial instruments under IFRS, gives rise to a significant change in the
methodology of accounting for financial instruments requiring, in general, that
financial instruments are recorded initially at fair value with subsequent
measurement either at fair value or amortised cost dependent on the nature of
the financial asset or financial liability. Under IAS 39, derivatives are always
measured at fair value (i.e. are 'marked-to-market') with changes in value
arising from fluctuations in interest rates, foreign exchange rates and
commodity prices inter alia. Irish GAAP focused on the disclosure, rather than
the recognition, of financial instrument exposures.
Prior to the conversion to IAS 39, the majority of derivatives were not
recognised in financial statements until settlement of the hedged item; this
methodology was consistent with Irish GAAP and was applied by CRH in its
consolidated financial statements until the end of 2004.
As highlighted in the qualifications section above (page 4), the financial
instruments framework under IFRS has not been finalised at the date of issue of
this press release. The accompanying restatements have been undertaken based on
the version of IAS 39 approved by the European Commission which prohibits the
fair valuation of financial liabilities.
The Group has elected to pursue early adoption of both IAS 39 and IAS 32 with
effect from the transition date. Whilst the application of IAS 32 has no direct
impact on this announcement given its focus on disclosures and presentation,
early application of this standard implies that the 2005 Annual Report will
contain full disclosures for the comparative period.
The impact of application of IAS 39 on the restated IFRS consolidated CRH Income
Statement and Balance Sheet may be summarised as follows:
• The net impact of the various adjustments required under IAS 39 on Group
debt is an increase of euro 3.3 million as at the transition date followed
by a decrease of euro 4.8 million as at 30 June 2004 and an increase of euro
6.2 million as at 31 December 2004.
• As discussed in more detail in the accounting policies provided in
Appendix 6, the following classifications have been adopted in respect of
the financial instruments employed by CRH:
• Cash and cash equivalents are defined as those items which have an
original maturity of three months or less from the date of acquisition.
Where the original maturity exceeds three months, the items are
classified within financial assets and recorded at either amortised cost
or at fair value.
• Derivative financial instruments are measured at fair value in all
cases with hedge accounting employed in respect of those derivatives
fulfilling the stringent requirements for hedge accounting laid down in
IAS 39; in general, these criteria relate to the documentation of the
hedging relationship, upfront designation of such in accordance with the
subsequent paragraph and the expectation that the hedge will be highly
effective throughout its life from inception. Where the criteria
enabling the employment of hedge accounting are not satisfied, movements
in the related derivatives are reported in the Group Income Statement
either in operating costs or net finance costs as appropriate. The total
charge of euro 7.2 million in the full-year 2004 Income Statement (euro
3.3 million income as at the interim stage) is attributable to a
combination of hedge ineffectiveness and movements on non-qualifying
hedging instruments.
• In applying hedge accounting, IAS 39 identifies three categories of
hedges - fair value, cash flow and net investment. In the case of fair
value hedges, movements in fair value between the hedged item and the
hedging instrument are dealt with through the income statement with any
measure of ineffectiveness being reflected either as a debit or a credit
(in the case of overly effective hedges still falling within the
80%-125% corridor stipulated in IAS 39). Where hedging instruments are
classified as cash flow or net investment hedges, movements in fair
value are accounted for through equity and released to the income
statement over time as changes in the hedged cash flow are recognised.
Ineffectiveness on fair value, cash flow and net investment hedges is
reflected in the income statement.
The impact on CRH of the application of IAS 39 is summarised as follows:
euro millions Transition H1 2004 FY 2004
Income Statement
Operating costs 0.8 (3.2)
Finance costs 4.1 (3.8)
Deferred tax (1.6) (0.2)
Net impact - increase/(decrease) in profit after tax 3.3 (7.2)
Balance Sheet
Deferred income tax assets 0.9 0.3 1.1
Derivative financial instruments 223.9 184.1 174.3
Total assets 224.8 184.4 175.4
Foreign currency translation reserve - 2.3 5.1
Retained income (3.6) 0.1 (11.1)
Interest-bearing loans and borrowings 26.2 (8.7) (81.8)
Derivative financial instruments 201.0 188.0 262.3
Deferred income tax liabilities 1.2 2.7 0.9
Total equity and liabilities 224.8 184.4 175.4
Reconciliation of net debt
As reported under Irish GAAP 2,308.1 3,174.7 2,440.7
Proportionate consolidation of joint ventures (v) 177.6 258.3 257.0
Reclassification of preference capital (vi) 65.7 65.0 54.2
Mark-to-market of derivatives 3.3 (4.8) 6.2
Net debt under IFRS 2,554.7 3,493.2 2,758.1
Appendix 1
Page 1 of 2
Independent auditors' report to the Directors of CRH plc on the preliminary IFRS
consolidated financial statements for the year ended 31 December 2004
We have audited the accompanying preliminary International Financial Reporting
Standards ('IFRS') consolidated financial statements of CRH plc ('the Company')
for the year ended 31 December 2004 which comprise the Group Balance Sheet as at
1 January 2004, the Group Income Statement and Group Statement of Recognised
Income and Expense for the year ended 31 December 2004, the Group Balance Sheet
as at 31 December 2004 together with the related accounting policies under IFRS
and segmental information set out on pages 31 to 40 and 27 and 28 respectively
but excluding half year information.
This report is made solely to the Directors in accordance with our engagement
letter dated 25 April 2005. Our audit work has been undertaken so that we might
state to the Directors 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 the Company's Directors and Ernst & Young,
Chartered Accountants
These preliminary IFRS consolidated 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 sections 2 and 3 to the Restatement of 2004 Results under IFRS and Appendix
6, which describe 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 consolidated financial statements as at
31 December 2005.
Our responsibility is to express an independent opinion on the preliminary IFRS
consolidated financial statements based on our audit. We read the other
information accompanying the preliminary IFRS consolidated financial statements
and consider whether it is consistent with the preliminary IFRS consolidated
financial statements. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary IFRS consolidated financial statements.
Basis of audit opinion
We conducted our audit in accordance with 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
consolidated 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 consolidated 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 consolidated 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 section 2 to
the Restatement of 2004 Results under IFRS explains why there is a possibility
that the preliminary IFRS consolidated financial statements may require
adjustment before constituting the final IFRS consolidated financial statements.
Moreover, we draw attention to the fact that, under IFRS only a complete set of
consolidated 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.
We also draw attention to the fact that we have not audited the Group Balance
Sheet of the Company, the related Group Income Statement, Group Statement of
Recognised Income and Expense and related segmental information for the half
year ended 30 June 2004.
Appendix 1
Page 2 of 2
Opinion
In our opinion, the preliminary IFRS consolidated financial statements for the
year ended 31 December 2004 have been prepared, in all material respects, in
accordance with the basis set out in sections 2 and 3 to the Restatement of 2004
Results under IFRS and Appendix 6, which describe 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 consolidated
financial statements as at 31 December 2005.
Ernst & Young, Chartered Accountants
Registered Auditors
27 May 2005
Appendix 2
Page 1 of 4
CRH plc
GROUP INCOME STATEMENT
for the year ended 31 December 2004
Restated under IFRS
Audited
Continuing operations
Joint
Ventures Total
2004 2004 2004
€m €m €m
Revenue 12,280.1 474.4 12,754.5
Cost of sales 8,415.5 301.9 8,717.4
Gross profit 3,864.6 172.5 4,037.1
Operating costs 2,706.8 110.1 2,816.9
Group operating profit 1,157.8 62.4 1,220.2
Profit on disposal of fixed assets 9.3 1.5 10.8
Profit before finance costs 1,167.1 63.9 1,231.0
Finance costs (net) 134.7 11.7 146.4
Group share of equity-accounted profit after tax of associates 19.4 - 19.4
Profit before tax 1,051.8 52.2 1,104.0
Income tax expense 218.6 13.6 232.2
Group profit after tax for the financial year 833.2 38.6 871.8
Profit attributable to:
Equity holders of the Company 827.5 38.6 866.1
Minority interest 5.7 - 5.7
Group profit after tax for the financial year 833.2 38.6 871.8
Earnings per Ordinary Share - basic 163.6c
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 December 2004
Audited
2004
€m
Items of income and expense recognised directly within equity:
Currency translation effects -179.9
Actuarial loss -119.2
Deferred tax asset on Group defined benefit pension schemes 31.3
Losses relating to cash flow hedges -0.3
Net expense recognised directly in equity -268.1
Group profit after tax for the financial year 871.8
Total recognised income and expense for the financial year 603.7
Attributable to:
Equity holders of the Company 599.8
Minority interest 3.9
Total recognised income and expense for the financial year 603.7
Appendix 2
Page 2 of 4
CRH plc
GROUP INCOME STATEMENT FULL-YEAR 2004 - RECONCILIATION FROM IRISH GAAP TO IFRS
Adjustments under IFRS
Share Busi-
All figures Previous based ness In- Joint Dividends/ Restated
in Irish pay- comb- tangible Income Pen- ven- Associ- Dis- Deri- Min. under
€ millions GAAP ments inations assets tax sions tures ates counting vatives interest IFRS
Turnover
incl.share
of
joint
ventures 12,819.7
Less: share
of
joint
ventures 539.6
Group
turnover 12,280.1 474.4 12,754.5
Cost of
sales 8,412.2 3.3 301.9 8,717.4
Gross
profit 3,867.9 -3.3 172.5 4,037.1
Operating
costs
excluding
goodwill
amortisation 2,710.0 9.7 -10.9 4.1 0.1 110.1 -9.4 3.2 2,816.9
Group
operating
profit 1,157.9 -9.7 7.6 -4.1 -0.1 62.4 9.4 -3.2 1,220.2
Share of
JV's
operating
profit 67.4 -67.4 -
Share of
associates'
operating
profit 21.7 -21.7 -
Operating
profit
excluding
goodwill
amortisation 1,247.0 -9.7 7.6 -4.1 -0.1 -5.0 -21.7 9.4 -3.2 1,220.2
Goodwill
amortisation 101.4 -93.1 -7.4 -0.9 -
Profit on
disposal of
fixed assets 11.3 -0.2 -0.3 10.8
Profit on
ordinary
activities
before
interest 1,156.9 -9.7 100.7 -4.1 -0.1 2.2 -21.1 9.4 -3.2 1,231.0
Group
interest
payable
(net) 126.0 -8.5 11.7 11.3 3.8 2.1 146.4
Share of
JV's
and
associates'
interest 13.9 -12.8 -1.1 -
Share of
associates'
profit after
tax - 4.5 14.9 19.4
Profit on
ordinary
activities
before
taxation 1,017.0 -9.7 100.7 -4.1 8.4 7.8 -5.1 -1.9 -7.0 -2.1 1,104.0
Taxation on
profit on
ordinary
activities 247.1 -9.0 1.9 -7.0 2.0 3.0 -6.0 0.2 232.2
Profit on
ordinary
activities
after
taxation 769.9 -0.7 98.8 -4.1 7.0 6.4 4.8 0.9 -1.9 -7.2 -2.1 871.8
Profit
applicable
to
equity
minority
interests 7.8 -7.8 -
Preference
dividends 0.1 -0.1 -
Profit for
the
year
attributable
to ordinary
shareholders 762.0 -0.7 98.8 -4.1 7.0 6.4 4.8 0.9 -1.9 -7.2 5.8 871.8
Dividends
paid 51.0 -51.0 -
Dividends
proposed 124.7 -124.7 -
Profit
retained for
the
financial 586.3 -0.7 98.8 -4.1 7.0 6.4 4.8 0.9 -1.9 -7.2 181.5 871.8
year
Appendix 2
Page 3 of 4
CRH plc
GROUP BALANCE SHEET AS AT 31 DECEMBER 2004
Restated
under IFRS
Audited
2004
€m
ASSETS
Non-current assets
Property, plant and equipment 5,830.6
Intangible assets 1,774.1
Investments in associates 178.8
Derivative financial instruments 173.2
Other financial assets 113.2
Deferred income tax assets 335.3
Total non-current assets 8,405.2
Current assets
Inventories 1,308.9
Trade and other receivables 1,973.1
Derivative financial instruments 1.1
Liquid investments 311.7
Cash and cash equivalents 1,072.0
Total current assets 4,666.8
Total assets 13,072.0
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 181.0
Non-equity share capital 1.2
Share premium account 2,149.3
Other reserves 23.5
Foreign currency translation reserve -179.9
Retained income 2,770.1
4,945.2
Minority interest 34.2
Total equity 4,979.4
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 3,802.4
Derivative financial instruments 51.9
Deferred income tax liabilities 987.4
Trade and other payables 122.0
Retirement benefit obligations 349.7
Provisions for other liabilities and charges 182.3
Capital grants 12.4
Total non-current liabilities 5,508.1
Current liabilities
Trade and other payables 1,742.1
Current income tax liabilities 284.5
Interest-bearing loans and borrowings 251.4
Derivative financial instruments 210.4
Provisions for other liabilities and charges 96.1
Total current liabilities 2,584.5
Total liabilities 8,092.6
Total equity and liabilities 13,072.0
Appendix 2
Page 4 of 4
CRH plc
GROUP BALANCE SHEET AS AT 31 DECEMBER 2004 - RECONCILIATION FROM IRISH GAAP TO IFRS
Adjustments under IFRS
Share Busi-
All figures Previous based ness Joint Dividends/ Restated
in Irish pay- comb- Income Pen- ven- Dis- Deri- Min. Reclass- under
€ millions GAAP ments inations tax sions tures counting vatives interest ifications IFRS
ASSETS
Non-current
assets
Property,
plant and
equipment 5,319.9 19.4 491.3 5,830.6
Intangible
assets -
goodwill 1,443.5 78.0 7.4 0.6 227.4 1,756.9
Intangible
assets - other - 17.2 17.2
Investments
in joint
ventures:
- share of
gross assets 993.1 -993.1 -
- share of
gross
liabilities -535.1 535.1 -
- loans to
joint ventures 83.5 -83.5 -
Investments in
associates 149.2 0.7 28.9 178.8
Derivative
financial
instruments - 173.2 173.2
Other
financial
assets 11.7 101.5 113.2
Deferred
income tax
assets - 18.5 207.4 101.2 7.1 1.1 335.3
Total
non-current
assets 7,465.8 18.5 95.9 234.2 101.8 314.7 174.3 8,405.2
Current
assets
Inventories 1,249.6 1.3 58.0 1,308.9
Trade and
other
receivables 1,829.8 132.9 10.4 1,973.1
Derivative
financial
instruments - 1.1 1.1
Liquid
investments - 311.7 311.7
Cash and cash
equivalents 1,322.4 61.3 -311.7 1,072.0
Total current
assets 4,401.8 1.3 252.2 10.4 1.1 4,666.8
Total assets 11,867.6 18.5 97.2 234.2 101.8 566.9 10.4 175.4 13,072.0
EQUITY
Capital and
reserves
attributable
to the
Company's
equity
holders
Equity share
capital 181.0 181.0
Non-equity
share capital 1.2 1.2
Share premium
account 2,149.3 2,149.3
Other reserves 9.9 13.6 23.5
Hedging - -
reserve
Foreign
currency
translation
reserve - -3.6 17.9 2.5 -0.4 -1.3 5.1 -200.1 -179.9
Retained
income 2,876.4 4.9 103.0 -358.9 -213.2 -3.3 47.5 -11.1 124.7 200.1 2,770.1
5,217.8 18.5 99.4 -341.0 -210.7 -3.7 46.2 -6.0 124.7 4,945.2
Minority
interest 82.6 1.7 -0.7 4.8 -54.2 34.2
Total equity 5,300.4 18.5 101.1 -341.7 -210.7 1.1 46.2 -6.0 70.5 4,979.4
LIABILITIES
Non-current
liabilities
Interest-bearing
loans and
borrowings 3,351.1 274.3 122.8 54.2 3,802.4
Derivative
financial
instruments - 51.9 51.9
Deferred
income tax
liabilities 528.3 371.4 86.8 0.9 987.4
Trade and
other payables 103.4 -5.0 29.7 -6.1 122.0
Retirement
benefit
obligations - 347.2 2.5 349.7
Provisions for
other
liabilities
and charges 325.7 0.3 -10.2 -133.5 182.3
Capital grants 11.0 1.4 12.4
Total
non-current
liabilities 4,319.5 -4.7 371.4 337.0 394.7 -139.6 175.6 54.2 5,508.1
Current
liabilities
Trade and
other payables 1,638.0 -1.0 -25.1 122.5 7.7 1,742.1
Current income
tax
liabilities 73.0 1.8 204.5 0.6 4.6 284.5
Interest-bearing
loans and
borrowings 412.0 44.0 -204.6 251.4
Derivative
financial
instruments - 210.4 210.4
Provisions for
other
liabilities
and charges - 96.1 96.1
Dividends
proposed 124.7 -124.7 -
Total current
liabilities 2,247.7 0.8 204.5 -24.5 171.1 103.8 5.8 -124.7 2,584.5
Total
liabilities 6,567.2 -3.9 575.9 312.5 565.8 -35.8 181.4 -70.5 8,092.6
Total equity
and
liabilities 11,867.6 18.5 97.2 234.2 101.8 566.9 10.4 175.4 13,072.0
Net debt (note
1) 2,440.7 - - - - 257.0 - 6.2 54.2 - 2,758.1
Note 1. Net debt as reported by CRH under Irish GAAP comprised current and non-current interest-bearing loans
and borrowings, net of cash and cash equivalents. Under IFRS, current and non-current derivative
financial instruments and liquid investments are separately reported in the balance sheet and are
also included in the net debt number shown here.
Appendix 3
Page 1 of 4
CRH plc
GROUP INCOME STATEMENT
for the six months ended 30 June 2004
Restated under IFRS
Unaudited
Continuing operations
Joint
Ventures Total
2004 2004 2004
€m €m €m
Revenue 5,473.0 134.9 5,607.9
Cost of sales 3,836.5 76.8 3,913.3
Gross profit 1,636.5 58.1 1,694.6
Operating costs 1,281.0 43.4 1,324.4
Group operating profit 355.5 14.7 370.2
Profit on disposal of fixed assets 5.5 0.5 6.0
Profit before finance costs 361.0 15.2 376.2
Finance costs (net) 59.8 4.3 64.1
Group share of equity-accounted profit after tax of associates 7.3 - 7.3
Profit before tax 308.5 10.9 319.4
Income tax expense 59.4 4.1 63.5
Group profit after tax for the financial period 249.1 6.8 255.9
Profit attributable to:
Equity holders of the Company 245.6 6.8 252.4
Minority interest 3.5 - 3.5
Group profit after tax for the financial period 249.1 6.8 255.9
Earnings per Ordinary Share - basic 47.7c
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30 June 2004
Unaudited
2004
€m
Items of income and expense recognised directly within equity:
Currency translation effects 107.5
Actuarial loss -5.9
Deferred tax asset on Group defined benefit pension schemes 2.7
Gains relating to cash flow hedges 0.4
Net income recognised directly in equity 104.7
Group profit after tax for the financial period 255.9
Total recognised income and expense for the financial period 360.6
Attributable to:
Equity holders of the Company 355.7
Minority interest 4.9
Total recognised income and expense for the financial period 360.6
Appendix 3
Page 2 of 4
CRH plc
GROUP INCOME STATEMENT FOR SIX MONTHS ENDED 30 JUNE 2004 - RECONCILIATION FROM IRISH GAAP TO IFRS (unaudited)
Adjustments under IFRS
Divi
Previous Share- Business Intan -dends/ Restated
All figures Irish based combin -gible Income Joint Discoun Deriv Min. under
in € GAAP payments - ations assets tax Pensions ventures Associates -ting -atives interest IFRS
millions
Turnover
including
share of
joint 5,670.4
ventures
Less: share
of 197.4
joint
ventures
Group 5,473.0 134.9 5,607.9
turnover
Cost of 3,834.6 1.9 76.8 3,913.3
sales
Gross 1,638.4 -1.9 58.1 1,694.6
profit
Operating
costs
excluding
goodwill
amortisation 1,278.4 4.1 -0.9 1.5 1.2 43.4 -2.5 -0.8 1,324.4
Group
operating
profit 360.0 -4.1 -1.0 -1.5 -1.2 14.7 2.5 0.8 370.2
Share of
joint
ventures'
operating 21.4 -21.4 -
profit
Share of
associates'
operating
profit 3.2 -3.2 -
Operating
profit
excluding
goodwill
amortisation 384.6 -4.1 -1.0 -1.5 -1.2 -6.7 -3.2 2.5 0.8 370.2
Goodwill
amortisation 48.7 -45.3 -3.6 0.2 -
Profit on
disposal of
fixed assets 6.4 -0.4 6.0
Profit on
ordinary
activities
before
interest 342.3 -4.1 44.3 -1.5 -1.2 -3.5 -3.4 2.5 0.8 376.2
Group
interest 61.9 -4.2 4.3 5.2 -4.1 1.0 64.1
payable
(net)
Share of
JV's
and
associates' 5.7 -6.0 0.3 -
interest
Share of
associates'
profit after
tax - 5.1 2.2 7.3
Profit on
ordinary
activities
before
taxation 274.7 -4.1 44.3 -1.5 3.0 3.3 -1.5 -2.7 4.9 -1.0 319.4
Taxation on
profit on
ordinary
activities 69.0 -1.5 -3.3 0.4 -1.4 -1.3 1.6 63.5
Profit on
ordinary
activities
after 205.7 -2.6 44.3 -1.5 3.3 2.6 4.7 -0.2 -2.7 3.3 -1.0 255.9
taxation
Profit
applicable
to
equity
minority 4.5 -4.5 -
interests
Preference - -
dividends
Profit for
the
year
attributable
to ordinary 201.2 -2.6 44.3 -1.5 3.3 2.6 4.7 -0.2 -2.7 3.3 3.5 255.9
shareholders
Dividends - -
paid
Dividends
proposed 50.9 -50.9 -
Profit
retained for
the
financial 150.3 -2.6 44.3 -1.5 3.3 2.6 4.7 -0.2 -2.7 3.3 54.4 255.9
period
Appendix 3
Page 3 of 4
CRH plc
GROUP BALANCE SHEET AS AT 30 JUNE 2004
Restated
under IFRS
Unaudited
2004
€m
ASSETS
Non-current assets
Property, plant and equipment 5,987.9
Intangible assets 1,836.5
Investments in associates 180.6
Derivative financial instruments 159.1
Other financial assets 93.4
Deferred income tax assets 340.8
Total non-current assets 8,598.3
Current assets
Inventories 1,405.7
Trade and other receivables 2,327.1
Derivative financial instruments 25.0
Liquid investments 318.1
Cash and cash equivalents 679.7
Total current assets 4,755.6
Total assets 13,353.9
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 180.1
Non-equity share capital 1.2
Share premium account 2,114.8
Other reserves 17.9
Foreign currency translation reserve 107.5
Retained income 2,292.7
4,714.2
Minority interest 38.6
Total equity 4,752.8
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 3,738.2
Derivative financial instruments 155.8
Deferred income tax liabilities 1,010.5
Trade and other payables 113.1
Retirement benefit obligations 253.9
Provisions for other liabilities and charges 188.4
Capital grants 13.8
Total non-current liabilities 5,473.7
Current liabilities
Trade and other payables 1,942.2
Current income tax liabilities 288.2
Interest-bearing loans and borrowings 748.9
Derivative financial instruments 32.2
Provisions for other liabilities and charges 115.9
Total current liabilities 3,127.4
Total liabilities 8,601.1
Total equity and liabilities 13,353.9
Appendix 3
Page 4 of 4
CRH plc
GROUP BALANCE SHEET AS AT 30 JUNE 2004 - RECONCILIATION FROM IRISH GAAP TO IFRS (unaudited)
Adjustments under IFRS
Share Busi-
All figures Previous based ness Joint Dividends/ Restated
in Irish pay- comb- Income Pen- ven- Dis- Deri- Min. Reclass- under
€ millions GAAP ments inations tax sions tures counting vatives interest ifications IFRS
ASSETS
Non-current
assets
Property,
plant and
equipment 5,491.4 496.5 5,987.9
Intangible
assets -
goodwill 1,542.7 34.5 10.8 235.6 1,823.6
Intangible
assets - other - 12.9 12.9
Investments in joint
ventures:
- share of
gross assets 1,297.5 -1,297.5 -
- share of
gross
liabilities -687.0 687.0 -
- loans to
joint ventures 59.7 -59.7 -
Investments in
associates 35.4 -0.2 145.4 180.6
Derivative
financial
instruments - 159.1 159.1
Other
financial
assets 11.9 81.5 93.4
Deferred
income tax
assets - 11.0 240.9 85.8 2.8 0.3 340.8
Total
non-current
assets 7,751.6 11.0 47.2 251.7 85.8 291.6 159.4 8,598.3
Current
assets
Inventories 1,340.5 65.2 1,405.7
Trade and
other
receivables 2,154.8 152.4 19.9 2,327.1
Derivative
financial
instruments - 25.0 25.0
Liquid
investments - 318.1 318.1
Cash and cash
equivalents 941.6 56.2 -318.1 679.7
Total current
assets 4,436.9 273.8 19.9 25.0 4,755.6
Total assets 12,188.5 11.0 47.2 251.7 85.8 565.4 19.9 184.4 13,353.9
EQUITY
Capital and
reserves
attributable
to the
Company's
equity
holders
Equity share
capital 180.1 180.1
Non-equity
share capital 1.2 1.2
Share premium
account 2,114.8 2,114.8
Other reserves 9.9 8.0 17.9
Foreign
currency
translation
reserve - 0.1 -12.9 -5.1 1.1 2.3 122.0 107.5
Retained
income 2,762.5 3.0 46.2 -362.6 -132.2 0.2 46.7 0.1 50.8 -122.0 2,292.7
5,068.5 11.0 46.3 -375.5 -137.3 0.2 47.8 2.4 50.8 4,714.2
Minority
interest 97.8 1.7 -0.6 4.7 -65.0 38.6
Total equity 5,166.3 11.0 48.0 -376.1 -137.3 4.9 47.8 2.4 -14.2 4,752.8
LIABILITIES
Non-current
liabilities
Interest-beari
ng loans and
borrowings 3,390.3 269.3 13.6 65.0 3,738.2
Derivative
financial
instruments - 155.8 155.8
Deferred
income tax
liabilities 515.7 404.2 8.0 79.9 2.7 1,010.5
Trade and
other payables 96.2 -1.1 30.4 -12.4 113.1
Retirement
benefit
obligations - 251.3 2.6 253.9
Provisions for
other
liabilities
and charges 337.4 1.3 -10.2 -140.1 188.4
Capital grants 11.9 1.9 13.8
Total
non-current
liabilities 4,351.5 0.2 404.2 249.1 384.1 -152.5 172.1 65.0 5,473.7
Current
liabilities
Trade and
other payables 1,838.2 -1.0 -26.0 122.3 8.7 1,942.2
Current income
tax
liabilities 55.7 223.6 8.9 288.2
Interest-bearing
loans and
borrowings 726.0 45.2 -22.3 748.9
Derivative
financial
instruments - 32.2 32.2
Provisions for
other
liabilities
and charges - 115.9 115.9
Dividends
proposed 50.8 -50.8 -
Total current
liabilities 2,670.7 -1.0 223.6 -26.0 176.4 124.6 9.9 -50.8 3,127.4
Total
liabilities 7,022.2 -0.8 627.8 223.1 560.5 -27.9 182.0 14.2 8,601.1
Total equity
and
liabilities 12,188.5 11.0 47.2 251.7 85.8 565.4 19.9 184.4 13,353.9
Net debt (note
1) 3,174.7 - - - - 258.3 - -4.8 65.0 - 3,493.2
Note 1. Net debt as reported by CRH under Irish GAAP comprised current and non-current interest-bearing loans
and borrowings, net of cash and cash equivalents. Under IFRS, current and non-current derivative
financial instruments and liquid investments are separately reported in the balance sheet and are
also included in the net debt number shown here.
Appendix 4
Page 1 of 2
CRH plc
GROUP BALANCE SHEET AS AT 1 JANUARY 2004 ('TRANSITION DATE')
Restated
under IFRS
Audited
€m
ASSETS
Non-current assets
Property, plant and equipment 5,366.2
Intangible assets 1,625.1
Investments in associates 69.4
Derivative financial instruments 214.2
Other financial assets 79.5
Deferred income tax assets 323.4
Total non-current assets 7,677.8
Current assets
Inventories 1,155.8
Trade and other receivables 1,747.7
Derivative financial instruments 9.7
Liquid investments 292.1
Cash and cash equivalents 1,040.9
Total current assets 4,246.2
Total assets 11,924.0
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 179.3
Non-equity share capital 1.2
Share premium account 2,078.3
Other reserves 13.8
Retained income 2,148.2
4,420.8
Minority interest 26.2
Total equity 4,447.0
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 3,387.4
Derivative financial instruments 159.6
Deferred income tax liabilities 881.6
Trade and other payables 87.7
Retirement benefit obligations 243.2
Provisions for other liabilities and charges 157.7
Capital grants 12.7
Total non-current liabilities 4,929.9
Current liabilities
Trade and other payables 1,557.5
Current income tax liabilities 302.3
Interest-bearing loans and borrowings 523.2
Derivative financial instruments 41.4
Provisions for other liabilities and charges 122.7
Total current liabilities 2,547.1
Total liabilities 7,477.0
Total equity and liabilities 11,924.0
Appendix 4
Page 2 of 2
CRH plc
GROUP TRANSITION BALANCE SHEET AS AT 1 JANUARY 2004 - RECONCILIATION FROM IRISH GAAP TO IFRS
Adjustments under IFRS
All figures in € millions
Previous Share- Restated
Irish based Income Joint Dividends/ Reclass- under
GAAP payments tax Pensions ventures Discounting Derivatives Min. Interest ifications IFRS
ASSETS
Non-current
assets
Property,
plant and
equipment 5,145.4 220.8 5,366.2
Intangible
assets -
goodwill 1,474.5 150.6 1,625.1
Intangible
assets -
other - -
Investments in joint
ventures:
- share of
gross assets 560.1 -560.1 -
- share of
gross
liabilities -330.4 330.4 -
- loans to
joint ventures 62.3 -62.3 -
Investments in
associates 44.6 24.8 69.4
Derivative
financial
instruments - 214.2 214.2
Other
financial
assets 12.1 67.4 79.5
Deferred
income tax
assets - 9.5 231.0 77.9 4.1 0.9 323.4
Total
non-current
assets 6,968.6 9.5 231.0 77.9 175.7 215.1 7,677.8
Current
assets
Inventories 1,117.6 38.2 1,155.8
Trade and
other
receivables 1,681.2 53.4 13.1 1,747.7
Derivative
financial
instruments - 9.7 9.7
Liquid
investments - 292.1 292.1
Cash and cash
equivalents 1,298.0 35.0 -292.1 1,040.9
Total current
assets 4,096.8 126.6 13.1 9.7 4,246.2
Total assets 11,065.4 9.5 231.0 77.9 302.3 13.1 224.8 11,924.0
EQUITY
Capital and reserves
attributable
to the Company's equity
holders
Equity share
capital 179.3 179.3
Non-equity
share capital 1.2 1.2
Share premium
account 2,078.3 2,078.3
Other reserves 9.9 3.9 13.8
Foreign - -
currency
translation
reserve
Retained
income 2,490.2 5.6 -365.9 -131.7 -0.8 49.4 -3.6 105.0 2,148.2
4,758.9 9.5 -365.9 -131.7 -0.8 49.4 -3.6 105.0 4,420.8
Minority
interest 90.6 -0.6 1.9 -65.7 26.2
Total equity 4,849.5 9.5 -366.5 -131.7 1.1 49.4 -3.6 39.3 4,447.0
LIABILITIES
Non-current
liabilities
Interest-bearing
loans and
borrowings 3,095.8 167.5 58.4 65.7 3,387.4
Derivative
financial
instruments - 159.6 159.6
Deferred
income tax
liabilities 485.6 376.8 4.8 13.2 1.2 881.6
Trade and
other payables 96.5 5.6 -14.4 87.7
Retirement
benefit
obligations - 240.7 2.5 243.2
Provisions for
other
liabilities
and charges 332.4 -10.3 -164.4 157.7
Capital grants 12.7 12.7
Total
non-current
liabilities 4,023.0 376.8 235.2 188.8 -178.8 219.2 65.7 4,929.9
Current
liabilities
Trade and
other payables 1,499.7 -25.6 63.6 19.8 1,557.5
Current income
tax
liabilities 77.9 220.7 3.7 302.3
Interest-bearing
loans and
borrowings 510.3 45.1 -32.2 523.2
Derivative
financial
instruments - 41.4 41.4
Provisions for
other
liabilities
and charges - 122.7 122.7
Dividends
proposed 105.0 -105.0 -
Total current
liabilities 2,192.9 220.7 -25.6 112.4 142.5 9.2 -105.0 2,547.1
Total
liabilities 6,215.9 597.5 209.6 301.2 -36.3 228.4 -39.3 7,477.0
Total equity
and
liabilities 11,065.4 9.5 231.0 77.9 302.3 13.1 224.8 11,924.0
Net debt (note
1) 2,308.1 - - - 177.6 - 3.3 65.7 - 2,554.7
Note 1. Net debt as reported by CRH under Irish GAAP comprised current and
non-current interest bearing loans and liabilities, net of cash and
cash equivalents. Under IFRS, current and non-current derivative
financial instruments and liquid investments are separately reported
in the balance sheet are also included in the net debt number shown
here.
Appendix 5
CRH plc
Page 1 of 4
Restatement under IFRS of selected segmental information - Full-year 2004
(audited)
Analysis by class of business and by geography
The Group is analysed into four Divisions, two in Europe: Materials and Products
& Distribution; and two in the Americas: Materials in the United States and
Products & Distribution in the United States, Canada, Argentina and Chile. These
activities comprise three reporting business segments as follows:
Materials businesses are involved in the production of cement, aggregates,
asphalt and readymixed concrete. Products businesses are involved in the
production of concrete products and a range of construction-related products and
services. Distribution businesses are engaged in the marketing and sale of
builders' supplies to the construction industry and of materials and products
for the DIY market.
Continuing operations - full-year 2004
Total
Products & Total
Materials Products Distribution Distribution Group
Segment revenue €m €m €m €m €m
Europe
Subsidiaries 2,147.3 2,091.8 1,804.9 3,896.7 6,044.0
Joint ventures 159.5 153.2 99.2 252.4 411.9
Total Europe 2,306.8 2,245.0 1,904.1 4,149.1 6,455.9
Americas
Subsidiaries 2,766.2 2,456.1 1,013.8 3,469.9 6,236.1
Joint ventures 57.0 5.5 - 5.5 62.5
Total Americas 2,823.2 2,461.6 1,013.8 3,475.4 6,298.6
Total revenue 5,130.0 4,706.6 2,917.9 7,624.5 12,754.5
Intersegment revenue is not material and is thus not subject to separate disclosure in the above analysis.
Group operating profit
Europe
Subsidiaries 286.4 173.5 115.2 288.7 575.1
Joint ventures 33.8 17.2 6.2 23.4 57.2
Total Europe 320.2 190.7 121.4 312.1 632.3
Americas
Subsidiaries 269.1 250.3 63.3 313.6 582.7
Joint ventures 4.8 0.4 - 0.4 5.2
Total Americas 273.9 250.7 63.3 314.0 587.9
Total Group operating profit 594.1 441.4 184.7 626.1 1,220.2
Profit/(loss) on disposal of fixed assets
Europe
Subsidiaries (0.2) 0.3 (2.6) (2.3) (2.5)
Joint ventures 0.4 0.5 0.4 0.9 1.3
Total Europe 0.2 0.8 (2.2) (1.4) (1.2)
Americas
Subsidiaries 5.7 4.8 1.3 6.1 11.8
Joint ventures - - 0.2 0.2 0.2
Total Americas 5.7 4.8 1.5 6.3 12.0
Total profit/(loss) on disposal of fixed 5.9 5.6 (0.7) 4.9 10.8
assets
Segment result (profit before finance
costs)
Europe
Subsidiaries 286.2 173.8 112.6 286.4 572.6
Joint ventures 34.2 17.7 6.6 24.3 58.5
Total Europe 320.4 191.5 119.2 310.7 631.1
Americas
Subsidiaries 274.8 255.1 64.6 319.7 594.5
Joint ventures 4.8 0.4 0.2 0.6 5.4
Total Americas 279.6 255.5 64.8 320.3 599.9
Segment result (profit before finance 600.0 447.0 184.0 631.0 1,231.0
costs)
Finance costs (net) 146.4
Group share of equity-accounted profit after tax of associates 19.4
Profit before tax 1,104.0
Income tax expense 232.2
Group profit after tax for the financial 871.8
year
Segment assets
Europe
Subsidiaries 2,063.6 2,096.3 1,039.7 3,136.0 5,199.6
Joint ventures 577.0 198.3 97.8 296.1 873.1
Total Europe 2,640.6 2,294.6 1,137.5 3,432.1 6,072.7
Americas
Subsidiaries 2,819.0 1,626.4 332.1 1,958.5 4,777.5
Joint ventures 33.0 3.5 - 3.5 36.5
Total Americas 2,852.0 1,629.9 332.1 1,962.0 4,814.0
Total segment assets 5,492.6 3,924.5 1,469.6 5,394.1 10,886.7
Reconciliation to total assets as reported in the Group Balance Sheet
Investments in associates 178.8
Derivative financial instruments (current and non-current) 174.3
Other financial assets 113.2
Deferred income tax assets 335.3
Liquid investments 311.7
Cash and cash equivalents 1,072.0
Total assets as reported in the Group Balance Sheet 13,072.0
Appendix 5
CRH plc
Page 2 of 4
Restatement under IFRS of selected segmental information - Full-year 2004 (audited)
Segment liabilities
Europe
Subsidiaries 590.2 578.7 250.3 829.0 1,419.2
Joint ventures 71.0 33.5 43.1 76.6 147.6
Total Europe 661.2 612.2 293.4 905.6 1,566.8
Americas
Subsidiaries 412.2 390.3 115.8 506.1 918.3
Joint ventures 6.1 1.0 - 1.0 7.1
Total Americas 418.3 391.3 115.8 507.1 925.4
Total segment liabilities 1,079.5 1,003.5 409.2 1,412.7 2,492.2
Reconciliation to total liabilities as reported in the Group Balance Sheet
Interest-bearing loans and borrowings (current and non-current) 4,053.8
Derivative financial instruments (current and non-current) 262.3
Income tax liabilities (current and 1,271.9
deferred)
Capital grants 12.4
Total liabilities as reported in the Group Balance Sheet 8,092.6
Other segment information
Capital expenditure
Europe
Subsidiaries 103.8 98.0 40.8 138.8 242.6
Joint ventures 19.3 6.7 2.9 9.6 28.9
Total Europe 123.1 104.7 43.7 148.4 271.5
Americas
Subsidiaries 142.5 120.7 14.4 135.1 277.6
Joint ventures 1.5 0.1 - 0.1 1.6
Total Americas 144.0 120.8 14.4 135.2 279.2
Total capital expenditure 267.1 225.5 58.1 283.6 550.7
Depreciation included in segment result
Europe
Subsidiaries 115.4 107.6 27.8 135.4 250.8
Joint ventures 10.1 6.5 2.2 8.7 18.8
Total Europe 125.5 114.1 30.0 144.1 269.6
Americas
Subsidiaries 148.7 86.0 8.9 94.9 243.6
Joint ventures 2.6 0.1 - 0.1 2.7
Total Americas 151.3 86.1 8.9 95.0 246.3
Total depreciation 276.8 200.2 38.9 239.1 515.9
Amortisation included in segment result
Europe
Subsidiaries - 0.3 0.3 0.6 0.6
Total Europe - 0.3 0.3 0.6 0.6
Americas
Subsidiaries - 2.8 0.7 3.5 3.5
Total Americas - 2.8 0.7 3.5 3.5
Total amortisation - 3.1 1.0 4.1 4.1
The following is a geographical analysis of the segmental data presented above with Ireland and The Netherlands
separately analysed on the basis of the aggregation thresholds contained in IAS 14:
Republic The Rest of Total
of Ireland Netherlands Europe Americas Group
€m €m €m €m €m
Income statement items
Segment revenue 800.5 2,018.7 3,625.6 6,309.7 12,754.5
Group operating profit 127.6 158.0 345.6 589.0 1,220.2
Profit/(loss) on disposal of fixed assets 0.6 1.6 ( 3.4) 12.0 10.8
Segment result (profit before finance 128.2 159.6 342.2 601.0 1,231.0
costs)
Balance sheet items
Segment assets 606.3 1,657.3 3,809.1 4,814.0 10,886.7
Segment liabilities 285.5 387.4 893.9 925.4 2,492.2
Other segment information
Capital expenditure 43.7 60.9 166.9 279.2 550.7
Depreciation 39.3 67.4 162.9 246.3 515.9
Amortisation - 0.1 0.5 3.5 4.1
Appendix 5
CRH plc
Page 3 of 4
Restatement under IFRS of selected segmental information - Interim 2004 (unaudited)
Analysis by class of business and by geography The Group is analysed into four
Divisions, two in Europe: Materials and Products & Distribution; and two in the
Americas:
Materials in the United States and Products & Distribution in the United States,
Canada, Argentina and Chile. These activities comprise three reporting business
segments as follows:
Materials businesses are involved in the production of cement, aggregates,
asphalt and readymixed concrete. Products businesses are involved in the
production of concrete products and a range of construction-related products and
services. Distribution businesses are engaged in the marketing and sale of
builders' supplies to the construction industry and of materials and products
for the DIY market.
Continuing operations - Interim 2004
Total
Products & Total
Materials Products Distribution Distribution Group
Segment revenue €m €m €m €m €m
Europe
Subsidiaries 994.5 1,019.9 874.2 1,894.1 2,888.6
Joint ventures 27.3 70.1 21.2 91.3 118.6
Total Europe 1,021.8 1,090.0 895.4 1,985.4 3,007.2
Americas
Subsidiaries 932.8 1,205.3 446.3 1,651.6 2,584.4
Joint ventures 14.0 2.3 - 2.3 16.3
Total Americas 946.8 1,207.6 446.3 1,653.9 2,600.7
Total revenue 1,968.6 2,297.6 1,341.7 3,639.3 5,607.9
Intersegment revenue is not material and is thus not subject to separate disclosure in the above analysis.
Group operating profit
Europe
Subsidiaries 118.7 89.3 46.8 136.1 254.8
Joint ventures 7.2 6.5 1.6 8.1 15.3
Total Europe 125.9 95.8 48.4 144.2 270.1
Americas
Subsidiaries (30.7) 113.4 18.0 131.4 100.7
Joint ventures (0.8) 0.2 - 0.2 (0.6)
Total Americas (31.5) 113.6 18.0 131.6 100.1
Total Group operating profit 94.4 209.4 66.4 275.8 370.2
Profit/(loss) on disposal of fixed assets
Europe
Subsidiaries 1.0 0.2 0.1 0.3 1.3
Joint ventures 0.2 0.2 - 0.2 0.4
Total Europe 1.2 0.4 0.1 0.5 1.7
Americas
Subsidiaries 3.2 0.9 0.1 1.0 4.2
Joint ventures 0.1 - - - 0.1
Total Americas 3.3 0.9 0.1 1.0 4.3
Total profit/(loss) on disposal of fixed 4.5 1.3 0.2 1.5 6.0
assets
Segment result (profit before finance
costs)
Europe
Subsidiaries 119.7 89.5 46.9 136.4 256.1
Joint ventures 7.4 6.7 1.6 8.3 15.7
Total Europe 127.1 96.2 48.5 144.7 271.8
Americas
Subsidiaries (27.5) 114.3 18.1 132.4 104.9
Joint ventures (0.7) 0.2 - 0.2 (0.5)
Total Americas (28.2) 114.5 18.1 132.6 104.4
Segment result (profit before finance 98.9 210.7 66.6 277.3 376.2
costs)
Finance costs (net) 64.1
Group share of equity-accounted profit after tax of associates 7.3
Profit before tax 319.4
Income tax expense 63.5
Group profit after tax for the financial 255.9
period
Segment assets
Europe
Subsidiaries 2,120.2 2,132.1 1,012.5 3,144.6 5,264.8
Joint ventures 580.0 216.4 106.7 323.1 903.1
Total Europe 2,700.2 2,348.5 1,119.2 3,467.7 6,167.9
Americas
Subsidiaries 3,151.5 1,800.6 390.5 2,191.1 5,342.6
Joint ventures 43.0 3.7 - 3.7 46.7
Total Americas 3,194.5 1,804.3 390.5 2,194.8 5,389.3
Total segment assets 5,894.7 4,152.8 1,509.7 5,662.5 11,557.2
Reconciliation to total assets as reported in the Group Balance Sheet
Investments in associates 180.6
Derivative financial instruments (current and non-current) 184.1
Other financial assets 93.4
Deferred income tax assets 340.8
Liquid investments 318.1
Cash and cash equivalents 679.7
Total assets as reported in the Group Balance Sheet 13,353.9
Appendix 5
CRH plc
Page 4 of 4
Restatement under IFRS of selected segmental information - Interim 2004 (unaudited)
Segment liabilities
Europe
Subsidiaries 559.4 583.1 238.7 821.8 1,381.2
Joint ventures 66.0 40.5 42.1 82.6 148.6
Total Europe 625.4 623.6 280.8 904.4 1,529.8
Americas
Subsidiaries 501.5 415.5 160.0 575.5 1,077.0
Joint ventures 5.6 1.1 - 1.1 6.7
Total Americas 507.1 416.6 160.0 576.6 1,083.7
Total segment liabilities 1,132.5 1,040.2 440.8 1,481.0 2,613.5
Reconciliation to total liabilities as reported in the Group Balance Sheet
Interest-bearing loans and borrowings (current and non-current) 4,487.1
Derivative financial instruments (current and non-current) 188.0
Income tax liabilities (current and 1,298.7
deferred)
Capital grants 13.8
Total liabilities as reported in the Group Balance Sheet 8,601.1
Other segment information
Capital expenditure
Europe
Subsidiaries 36.7 50.6 19.0 69.6 106.3
Joint ventures 0.2 2.0 0.4 2.4 2.6
Total Europe 36.9 52.6 19.4 72.0 108.9
Americas
Subsidiaries 95.6 46.0 11.0 57.0 152.6
Joint ventures 0.9 0.1 - 0.1 1.0
Total Americas 96.5 46.1 11.0 57.1 153.6
Total capital expenditure 133.4 98.7 30.4 129.1 262.5
Depreciation included in segment result
Europe
Subsidiaries 50.5 57.5 12.8 70.3 120.8
Joint ventures 0.4 3.2 0.7 3.9 4.3
Total Europe 50.9 60.7 13.5 74.2 125.1
Americas
Subsidiaries 74.1 42.9 4.3 47.2 121.3
Joint ventures 1.4 - - - 1.4
Total Americas 75.5 42.9 4.3 47.2 122.7
Total depreciation 126.4 103.6 17.8 121.4 247.8
Amortisation included in segment result
Europe
Subsidiaries - 0.1 0.1 0.2 0.2
Total Europe - 0.1 0.1 0.2 0.2
Americas
Subsidiaries - 1.0 0.3 1.3 1.3
Total Americas - 1.0 0.3 1.3 1.3
Total amortisation - 1.1 0.4 1.5 1.5
The following is a geographical analysis of the segmental data presented above with Ireland and The Netherlands
separately analysed on the basis of the aggregation thresholds contained in IAS 14:
Republic The Rest of Total
of Ireland Netherlands Europe Americas Group
€m €m €m €m €m
Income statement items
Segment revenue 384.3 985.9 1,629.1 2,608.6 5,607.9
Group operating profit 66.8 72.5 130.2 100.7 370.2
Profit/(loss) on disposal of fixed assets 0.5 0.6 0.6 4.3 6.0
Segment result (profit before finance 67.3 73.1 130.8 105.0 376.2
costs)
Balance sheet items
Segment assets 586.9 1,627.4 3,953.6 5,389.3 11,557.2
Segment liabilities 244.5 396.8 888.5 1,083.7 2,613.5
Other segment information
Capital expenditure 15.7 30.4 62.8 153.6 262.5
Depreciation 18.8 37.9 68.4 122.7 247.8
Amortisation - - 0.2 1.3 1.5
Appendix 6
Page 1 of 10
Accounting policies under IFRS
Statement of compliance
The restatement of financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Commission, which comprise standards and interpretations approved by the
International Accounting Standards Board (IASB) and International Accounting
Standards and Standing Interpretations Committee interpretations approved by the
predecessor International Accounting Standards Committee that have been
subsequently authorised by the IASB and remain in effect.
Please refer to sections 2 and 3 of the Restatement of 2004 results under IFRS
(pages 4 and 5) for details of the qualifications to be taken into account and
the principal exemptions availed of on transition to IFRS.
Basis of preparation
The restated financial information, which is presented in euro millions to one
decimal place, has been prepared under the historical cost convention, as
modified by the revaluation of land and buildings and the measurement at fair
value of share options, available-for-sale financial assets and derivative
instruments. The carrying values of recognised assets and liabilities that are
hedged are adjusted to record changes in the fair values attributable to the
risks that are being hedged.
The financial period-ends of the Group's subsidiary, joint venture and
associated undertakings are coterminous.
Basis of consolidation
The restated financial information includes the financial statements of the
Company and all subsidiary, joint venture and associated undertakings, drawn up
to the relevant period-end.
Subsidiary undertakings
The financial statements of subsidiary undertakings are included in the restated
financial information from the date on which control over the operating and
financial decisions is obtained and cease to be consolidated from the date on
which control is transferred out of the Group. Control exists when the Company
has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain economic benefits from its activities. The
existence and effect of potential voting rights that are currently exercisable
or convertible are considered in determining the existence or otherwise of
control.
Joint venture undertakings
In line with the benchmark accounting methodology in IAS 31 Interests in Joint
Ventures, the Group's share of results and net assets of joint venture
undertakings, which are entities in which the Group holds an interest on a
long-term basis and which are jointly controlled by the Group and one or more
other venturers under a contractual arrangement, are accounted for on the basis
of proportionate consolidation from the date on which the contractual agreements
stipulating joint control are finalised and are derecognised when joint control
ceases. These joint venture undertakings are jointly controlled entities within
the meaning of IAS 31. The Group combines its share of the joint ventures'
individual income and expenses, assets and liabilities and cash flows on a
line-by-line basis with similar items in the Group's financial statements.
Loans to joint venture undertakings are classified as loans and receivables
within financial assets and are recorded at amortised cost.
Associated undertakings
Entities other than subsidiary and joint venture undertakings in which the Group
has a participating interest, and over whose operating and financial policies
the Group is in a position to exercise a significant influence, are accounted
for as associated undertakings using the equity method and are included in the
consolidated financial statements from the date on which the exercise of
significant influence is deemed to arise until the date on which such influence
ceases to exist. If the Group's share of losses exceeds the carrying amount of
an associated undertaking, the carrying amount is reduced to nil and recognition
of further losses is discontinued except to the extent that the Group has
incurred obligations in respect of the undertaking and is included within
financial assets in the Group balance sheet.
Appendix 6
Page 2 of 10
Equity method
Under the equity method, which is used in respect of accounting for the Group's
investments in associated undertakings, the income statement reflects the
Group's share of profit after tax of the related associated undertakings.
Investments in associated undertakings are carried in the Group balance sheet at
cost adjusted in respect of post-acquisition changes in the Group's share of net
assets, less any impairment in value. Goodwill attributable to investments in
associated undertakings is treated in accordance with the accounting policy for
goodwill addressed below.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from
+such transactions, are eliminated in preparing the consolidated financial
statements. Unrealised gains arising from transactions with joint venture and
associated undertakings are eliminated to the extent of the Group's interest in
the undertaking. Unrealised losses are eliminated in the same manner as
unrealised gains, but only to the extent that there is no evidence of
impairment.
Turnover and revenue recognition
Turnover represents the value of goods and services supplied to external
customers and excludes intercompany sales, trade discounts and value added tax/
sales tax.
In general, revenue is recognised to the extent that it is subject to reliable
measurement, that it is probable that economic benefits will flow to the Group
and that the significant risks and rewards of ownership have passed to the
buyer. Revenue on long-term contracts is recognised in accordance with the
percentage-of-completion method with the percentage-of-completion being computed
on an input cost basis. No revenue is recognised if there is uncertainty
regarding recovery of the consideration due at the outset of the transaction,
associated costs or the possible return of goods.
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which
is subject to risks and returns different to those of other segments. Stemming
from the Group's internal organisational and management structure and its system
of internal financial reporting, segmentation by business is regarded as being
the predominant source and nature of the risks and returns facing the Group and
is thus the primary segment under IAS 14 Segment Reporting. Geographical
segmentation is therefore the secondary segment.
Foreign currency translation
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in euro which is the presentation currency of the
Group.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet
date. All currency translation differences are taken to the income statement
with the exception of differences on foreign currency borrowings, to the extent
that they are used to finance or to provide a hedge against foreign equity
investments, which are taken directly to equity together with the exchange
difference on the carrying amount of the related investments. Translation
differences applicable to foreign currency borrowings are taken directly to
equity until disposal of the net investment, at which time they are recycled
through the income statement.
Results and cash flows of subsidiary, joint venture and associated undertakings
based in non-euro countries have been translated into euro at average exchange
rates for the year, and the related balance sheets have been translated at the
rates of exchange ruling at the balance sheet date. Adjustments arising on
translation of the results of non-euro subsidiary, joint venture and associated
undertakings at average rates, and on restatement of the opening net assets at
closing rates, are dealt with in a separate translation reserve within equity,
net of differences on related currency borrowings. All other translation
differences are taken to the income statement.
Appendix 6
Page 3 of 10
On disposal of a foreign operation, accumulated currency translation differences
are recognised in the income statement as part of the overall gain or loss on
disposal; the cumulative currency translation differences arising prior to the
transition date have been set to zero for the purposes of ascertaining the gain
or loss on disposal of a foreign operation subsequent to 1 January 2004.
Goodwill and fair value adjustments arising on acquisition of a foreign
operation are regarded as assets and liabilities of the foreign operation, are
expressed in the functional currency of the foreign operation and are recorded
at the exchange rate at the date of the transaction and subsequently
retranslated at the applicable closing rates.
Pensions and other post-retirement obligations
The Group operates defined contribution and defined benefit pension schemes in a
number of its operating areas. In addition, the Group has also undertaken to
provide certain additional post-employment healthcare and life assurance
benefits, which are unfunded, to certain current and former employees in the
United States.
Costs arising in respect of the Group's defined contribution pension schemes are
charged to the income statement in the period in which they are incurred. Under
these schemes, the Group has no obligation, either legal or constructive, to pay
further contributions in the event that the fund does not hold sufficient assets
to meet its benefit commitments.
The liabilities and costs associated with the Group's defined benefit pension
schemes are assessed on the basis of the projected unit credit method by
professionally qualified actuaries and are arrived at using actuarial
assumptions based on market expectations at the balance sheet date. The discount
rates employed in determining the present value of the schemes' liabilities are
determined by reference to market yields at the balance sheet date on
high-quality corporate bonds of a currency and term consistent with the currency
and term of the associated post-employment benefit obligations. When the
benefits of a defined benefit scheme are improved, the portion of the increased
benefit relating to past service by employees is recognised as an expense in the
income statement on a straight-line basis over the average period until the
benefits become vested. To the extent that the enhanced benefits vest
immediately, the related expense is recognised immediately in the income
statement. The net surplus or deficit arising on the Group's defined benefit
pension schemes, together with the liabilities associated with unfunded schemes,
are shown either within non-current assets or liabilities on the face of the
Group balance sheet. The deferred tax impact of pension scheme surpluses and
deficits is disclosed separately within deferred tax assets or liabilities, as
appropriate. The Group has elected to avail of the Amendment to IAS 19 Employee
Benefits to recognise post transition date actuarial gains and losses
immediately in the statement of recognised income and expense.
The Group's net obligation in respect of post-employment healthcare and life
assurance benefits represents the amount of future benefit that employees have
earned in return for service in the current and prior periods and is stated net
of the fair value of associated assets. The obligation is computed on the basis
of the projected unit credit method and is discounted to present value using a
discount rate equating to the market yield at the balance sheet date on high
quality corporate bonds of a currency and term consistent with the currency and
estimated term of the post-employment obligations.
In accordance with the exemption granted under IFRS 1, IAS 19 has not been
applied retrospectively in preparing the Group's transition balance sheet to
IFRS. All cumulative actuarial gains and losses as at the transition date (1
January 2004) have therefore been recognised in retained income at that date.
Equity compensation benefits
For equity-settled share-based payment transactions (i.e. the issuance of share
options), the Group measures the services received and the corresponding
increase in equity at fair value at the measurement date (which is the grant
date) using a recognised valuation methodology for the pricing of financial
instruments (i.e. the trinomial model). Given that the share options granted do
not vest until the completion of a specified period of service and are subject
to the realisation of demanding performance conditions, the fair value is
determined on the basis that the services to be rendered by employees as
consideration for the granting of share options will be received over the
vesting period, which is assessed as at the grant date.
Appendix 6
Page 4 of 10
The share options issued by the Company are not subject to market-based vesting
conditions as defined in the IFRS. Non-market vesting conditions are not taken
into account when estimating the fair value of share options as at the grant
date; such conditions are taken into account through adjusting the number of
equity instruments included in the measurement of the transaction amount so
that, ultimately, the amount recognised equates to the number of equity
instruments that actually vest. The expense in the income statement in relation
to share options represents the product of the total number of options
anticipated to vest and the fair value of those options; this amount is
allocated to accounting periods on a straight-line basis over the vesting
period. Given that the performance conditions underlying the Group's share
options are non-market in nature, the cumulative charge to the income statement
is reversed only where the performance condition is not met or where an employee
in receipt of share options relinquishes service prior to completion of the
expected vesting period.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options are
exercised.
In line with the transitional provisions applicable to a first-time adopter of
International Financial Reporting Standards, as contained in IFRS 2 Share-based
Payment, the Group has elected to implement the measurement requirements of the
IFRS in respect of share options that were granted after 7 November 2002 that
had not vested as at the effective date of the standard (1 January 2005). In
accordance with the standard, the disclosure requirements of IFRS 2 have been
applied in relation to all outstanding share-based payments regardless of their
grant date.
To the extent that the Group receives a tax deduction relating to the services
paid in shares, deferred tax in respect of share options is provided on the
basis of the difference between the market price of the underlying equity as at
the date of the financial statements and the exercise price of the option; as a
result, the deferred tax impact of share options will not correlate with the
expense reported in the Group income statement.
The Group does not operate any cash-settled share-based payment schemes or
share-based payment transactions with cash alternatives as defined in IFRS 2.
Property, plant and equipment
With the exception of the one-time revaluation of land and buildings noted
below, items of property, plant and equipment are stated at historical cost less
any accumulated depreciation and any accumulated impairments.
Depreciation and amortisation
Depreciation is calculated to write-off the book value of each item of property,
plant and equipment over its useful economic life on a straight-line basis at
the following rates:
Land and buildings: The book value of mineral-bearing land, less an
estimate of its residual value, is amortised over the period of the mineral
extraction in the proportion which production for the year bears to the latest
estimates of mineral reserves. Land other than mineral-bearing land is not
depreciated. In general, buildings are depreciated at 2.5% p.a.
Plant and machinery: These are depreciated at rates ranging from 3.3%
p.a. to 20% p.a. depending on the type of asset.
Transport: In general, transport equipment is
depreciated at 20% p.a.
Certain items of property, plant and equipment that had been revalued to fair
value prior to the date of transition to IFRS (1 January 2004) are measured on
the basis of deemed cost, being the revalued amount as at the date the
revaluation was performed.
The residual values and useful lives of property, plant and equipment are
reviewed, and adjusted if appropriate, at each balance sheet date.
Appendix 6
Page 5 of 10
Impairment of tangible assets
In accordance with IAS 36 Impairment of Assets, the carrying values of items of
property, plant and equipment are reviewed for impairment at each reporting date
and are subject to impairment testing when events or changes in circumstances
indicate that the carrying values may not be recoverable. Where the carrying
values exceed the estimated recoverable amount (being the greater of fair value
less costs to sell and value in use), the assets or cash-generating units are
written-down to their recoverable amount. Fair value less costs to sell is
defined as the amount obtainable from the sale of an asset or cash-generating
unit in an arm's length transaction between knowledgeable and willing parties,
less the costs which would be incurred in disposal. Value in use is defined as
the present value of the future cash flows expected to be derived through the
continued use of an asset or cash-generating unit including those anticipated to
be realised on its eventual disposal. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the
risks specific to the asset for which the future cash flow estimates have not
been adjusted. The estimates of future cash flows exclude cash inflows or
outflows attributable to financing activities and income tax. For an asset that
does not generate largely independent cash inflows, the recoverable amount is
determined by reference to the cash-generating unit to which the asset belongs.
Impairment losses (and reversals of such losses) are recognised in the income
statement unless they arise on a previously revalued asset, in which case the
losses and reversals are dealt with firstly through the revaluation reserve with
any residual being transferred to the income statement. Following recognition of
an impairment loss (and on recognition of an impairment loss reversal), the
depreciation charge applicable to the asset or cash-generating unit is adjusted
prospectively with the objective of systematically allocating the revised
carrying amount, net of any residual value, over the remaining useful life.
Subsequent costs
Subsequent costs are included in an asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Borrowing costs
Borrowing costs incurred in the construction of assets which take a substantial
period of time to complete are ordinarily expensed in the period in which they
are incurred. Where borrowing costs are directly attributable to the
acquisition, construction or production of a qualifying asset, such costs may be
capitalised.
Business combinations
The purchase method of accounting is employed in accounting for the acquisition
of subsidiaries by the Group.
The Group has elected to avail of the exemption under IFRS 1 First-time Adoption
of International Financial Reporting Standards whereby business combinations
prior to the transition date (1 January 2004) are not restated. IFRS 3 Business
Combinations has been applied with effect from the transition date and goodwill
amortisation ceased from that date.
The cost of a business combination is measured as the aggregate of the fair
values at the date of exchange of assets given, liabilities incurred or assumed
and equity instruments issued in exchange for control together with any directly
attributable expenses. To the extent that settlement of all or any part of a
business combination is deferred, the fair value of the deferred component is
determined through discounting the amounts payable to their present value at the
date of exchange. The discount component is unwound as an interest charge in the
income statement over the life of the obligation.
Where a business combination agreement provides for an adjustment to the cost of
the combination contingent on future events, the amount of the adjustment is
included in the cost at the acquisition date if the adjustment can be reliably
measured. Contingent consideration is included in the acquisition balance sheet
on a discounted basis.
Appendix 6
Page 6 of 10
The assets and liabilities and contingent liabilities of a subsidiary are
measured at their fair values at the date of acquisition. In the case of a
business combination which is completed in stages, the fair values of the
identifiable assets, liabilities and contingent liabilities are determined at
the date of each exchange transaction.
When the initial accounting for a business combination is determined
provisionally, any adjustments to the provisional values allocated to the
identifiable assets, liabilities and contingent liabilities are made within
twelve months of the acquisition date and are effected prospectively from that
date.
The interest of minority shareholders is stated at the minority's proportion of
the fair values of the assets and liabilities recognised. Subsequently, any
losses applicable to the minority interest in excess of the minority interest
are allocated against the interests of the parent.
Goodwill
Goodwill arising in respect of acquisitions completed prior to 1 January 2004
(being the transition date to IFRS) is included at its deemed cost, which
equates to its net book value recorded under previous GAAP. Save for
retrospective restatement of deferred tax in accordance with IAS 12 Income
Taxes, the classification and accounting treatment of business combinations
undertaken prior to the transition date has not been reconsidered in preparing
the opening IFRS balance sheet as at 1 January 2004. In line with the provisions
applicable to a first-time adopter under IFRS 3, goodwill amortisation has been
ceased with effect from the transition date.
The carrying amount of goodwill in respect of associated undertakings, net of
any impairments, is included in financial assets under the equity method in the
Group balance sheet. Goodwill applicable to jointly controlled entities is
accounted for on the basis of proportionate consolidation and is therefore
included in the goodwill caption in the consolidated balance sheet, net of any
impairments assessed in accordance with the methodology discussed below.
Where a subsidiary undertaking is terminated through closure or disposed of, any
goodwill arising on acquisition, net of any impairments, and which has not been
amortised through the income statement, is included in the determination of the
profit or loss arising on termination or disposal.
To the extent that the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities acquired exceeds the
cost of a business combination, the identification and measurement of the
related assets, liabilities and contingent liabilities are revisited accompanied
by a reassessment of the cost of the transaction, and any remaining balance is
recognised immediately in the income statement.
Goodwill was tested for impairment as at 1 January 2004, the date of transition
to IFRS, and no impairment resulted from this exercise.
Goodwill acquired in a business combination is allocated, from the acquisition
date, to the cash-generating units that are anticipated to benefit from the
combination's synergies. Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses. The cash-generating units represent
the lowest level within the Group at which the associated goodwill is monitored
for internal management purposes and are not larger than the primary and
secondary reporting segments determined in accordance with IAS 14 Segment
Reporting. Goodwill is subject to impairment testing on an annual basis and at
any time during the year if an indicator of impairment is considered to exist;
the goodwill impairment tests are undertaken at a consistent time in each annual
period. Impairment is determined by assessing the recoverable amount of the
cash-generating unit to which the goodwill relates. Where the recoverable amount
of the cash-generating unit is less than the carrying amount, an impairment loss
is recognised. In the year in which a business combination is effected, and
where some or all of the goodwill allocated to a particular cash-generating unit
arose in respect of that combination, the cash-generating unit is tested for
impairment prior to the end of the relevant annual period. Impairment losses
arising in respect of goodwill are not reversed following recognition.
Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
Appendix 6
Page 7 of 10
Intangible assets (other than goodwill)
An intangible asset, which is an identifiable non-monetary asset without
physical substance, is recognised to the extent that it is probable that the
expected future economic benefits attributable to the asset will flow to the
Group and that its cost can be measured reliably. The asset is deemed to be
identifiable when it is separable (i.e. capable of being divided from the entity
and sold, transferred, licensed, rented or exchanged, either individually or
together with a related contract, asset or liability) or when it arises from
contractual or other legal rights, regardless of whether those rights are
transferable or separable from the Group or from other rights and obligations.
Intangible assets acquired as part of a business combination are capitalised
separately from goodwill if the intangible asset meets the definition of an
asset and the fair value can be reliably measured on initial recognition.
Subsequent to initial recognition, intangible assets are carried at cost less
any accumulated amortisation and any accumulated impairment losses. The carrying
values of definite-lived intangible assets are reviewed for indicators of
impairment at each reporting date and are subject to impairment testing when
events or changes in circumstances indicate that the carrying values may not be
recoverable.
The amortisation of intangible assets is calculated to write-off the book value
of definite-lived intangible assets over their useful lives on a straight-line
basis on the assumption of zero residual value. In general, definite-lived
intangible assets are amortised over periods ranging from one to ten years,
depending on the nature of the intangible asset.
Leases
Assets held under finance leases, which are leases where substantially all the
risks and rewards of ownership of the asset have transferred to the Group, and
hire purchase contracts are capitalised in the balance sheet and are depreciated
over their useful lives with any impairment being recognised in accumulated
depreciation. The asset is recorded at an amount equal to the lower of its fair
value and the present value of the minimum lease payments at the inception of
the finance lease. The capital elements of future obligations under leases and
hire purchase contracts are included in liabilities in the balance sheet and
analysed between current and non-current amounts. The interest elements of the
rental obligations are charged to the income statement over the periods of the
leases and hire purchase contracts and represent a constant proportion of the
balance of capital repayments outstanding in line with the effective yield
methodology.
Leases where the lessor retains substantially all the risks and rewards of
ownership are classified as operating leases. Operating lease rentals are
charged to the income statement on a straight-line basis over the lease term.
Inventories and construction contracts
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in, first-out principle and includes all expenditure incurred
in acquiring the inventories and bringing them to their present location and
condition. Raw materials are valued on the basis of purchase cost on a first-in,
first-out basis. In the case of finished goods and work-in-progress, cost
includes direct materials, direct labour and attributable overheads based on
normal operating capacity and excludes borrowing costs. Net realisable value is
the estimated proceeds of sale less all further costs to completion, and less
all costs to be incurred in marketing, selling and distribution.
Contract costs are recognised as incurred. When the outcome of a construction
contract cannot be estimated reliably, contract revenue is recognised only to
the extent of contract costs incurred that are likely to be recoverable. When
the outcome of a construction contract can be estimated reliably and it is
probable that the contract will be profitable, contract revenue is recognised
over the period of the contract. When it is probable that total contract costs
will exceed total contract revenue, the expected loss is immediately recognised
as an expense. The percentage-of-completion method is used to determine the
appropriate amount to recognise in a particular reporting period with the stage
of completion assessed by reference to the proportion that contract costs
incurred at the balance sheet date bear to the total estimated cost of the
contract.
Appendix 6
Page 8 of 10
Amounts recoverable on construction contracts, which are included in debtors,
are stated at the net sales value of the work done less amounts received as
progress payments on account. Cumulative costs incurred, net of amounts
transferred to cost of sales, after deducting foreseeable losses, provision for
contingencies and payments on account not matched with turnover, are included as
construction contract balances in inventories. Cost includes all expenditure
related directly to specific projects and an allocation of fixed and variable
overheads incurred in the Group's contract activities based on normal operating
capacity.
Trade and other receivables and payables
Trade and other receivables and payables are stated at cost, which approximates
fair value given the short-dated nature of these assets and liabilities.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less. Deposits with a
maturity greater than 3 months from the date of acquisition are recognised
either in held-for-trading financial assets or as loans and receivables.
Short-term borrowings and bank overdrafts are recorded at amortised cost.
Derivative financial instruments
The Group employs derivative financial instruments (principally interest rate
and currency swaps and forward foreign exchange contracts) to manage interest
rate risks and to realise the desired currency profile of borrowings. In
accordance with its treasury policy, the Group does not trade in financial
instruments nor does it enter into leveraged derivative transactions.
At the inception of a hedging transaction entailing the usage of derivatives,
the Group documents the relationship between the hedged item and the hedging
instrument together with its risk management objective and the strategy
underlying the proposed transaction. The Group also documents its assessment,
both at the inception of the hedging relationship and subsequently on an ongoing
basis, of the effectiveness of the hedge in offsetting movements in the fair
values or cash flows of the hedged items.
Derivative financial instruments are initially recognised at cost and are
thereafter stated at fair value. Where derivatives do not fulfil the criteria
for hedge accounting, they are classified as held-for-trading and changes in
fair values are reported in the income statement. The fair value of interest
rate and currency swaps is the estimated amount the Group would pay or receive
to terminate the swap at the balance sheet date taking into account current
interest and currency exchange rates and the creditworthiness of the swap
counterparties. The fair value of forward exchange contracts is calculated by
reference to current forward exchange rates for contracts with similar maturity
profiles and equates to the quoted market price at the balance sheet date (being
the present value of the quoted forward price).
Hedging
Fair value and cash flow hedges
The Group uses fair value hedges and cash flow hedges in its treasury
activities. For the purposes of hedge accounting, hedges are classified either
as fair value hedges (which entail hedging the exposure to movements in the fair
value of a recognised asset or liability) or cash flow hedges (which hedge
exposure to fluctuations in future cash flows derived from a particular risk
associated with a recognised asset or liability, a firm commitment or a highly
probable forecast transaction).
In the case of fair value hedges which satisfy the conditions for special hedge
accounting, any gain or loss stemming from the re-measurement of the hedging
instrument to fair value is reported in the income statement. In addition, any
gain or loss on the hedged item which is attributable to the hedged risk is
adjusted against the carrying amount of the hedged item and reflected in the
income statement. Where the adjustment is to the carrying amount of a hedged
interest-bearing financial instrument, the adjustment is amortised to the income
statement with the objective of achieving full amortisation by maturity.
Appendix 6
Page 9 of 10
Where a derivative financial instrument is designated as a hedge of the
variability in cash flows of a recognised liability, a firm commitment or a
highly probable forecasted transaction, the effective part of any gain or loss
on the derivative financial instrument is recognised as a separate component of
equity with the ineffective portion being reported in the income statement. When
a firm commitment or forecast transaction results in the recognition of an asset
or a liability, the cumulative gain or loss is removed from equity and included
in the initial measurement of the asset or liability. Otherwise, the associated
gains or losses that had previously been recognised in equity are transferred to
the income statement contemporaneous with the materialisation of the hedged
transaction. Any gain or loss arising in respect of changes in the time value of
the derivative financial instrument is excluded from the measurement of hedge
effectiveness and is recognised immediately in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for special hedge accounting. At
that point in time, any cumulative gain or loss on the hedging instrument
recognised as a separate component of equity is kept in equity until the
forecast transaction occurs. If a hedged transaction is no longer anticipated to
occur, the net cumulative gain or loss recognised in equity is transferred to
the income statement in the period.
Hedges of monetary assets and liabilities
Where a derivative financial instrument is used to economically hedge the
foreign exchange exposure of a recognised monetary asset or liability, hedge
accounting is not applied and any gain or loss accruing on the hedging
instrument is recognised in the income statement.
Net investment hedges
Where foreign currency borrowings provide a hedge against a net investment in a
foreign operation, foreign exchange differences are taken directly to a foreign
currency translation reserve (being a separate component of equity). Cumulative
gains and losses remain in equity until disposal of the net investment in the
foreign operation at which point the related differences are transferred to the
income statement as part of the overall gain or loss on sale.
Interest-bearing loans and borrowings
All loans and borrowings are initially recorded at cost being the fair value of
the consideration received net of attributable transaction costs.
Subsequent to initial recognition, non-current interest-bearing loans and
borrowings are measured at amortised cost employing the effective interest yield
methodology. The computation of amortised cost includes any issue costs and any
discount or premium materialising on settlement.
Gains and losses are recognised in the income statement through amortisation on
the basis of the period of the loans and borrowings and on impairment or
derecognition of the associated loans and borrowings.
Provisions
A provision is recognised on a discounted basis when the Group has a present
obligation (either legal or constructive) as a result of a past event, it is
probable that a transfer of economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group anticipates that a provision will be reimbursed, the
reimbursement is recognised as a separate asset when it is virtually certain
that the reimbursement will arise. Provisions are not recognised in respect of
future operating losses.
In business combination activity, the probability criterion applicable to the
recognition of a provision is presumed to be satisfied. Provisions arising on
business combination activity are accordingly recognised only to the extent that
they would have qualified for recognition in the financial statements of the
acquiree prior to acquisition.
Appendix 6
Page 10 of 10
Tax (current and deferred)
Current tax represents the expected tax payable (or recoverable) on the taxable
profit for the year using tax rates enacted or substantively enacted at the
balance sheet date and taking into account any adjustments stemming from prior
years.
Deferred tax is provided on the basis of the balance sheet liability method on
all temporary differences at the balance sheet date which is defined as the
difference between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred tax assets and liabilities are not
subject to discounting and are measured at the tax rates that are anticipated to
apply in the period in which the asset is realised or the liability is settled
based on tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences
(i.e. differences that will result in taxable amounts in future periods when the
carrying amount of the asset or liability is recovered or settled) with the
exception of the following:
where the deferred tax liability arises from the initial recognition of goodwill
(but including subsequent measurement of tax-deductible goodwill) or the initial
recognition of an asset or a liability in a transaction that is not a business
combination and affects neither the accounting profit nor the taxable profit or
loss at the time of the transaction; and
where, in respect of taxable temporary differences associated with investments
in subsidiary and joint venture undertakings, the timing of the reversal of the
temporary difference is subject to control and it is probable that reversal will
not reverse in the foreseeable future.
Deferred tax assets are recognised in respect of all deductible temporary
differences (i.e. differences that give rise to amounts which are deductible in
determining taxable profits in future periods when the carrying amount of the
asset or liability is recovered or settled), carry-forward of unused tax credits
and unused tax losses to the extent that it is probable that taxable profits
will be available against which to offset these items. The following exceptions
apply in this instance:
where the deferred tax asset arises from the initial recognition of an asset or
a liability in a transaction that is not a business combination and affects
neither the accounting profit nor the taxable profit or loss at the time of the
transaction; and
where, in respect of deductible temporary differences associated with
investments in subsidiaries and associated and joint venture undertakings, a
deferred tax asset is recognised only if it is probable that the deductible
temporary difference will reverse in the foreseeable future and that sufficient
taxable profits will be available against which the temporary difference can be
utilised.
The carrying amounts of deferred tax assets are subject to review at each
balance sheet date and are reduced to the extent that future taxable profits are
considered to be inadequate to allow all or part of any deferred tax asset to be
utilised.
Government grants
Government grants are recognised at their fair value where there is reasonable
assurance that the grant will be received and all attaching conditions have been
complied with. When the grant relates to an expense item, it is recognised as
income over the periods necessary to match the grant on a systematic basis to
the costs that it is intended to compensate. Where the grant relates to an
asset, the fair value is treated as a deferred credit and is released to the
income statement over the expected useful life of the relevant asset through
equal annual instalments.
Share capital
Preference share capital
Preference share capital is classified as equity on the basis that the share
capital is not mandatorily redeemable.
Dividends
Dividends on Ordinary Shares are recognised as a liability in the Group's
financial statements in the period in which they are declared by the Company.
CRH plc, Belgard Castle, Clondalkin, Dublin 22, Ireland TELEPHONE +353.1.404
1000 FAX +353.1.404 1007
E-MAIL mail@crh.com WEBSITE www.crh.com Registered Office, 42 Fitzwilliam
Square, Dublin 2, Ireland
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