IFRS Financial Statements
GlaxoSmithKline PLC
29 October 2004
Issued: 29th October 2004, London
GlaxoSmithKline plc
Financial statements in accordance with
International Financial Reporting Standards
2003 Full year
2004 Quarter 1
2004 Quarter 2
2004 Half-year
GlaxoSmithKline prepares its financial results in £ sterling.
Accordingly these IFRS Financial statements are prepared in £ sterling.
www.gsk.com
Brand names appearing in italics throughout this document are trade marks of GlaxoSmithKline or associated companies
with the exception of Levitra a trade mark of Bayer which is used under licence by the Group.
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions
investors that any forward-looking statements or projections made by the company, including those made in this
Announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those
projected. Factors that may affect the Group's operations are described under 'Risk Factors' in the Operating and
Financial Review and Prospects in the company's Annual Report on Form 20-F for 2003.
Table of contents
Page
Basis of preparation 3
Income statement
Explanation of IFRS income statement adjustments 6
2003 Full year 8
2004 Quarter 1 10
2004 Quarter 2 12
2004 Half-year 14
Turnover
Pharmaceuticals
2003 Full year 17
2004 Quarter 1 18
2004 Quarter 2 19
2004 Half-year 20
Consumer Healthcare
2003 Full year 21
2004 Quarter 1 21
2004 Quarter 2 21
2004 Half-year 21
Balance sheet
Explanation of IFRS balance sheet adjustments 23
At 31st December 2003 25
At 31st March 2004 27
At 30th June 2004 29
Cash flow statement
Explanation of IFRS cash flow statement adjustments 32
2003 Full year 33
2004 Quarter 1 34
2004 Quarter 2 35
2004 Half-year 36
Reconciliation of movements in equity
At 31st December 2003 38
At 31st March 2004 39
At 30th June 2004 39
Reconciliation by component of equity at 1st January 2003 40
Basis of preparation
Introduction
Following a European Union Regulation issued in 2002, GlaxoSmithKline will move to reporting its financial
results in accordance with International Financial Reporting Standards (IFRS) from 1st January 2005. This
document presents the unaudited consolidated results of GlaxoSmithKline plc converted from the current UK
Generally Accepted Accounting Principles (UK GAAP) basis onto an IFRS basis for the full year 2003 and the first
and second quarters of 2004. The transition date to IFRS for GlaxoSmithKline is 1st January 2003.
Basis of preparation
This restatement document has been prepared on the basis of all IFRS and Standing Interpretations Committee
(SIC) and International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the IASB
effective for 2005 reporting, on the assumption that they will all be endorsed by the European Commission. At
the date of publication of this document, not all of these Standards have been endorsed by the European
Commission. The failure of the European Commission to endorse all of these standards in time for financial
reporting in 2005 could result in the need to change the basis of accounting or presentation of certain
financial information from that presented in this document. It is possible, therefore, that further changes
will be required to this information before it is published as official comparative information in the Quarter 1
and Quarter 2 Results Announcements in April and July 2005, respectively and in the Annual Report 2005.
The financial information presented within this document is unaudited.
IFRS 1 exemptions
IFRS 1, First-Time Adoption of International Financial Reporting Standards, permits those companies adopting
IFRS for the first time to take some exemptions from the full requirements of IFRS in the transition period.
GlaxoSmithKline intends to take the following key exemptions:
(a) Business combinations: Business combinations prior to the transition date (1st January 2003) have not been
restated onto an IFRS basis;
(b) Employee benefits: All cumulative actuarial gains and losses have been recognised in equity at the
transition date;
(c) Share-based payments: IFRS 2, Share-based Payment, applies to equity instruments, such as share options,
granted since 7th November 2002, but GlaxoSmithKline has elected to adopt full retrospective application of
the standard;
(d) Financial instruments: Financial instruments in the comparative periods to be presented in the Annual
Report 2005 (i.e. 2004 and 2003) are recorded on the existing UK GAAP basis, rather than in accordance with
IAS 32, Financial Instruments : Disclosure and Presentation, and IAS 39, Financial Instruments :
Recognition and Measurement (see below).
The financial information contained in this document has been prepared on the basis of taking these exemptions.
Financial instruments
One of the exemptions available under IFRS 1 relaxes the requirement for comparative information to be presented
in the Annual Report 2005 to comply with IAS 32 and IAS 39. GlaxoSmithKline intends to take advantage of this
exemption, and so in 2003 and 2004 financial instruments will continue to be accounted for and presented on a UK
GAAP basis. On 1st January 2005 there will be an adjustment to the opening balance sheet to reflect the
movements from the UK GAAP carrying values to the IAS 32/39 values, which for many financial instruments will be
fair value.
The financial instruments concerned are:
(a) Held at fair value under IFRS with movements recorded in equity:
• Equity investments
• Liquid investments
• Derivatives classified as cash flow hedging instruments.
(b) Held at fair value under IFRS with movements recorded in the income statement:
• Equity collar linked to the Group's investment in Quest Diagnostics, Inc.
• Put and call options linked to the Group's strategic alliance with Theravance, Inc.
• Other derivatives not classified as hedging instruments, including embedded derivatives
• Derivatives classified as fair value hedges together with the hedged element of the relevant asset or
liability.
(c) Presentation differences only
• Non-equity minority interests (repaid during 2004).
Although valuations are inherently unpredictable, the only items that are likely to have a material impact are equity
investments, the Quest collar and the Theravance put and call options. If the IAS 39 valuation rules had been applied
the overall effect would have been to reduce profit before tax in 2003 by some £65 million and for the first half of
2004 by some £92 million. The 2003 adjustment includes £14 million for equity investments, £42 million related to the
reduction in the asset value of the Quest Collar, and £9 million on all other financial instruments. Of the H1 2004
charge of £92 million, £8 million relates to an adjustment for equity investments, £27 million arises from a reduction
in the asset value of the Quest collar and £60 million arises from the recognition of the net liability for the
Theravance put and call options. These are offset by a £3 million credit on all other financial instruments.
Effective tax rate
The effective rate of taxation for 2003 IFRS restated financial statements is 27.7%. This is the rate which is forecast
to apply throughout 2004 and is therefore the rate which has been applied to the results for the first and second
quarters. The actual tax rate for the full year 2004 may differ from this forecast rate if the actual tax effects of
various items, particularly in relation to share-based payments and intercompany profit in inventory, differ from those
assumed in the forecast calculation.
Presentation of the financial statements
The financial statements contained in this document are presented in accordance with IAS 1. However where no definitive
guidance on presentation exists, a UK GAAP approach has been taken in order to minimise the number of restatement
adjustments. It is possible that certain aspects of the presentation of these financial statements may change as
further guidance is issued or a different reporting practice is established.
UK GAAP restatement for 2003
The UK GAAP results for 2003 have been restated following the implementation of UITF Abstract 38 'Accounting for ESOP
Trusts' and related amendments to Abstract 17 'Employee Share Schemes'. UITF 38 changed the presentation of an entity's
own shares held in an ESOP trust from requiring them to be recognised as assets to requiring them to be deducted in
arriving at shareholders' funds. UITF 17 (revised) requires that the minimum expense should be the difference between
the fair value of the shares at the date of award and the amount that an employee may be required to pay for the shares
(i.e. the intrinsic value of the award), spread over the vesting period. The restated information for 2003 has been
presented in the UK GAAP Results Announcements for the first and second quarters of 2004.
Further information
This document was approved by the Board of Directors on 29th October 2004 and is available on the company's website:
www.gsk.com or in hard-copy from the Company Secretary. GlaxoSmithKline intends to publish its results for the third
and fourth quarters of 2004 restated onto an IFRS basis in a similar manner on
10th February 2005.
Income statement
Explanation of IFRS income statement adjustments
2003 Full year
2004 Quarter 1
2004 Quarter 2
2004 Half-year
Explanation of IFRS income statement adjustments
A summary of the principal differences between UK GAAP and IFRS as they apply to GlaxoSmithKline are as follows:
(a) Customer allowances
This adjustment is purely a reclassification between turnover and expenses with no profit or cash flow effect. IFRS
has no detailed rules in relation to when certain marketing and promotional expenditure should be deducted from
turnover rather than recorded as an expense. However these rules do exist under US GAAP in EITF 01-09, Accounting for
Consideration Given by a Vendor to a Customer, which requires most marketing, advertising, and promotion payments made
to customers to be deducted from turnover. This has the most significant impact in the Consumer Healthcare business
where payments to large retailers for in-store advertising, preferential shelf-space, product listings etc. are
commonplace.
GlaxoSmithKline believes that best practice in revenue recognition is moving towards this US GAAP approach and, in the
absence of detailed guidance under IFRS, has decided to adopt a revenue recognition policy under IFRS in line with EITF
01-09. Therefore going forward there would be no difference between turnover reported under IFRS and turnover reported
under US GAAP.
(b) Share-based payments
The present UK GAAP approach to share-based payments is to record any intrinsic loss on grant suffered by the company.
This means that for share options granted at the market price, there is no charge to the income statement. Where shares
or options are granted at no cost to the employee (e.g. under long-term incentive plans) the income statement is
charged with an amount equal to the market price on the date of the award, spread over the performance period (usually
three years).
IFRS 2, Share-based Payment, and its UK GAAP equivalent FRS 20, which will come into force in 2005, requires the fair
value of the equity instruments issued to be charged to the income statement. For nil-cost options or share awards
granted to senior executives, although the calculation is different, the resultant charge is not materially different
from that under UK GAAP. The major difference arises in respect of share options; of the £368 million adjustment some
£350 million arises from the grant of share options at market price to approximately 12,000 employees. GlaxoSmithKline
has chosen to recognise all unvested options and awards retrospectively.
The adjustment for share-based payments is expected to reduce to a more normal level of £200-£250 million by 2005. The
considerably higher charge in 2003 arises from two main factors. Relatively few share options were granted during 2000
when the GW/SB merger was being finalised, but then in 2001 there was a full "catch-up" grant early in the year
followed by the normal annual grant in November 2001. In addition, the grants in 2001 were made at an average share
price in excess of £18. These share options will become exercisable in 2004 and therefore fall out of the charge in
2005, when the charge will reflect more current share prices and more normal grant levels.
GlaxoSmithKline receives a tax credit, as appropriate, which relates to share options and awards when exercised, based
on the gains the option or award holders make. The deferred tax asset represents an estimate of future tax relief for
this gain and is based on the potential gains available to the option or award holders at the balance sheet date. The
movement in deferred tax asset from one balance sheet to the next has resulted in the tax credit recorded in the income
statement.
(c) Coreg amortisation
The North American rights to Coreg were acquired at the time of the GW/SB merger as partial consideration for the
required disposal of Kytril to Roche. Under UK GAAP this was accounted for as an exchange of assets with no value being
attributed to Coreg on the balance sheet. IFRS, however, requires the acquired rights to Coreg to be added to
intangible assets at their fair value on the date of acquisition of $400 million, and then amortised over their
remaining useful life of eight years. This leads to an amortisation charge in 2003 of £31 million.
(d) Other intangible assets amortisation
Under UK GAAP, GlaxoSmithKline amortises intangible assets over their estimated expected useful lives from acquisition,
which can be up to a maximum of 15 years. IFRS only permits amortisation to commence when the asset becomes available
for use, with annual impairment testing required before this point. GlaxoSmithKline has determined that the point at
which amortisation of product-related assets commences under IFRS will normally be regulatory approval. The majority
of GlaxoSmithKline's intangible assets relates to the acquisition of rights to compounds in development and so has not
reached the point at which amortisation commences. This has led to a reduction in the amortisation charge in the
periods presented, which is likely to reverse in the future as these compounds reach regulatory approval and
amortisation is then charged over a shorter period.
(e) Goodwill amortisation
UK GAAP requires goodwill to be amortised over its estimated expected useful life, which GlaxoSmithKline has determined
to be normally no longer than 20 years. Under IFRS, however, goodwill is considered to have an indefinite life and so
is not amortised, but is subject to annual impairment testing. This adjustment therefore reverses the goodwill
amortisation charged under UK GAAP, including that recorded in the profit on share of associates line relating to the
acquisition of the Group's interest in Quest Diagnostics, Inc. Under the business combinations exemption of IFRS 1,
goodwill previously written off direct to reserves under UK GAAP is not recycled to the income statement on the
disposal or part-disposal of the subsidiary or associate, as it would be under UK GAAP.
(f) Pensions and other post-employment benefits
GlaxoSmithKline accounts under UK GAAP for pensions and other post-employment benefits (OPEBs) in accordance with SSAP
24, which spreads the costs of providing the benefits over the estimated average service lives of the employees. The
additional FRS 17 disclosures give the pension fund surpluses and deficits and the liabilities for OPEBs based on the
valuation methodologies required by that Standard.
IAS 19 takes a similar valuation approach to FRS 17, and in accordance with the transitional provisions of IAS 19 the
surpluses and deficits have been recognised on the balance sheet at the transition date of 1st January 2003. However,
whereas FRS 17 would recognise any movements in the surpluses or deficits immediately in subsequent balance sheets, IAS
19 permits a smoothing approach to be adopted. This means that only actuarial movements outside a "corridor" are
required to be recognised, but even then they are recognised through the income statement over the estimated average
service lives of the employees concerned. This means that, except on initial adoption, the balance sheet does not show
the full surplus or deficit positions of the funds.
The Group's policy is to charge out to the operating businesses the service cost element of the pension charge, which
then gets reported within Cost of Sales, S,G&A or R&D as appropriate, but not to charge out the element related to the
funding deficit, which is all reported in S,G&A. Under IAS 19, the service cost element of the total charge is
considerably higher than under SSAP 24 and the funding deficit element lower. This leads to an additional
reclassification adjustment between the income statement expense headings.
In the USA, the recently enacted Medicare Prescription Drug, Improvement and Modernization Act is expected to lead to
payments being received by GlaxoSmithKline from the US Government in respect of its employee healthcare plans. At
present there is no clear consensus on how these receipts should be accounted for under IAS 19. GlaxoSmithKline has
recognised these receipts as an actuarial adjustment and so the impact of them in the income statement is smoothed
through the "corridor" approach outlined above. This treatment would change if guidance is issued which requires a
different accounting treatment.
(g) Share of profits of associates
The share of profits of associates is reported within profit before tax for the Group. However, IFRS requires this
share of profits to be the net profit attributable to the Group, i.e. after interest, tax and minority interests of the
associate. This leads to a reclassification adjustment removing the share of the associates' interest, tax and
minority interests from those lines in the income statement and netting them all together in the share of profits of
associates line.
(h) Other adjustments
There are a number of other minor adjustments and reclassifications, the most significant of which relates to deferred
tax on intercompany profit in inventory.
Under UK GAAP deferred tax on the provision for intercompany profit held in inventory is calculated at the supplying
company's effective tax rate. IFRS, however, takes a balance sheet approach to the recognition of deferred tax which
results in the tax rate of the company holding the inventory at the balance sheet date being applied to the provision.
As the companies in the Group that hold the majority of the inventory tend to be in relatively higher tax rate
countries than the Group's manufacturing companies there is an increase in the deferred tax asset recognised.
INCOME STATEMENT
Year ended 31st December 2003
Merger,
UK GAAP restructuring
business IFRS IFRS and disposal
performance adjustments business of businesses IFRS
(Note 1) (Note 2) performance (Note 3) statutory
£m £m £m £m £m
--- --- --- --- ---
TURNOVER
Pharmaceuticals 18,181 (67) 18,114 - 18,114
Consumer Healthcare 3,260 (304) 2,956 - 2,956
--- --- --- --- ---
21,441 (371) 21,070 - 21,070
Cost of sales (4,188) (33) (4,221) (356) (4,577)
--- --- --- --- ---
Gross profit 17,253 (404) 16,849 (356) 16,493
% of sales 80.5% 80.0% 78.3%
Selling, general and administration (7,579) 145 (7,434) (18) (7,452)
% of sales 35.4% 35.3% 35.4%
Research and development (2,770) (74) (2,844) (21) (2,865)
% of sales 12.9% 13.5% 13.6%
--- --- --- --- ---
TRADING PROFIT 6,904 (333) 6,571 (395) 6,176
% of sales 32.2% 31.2% 29.3%
Other operating income/(expense) (133) 7 (126) - (126)
--- --- --- --- ---
Operating profit 6,771 (326) 6,445 (395) 6,050
Share of profits/(losses) of joint ventures 93 (36) 57 - 57
and associates
Profit on disposal of business - - - 5 5
--- --- --- --- ---
Profit before interest 6,864 (362) 6,502 (390) 6,112
Finance income 61 - 61 - 61
Finance costs (222) 8 (214) - (214)
--- --- --- --- ---
PROFIT BEFORE TAXATION 6,703 (354) 6,349 (390) 5,959
Taxation (1,838) 78 (1,760) 109 (1,651)
Tax rate % 27.4% 27.7% 27.7%
--- --- --- --- ---
Profit after taxation 4,865 (276) 4,589 (281) 4,308
Equity minority interests (94) (1) (95) - (95)
Preference share dividends (12) - (12) - (12)
--- --- --- --- ---
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 4,759 (277) 4,482 (281) 4,201
--- --- --- --- ---
EARNINGS PER SHARE 82.0p (4.8)p 77.2p (4.9)p 72.3p
--- --- --- --- ---
Diluted earnings per share 81.7p (4.7)p 77.0p (4.9)p 72.1p
--- --- --- --- ---
Weighted average number of shares (millions) 5,806 5,806 5,806
--- --- ---
Notes:
1. The UK GAAP business performance results have been restated for the implementation of UITF 38 and UITF 17
(revised).
2. The analysis of these adjustments is shown on the next page.
3. There are no IFRS adjustments on merger, restructuring and disposal of businesses.
Analysis of IFRS adjustments to the Income Statement
Year ended 31st December 2003
Other
Share- Coreg intangible Pensions Share of
Customer based amorti- assets Goodwill and profits of IFRS
allowances payments amortisation amortisation OPEBs associates Other adjust-
(a) (b) sation (d) (e) (f) (g) (h)
(c) ments
£m £m £m £m £m £m £m £m £m
--- --- --- --- --- --- --- -- ---
Turnover (371) - - - - - - - (371)
Cost of sales 20 (41) - - - (12) - - (33)
--- --- --- --- --- --- --- -- ---
Gross profit (351) (41) - - - (12) - - (404)
Selling, general 351 (220) (31) - 13 31 - 1 145
and
administration
Research and - (107) - 42 - (8) - (1) (74)
development
--- --- --- --- --- --- --- --- ---
Trading profit - (368) (31) 42 13 11 - - (333)
Other operating - - - - - - - 7 7
income/(expenses)
--- --- --- --- --- --- --- -- ---
Operating profit - (368) (31) 42 13 11 - 7 (326)
Share of profits/ - - - 1 13 - (50) - (36)
(losses) of joint
ventures and
associates
--- --- --- --- --- --- --- -- ---
Profit before - (368) (31) 43 26 11 (50) 7 (362)
interest
Finance income - - - - - - - - -
Finance costs - - - - - - 8 - 8
--- --- --- --- --- --- --- -- ---
Profit before - (368) (31) 43 26 11 (42) 7 (354)
taxation
Taxation - 24 10 (13) - (7) 40 24 78
--- --- --- --- --- --- --- -- ---
Profit after - (344) (21) 30 26 4 (2) 31 (276)
taxation
Minority - - - - - (3) 2 - (1)
interests
--- --- --- --- --- --- --- -- ---
Profit - (344) (21) 30 26 1 - 31 (277)
attributable to
shareholders
--- --- --- --- --- --- --- -- ---
Earnings per - (5.9)p (0.3)p 0.5p 0.4p - - 0.5p (4.8)p
share (basic)
--- --- --- --- --- --- --- -- ---
INCOME STATEMENT
Three months ended 31st March 2004
IFRS
adjustments
UK GAAP (Note) IFRS
£m £m £m
--- --- ---
TURNOVER
Pharmaceuticals 4,180 (12) 4,168
Consumer Healthcare 763 (76) 687
--- --- ---
4,943 (88) 4,855
Cost of sales (1,024) (11) (1,035)
--- --- ---
Gross profit 3,919 (99) 3,820
% of sales 79.3% 78.7%
Selling, general and administration (1,726) 19 (1,707)
% of sales 34.9% 35.2%
Research and development (631) (28) (659)
% of sales 12.8% 13.6%
--- --- ---
TRADING PROFIT 1,562 (108) 1,454
% of sales 31.6% 29.9%
Other operating income/(expense) 35 - 35
--- --- ---
Operating profit 1,597 (108) 1,489
Share of profits/(losses) of joint ventures and associates 22 (8) 14
--- --- ---
Profit before interest 1,619 (116) 1,503
Finance income 65 - 65
Finance costs (108) 2 (106)
--- --- ---
PROFIT BEFORE TAXATION 1,576 (114) 1,462
Taxation (433) 28 (405)
Tax rate % 27.5% 27.7%
--- --- ---
Profit after taxation 1,143 (86) 1,057
Equity minority interests (22) 1 (21)
Preference share dividends (2) - (2)
--- --- ---
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 1,119 (85) 1,034
--- --- ---
EARNINGS PER SHARE 19.4p (1.5)p 17.9p
--- --- ---
Diluted earnings per share 19.4p (1.5)p 17.9p
--- --- ---
Weighted average number of shares 5,768 5,768
(millions)
--- ---
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS adjustments to the Income Statement
Three months ended March 2004
Other
Share- Coreg intangible Pensions Share of
Customer based amorti- assets Goodwill and profits of IFRS
allowances payments amortisation amortisation OPEBs associates Other adjust-
(a) (b) sation (d) (e) (f) (g) (h)
(c) ments
£m £m £m £m £m £m £m £m £m
--- --- --- --- --- --- --- -- ---
Turnover (88) - - - - - - - (88)
Cost of sales 6 (12) - - - (6) - 1 (11)
--- --- --- --- --- --- --- -- ---
Gross profit (82) (12) - - - (6) - 1 (99)
Selling, general 82 (62) (6) - 3 3 - (1) 19
and
administration
Research and - (30) - 9 - (6) - (1) (28)
development
--- --- --- --- --- --- --- -- ---
Trading profit - (104) (6) 9 3 (9) - (1) (108)
Other operating - - - - - - - - -
income/(expense)
--- --- --- --- --- --- --- -- ---
Operating profit - (104) (6) 9 3 (9) - (1) (108)
Share of profits/ - - - - 3 - (11) - (8)
(losses) of joint
ventures and
associates
--- --- --- --- --- --- --- -- ---
Profit before - (104) (6) 9 6 (9) (11) (1) (116)
interest
Finance income - - - - - - - - -
Finance costs - - - - - - 2 - 2
--- --- --- --- --- --- --- -- ---
Profit before - (104) (6) 9 6 (9) (9) (1) (114)
taxation
Taxation - 7 2 (3) - 3 8 11 28
--- --- --- --- --- --- --- -- ---
Profit after - (97) (4) 6 6 (6) (1) 10 (86)
taxation
Minority - - - - - - 1 - 1
interests
--- --- --- --- --- --- --- -- ---
Profit - (97) (4) 6 6 (6) - 10 (85)
attributable to
shareholders
--- --- --- --- --- --- --- --- ---
Earnings per - (1.7)p (0.1)p 0.1p 0.1p (0.1)p - 0.2p (1.5)p
share (basic)
--- --- --- --- --- --- --- --- ---
INCOME STATEMENT
Three months ended 30th June 2004
IFRS
adjustments IFRS
UK GAAP (Note) statutory
£m £m £m
--- --- ---
TURNOVER 4,266 (11) 4,255
Pharmaceuticals 798 (82) 716
Consumer Healthcare
--- --- ---
5,064 (93) 4,971
Cost of sales (1,031) (13) (1,044)
--- --- ---
Gross profit 4,033 (106) 3,927
% of sales 79.6% 79.0%
Selling, general and administration (1,641) 34 (1,607)
% of sales 32.4% 32.3%
Research and development (680) (16) (696)
% of sales 13.4% 14.0%
--- --- ---
TRADING PROFIT 1,712 (88) 1,624
% of sales 33.8% 32.7%
Other operating income/(expense) (102) - (102)
--- --- ---
Operating profit 1,610 (88) 1,522
Share of profits/(losses) of joint ventures and associates 28 (12) 16
Profit on disposal of interest in associate 41 4 45
--- --- ---
Profit before interest 1,679 (96) 1,583
Finance income 99 - 99
Finance costs (147) 2 (145)
--- --- ---
PROFIT BEFORE TAXATION 1,631 (94) 1,537
Taxation (449) 24 (425)
Tax rate % 27.5% 27.7%
--- --- ---
Profit after taxation 1,182 (70) 1,112
Equity minority interests (25) - (25)
Preference share dividends - - -
--- --- ---
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 1,157 (70) 1,087
--- --- ---
EARNINGS PER SHARE 20.1p (1.2)p 18.9p
--- --- ---
Diluted earnings per share 20.1p (1.2)p 18.9p
--- --- ---
Weighted average number of shares 5,769 5,769
(millions)
--- ---
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS adjustments to the Income Statement
Three months ended 30th June 2004
Other
Share- Coreg intangible Pensions Share of
Customer based amorti- assets Goodwill and profits of IFRS
allowances payments amortisation amortisation OPEBs associates Other adjust-
(a) (b) sation (d) (e) (f) (g) (h)
(c) ments
£m £m £m £m £m £m £m £m £m
--- --- --- --- --- --- --- -- ---
Turnover (93) - - - - - - - (93)
Cost of sales - (8) - - - (4) - (1) (13)
--- --- --- --- --- --- --- -- ---
Gross profit (93) (8) - - - (4) - (1) (106)
Selling, general 93 (47) (7) - 3 (8) - - 34
and
administration
Research and - (22) - 11 - (4) - (1) (16)
development
--- --- --- --- --- --- --- -- ---
Trading profit - (77) (7) 11 3 (16) - (2) (88)
Other operating - - - - - - - - -
income/(expense)
--- --- --- --- --- --- --- -- ---
Operating profit - (77) (7) 11 3 (16) - (2) (88)
Share of profits/ - - - - 2 - (14) - (12)
(losses) of joint
ventures and
associates
Profit on - - - - 4 - - - 4
disposal of
interest in
associates
--- --- --- --- --- --- --- -- ---
Profit before - (77) (7) 11 9 (16) (14) (2) (96)
interest
Finance income - - - - - - - - -
Finance costs - - - - - - 2 - 2
--- --- --- --- --- --- --- -- ---
Profit before - (77) (7) 11 9 (16) (12) (2) (94)
taxation
Taxation - 5 2 (4) - 6 12 3 24
--- --- --- --- --- --- --- -- ---
Profit after - (72) (5) 7 9 (10) - 1 (70)
taxation
Minority - - - - - - - - -
interests
--- --- --- --- --- --- --- -- ---
Profit - (72) (5) 7 9 (10) - 1 (70)
attributable to
shareholders
--- --- --- --- --- --- --- -- ---
Earnings per - (1.2)p (0.1)p 0.1p 0.2p (0.2)p - - (1.2)p
share (basic)
--- --- --- --- --- --- --- -- ---
INCOME STATEMENT
Six months ended 30th June 2004
IFRS
adjustments IFRS
UK GAAP (Note) statutory
£m £m £m
--- --- ---
TURNOVER
Pharmaceuticals 8,446 (23) 8,423
Consumer Healthcare 1,561 (158) 1,403
--- --- ---
10,007 (181) 9,826
Cost of sales (2,055) (24) (2,079)
--- --- ---
Gross profit 7,952 (205) 7,747
% of sales 79.5% 78.8%
Selling, general and administration (3,367) 53 (3,314)
% of sales 33.7% 33.7%
Research and development (1,311) (44) (1,355)
% of sales 13.1% 13.8%
--- --- ---
TRADING PROFIT 3,274 (196) 3,078
% of sales 32.7% 31.3%
Other operating income/(expense) (67) - (67)
--- --- ---
Operating profit 3,207 (196) 3,011
Share of profits/(losses) of joint ventures and associates 50 (20) 30
Profit on disposal of interest in associate 41 4 45
--- --- ---
Profit before interest 3,298 (212) 3,086
Finance income 164 - 164
Finance costs (255) 4 (251)
--- --- ---
PROFIT BEFORE TAXATION 3,207 (208) 2,999
Taxation (882) 52 (830)
Tax rate % 27.5% 27.7%
--- --- ---
Profit after taxation 2,325 (156) 2,169
Equity minority interests (47) 1 (46)
Preference share dividends (2) - (2)
--- --- ---
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 2,276 (155) 2,121
--- --- ---
EARNINGS PER SHARE 39.5p (2.7)p 36.8p
--- --- ---
Diluted earnings per share 39.5p (2.7)p 36.8p
--- --- ---
Weighted average number of shares 5,769 5,769
(millions)
--- ---
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS adjustments to the Income Statement
Six months ended 30th June 2004
Other
Share- Coreg intangible Pensions Share of
Customer based amorti- assets Goodwill and profits of IFRS
allowances payments amortisation amortisation OPEBs associates Other adjust-
(a) (b) sation (d) (e) (f) (g) (h)
(c) ments
£m £m £m £m £m £m £m £m £m
--- --- --- --- --- --- --- -- ---
Turnover (181) - - - - - - - (181)
Cost of sales 6 (20) - - - (10) - - (24)
--- --- --- --- --- --- --- -- ---
Gross profit (175) (20) - - - (10) - - (205)
Selling, general 175 (109) (13) - 6 (5) - (1) 53
and
administration
Research and - (52) - 20 - (10) - (2) (44)
development
--- --- --- --- --- --- --- -- ---
Trading profit - (181) (13) 20 6 (25) - (3) (196)
Other operating - - - - - - - - -
income/(expense)
--- --- --- --- --- --- --- -- ---
Operating profit - (181) (13) 20 6 (25) - (3) (196)
Share of profits/ - - - - 5 - (25) - (20)
(losses) of joint
ventures and
associates
Profit on - - - - 4 - - - 4
disposal of
interest in
associate
--- --- --- --- --- --- --- -- ---
Profit before - (181) (13) 20 15 (25) (25) (3) (212)
interest
Finance income - - - - - - - - -
Finance costs - - - - - - 4 - 4
--- --- --- --- --- --- --- -- ---
Profit before - (181) (13) 20 15 (25) (21) (3) (208)
taxation
Taxation - 12 4 (7) - 9 20 14 52
--- --- --- --- --- --- --- -- ---
Profit after - (169) (9) 13 15 (16) (1) 11 (156)
taxation
Minority - - - - - - 1 - 1
interests
--- --- --- --- --- --- --- -- ---
Profit - (169) (9) 13 15 (16) - 11 (155)
attributable to
shareholders
--- --- --- --- --- --- --- -- ---
Earnings per - (2.9)p (0.2)p 0.2p 0.3p (0.3)p - 0.2p (2.7)p
share (basic)
--- --- --- --- --- --- --- -- ---
Turnover
Pharmaceuticals
2003 Full year
2004 Quarter 1
2004 Quarter 2
2004 Half-year
Consumer Healthcare
2003 Full year
2004 Quarter 1
2004 Quarter 2
2004 Half-year
PHARMACEUTICAL TURNOVER
Year ended 31st December 2003
Total USA Europe International
--------------- --------------- --------------- ---------------
UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS
£m £m £m £m £m £m £m £m
------- ----- ------- ----- ------- ----- ------- -----
RESPIRATORY 4,417 4,390 2,242 2,242 1,481 1,454 694 694
Seretide/Advair, 3,352 3,328 1,750 1,750 1,170 1,146 432 432
Flixotide/Flovent, Serevent
Seretide/Advair 2,214 2,192 1,235 1,235 773 751 206 206
Flixotide/Flovent 705 704 319 319 208 207 178 178
Serevent 433 432 196 196 189 188 48 48
Flixonase/Flonase 594 594 461 461 56 56 77 77
CENTRAL NERVOUS SYSTEM 4,455 4,446 3,112 3,112 847 838 496 496
Depression 2,830 2,830 2,107 2,107 369 369 354 354
Seroxat/Paxil 1,877 1,877 1,179 1,179 369 369 329 329
Wellbutrin 953 953 928 928 - - 25 25
Migraine 849 848 609 609 179 178 61 61
Imigran/Imitrex 760 759 560 560 147 146 53 53
Lamictal 556 549 311 311 202 195 43 43
Requip 99 98 47 47 47 46 5 5
ANTI-VIRALS 2,349 2,345 1,159 1,159 726 722 464 464
HIV 1,508 1,505 798 798 555 552 155 155
Combivir 589 588 301 301 218 217 70 70
Trizivir 376 375 219 219 143 142 14 14
Epivir 293 293 148 148 107 107 38 38
Ziagen 167 167 86 86 61 61 20 20
Agenerase 31 31 19 19 9 9 3 3
Herpes 669 668 325 325 148 147 196 196
Valtrex 499 498 316 316 86 85 97 97
Zovirax 170 170 9 9 62 62 99 99
Zeffix 129 129 10 10 17 17 102 102
ANTI-BACTERIALS 1,815 1,800 524 524 755 741 536 535
Augmentin 825 825 312 312 332 332 181 181
Zinnat/Ceftin 246 232 22 22 134 121 90 89
METABOLIC 1,079 1,077 755 755 116 114 208 208
Avandia, Avandamet 931 929 755 755 70 68 106 106
VACCINES 1,123 1,121 281 281 495 493 347 347
Hepatitis 417 417 157 157 192 192 68 68
Infanrix, Pediarix 336 336 124 124 147 147 65 65
ONCOLOGY AND EMESIS 1,001 1,000 743 743 163 163 95 94
Zofran 774 774 575 575 126 126 73 73
Hycamtin 110 110 77 77 25 25 8 8
CARDIOVASCULAR AND UROGENITAL 771 770 495 495 176 175 100 100
Coreg 361 361 346 346 - - 15 15
Levitra 37 37 22 22 11 11 4 4
Avodart 19 19 14 14 5 5 - -
OTHER 1,171 1,165 99 99 355 350 717 716
Zantac 328 328 77 77 94 94 157 157
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 18,181 18,114 9,410 9,410 5,114 5,050 3,657 3,654
-------------- -------------- ------------- -------------
Turnover includes co-promotion income.
PHARMACEUTICAL TURNOVER
Three months ended 31st March 2004
Total USA Europe International
--------------- --------------- --------------- ---------------
UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS
£m £m £m £m £m £m £m £m
------- ----- ------- ----- ------- ----- ------- -----
RESPIRATORY 1,086 1,082 548 548 374 370 164 164
Seretide/Advair, 824 820 416 416 301 297 107 107
Flixotide/Flovent, Serevent
Seretide/Advair 581 577 317 317 211 207 53 53
Flixotide/Flovent 154 154 63 63 48 48 43 43
Serevent 89 89 36 36 42 42 11 11
Flixonase/Flonase 157 157 126 126 14 14 17 17
CENTRAL NERVOUS SYSTEM 914 914 612 612 193 193 109 109
Depression 512 512 365 365 71 71 76 76
Seroxat/Paxil 291 291 148 148 71 71 72 72
Wellbutrin 221 221 217 217 - - 4 4
Migraine 192 192 135 135 44 44 13 13
Imigran/Imitrex 172 172 126 126 35 35 11 11
Lamictal 153 153 91 91 51 51 11 11
Requip 26 26 12 12 13 13 1 1
ANTI-VIRALS 562 562 271 271 183 183 108 108
HIV 348 348 172 172 140 140 36 36
Combivir 139 139 68 68 56 56 15 15
Trizivir 81 81 43 43 34 34 4 4
Epivir 71 71 33 33 29 29 9 9
Ziagen 38 38 18 18 15 15 5 5
Agenerase 9 9 6 6 2 2 1 1
Herpes 174 174 89 89 37 37 48 48
Valtrex 133 133 86 86 22 22 25 25
Zovirax 41 41 3 3 15 15 23 23
Zeffix 30 30 3 3 5 5 22 22
ANTI-BACTERIALS 426 422 111 111 194 190 121 121
Augmentin 204 204 78 78 82 82 44 44
Zinnat/Ceftin 63 59 4 4 41 37 18 18
METABOLIC 270 269 185 185 31 30 54 54
Avandia, Avandamet 238 237 185 185 22 21 31 31
VACCINES 240 239 55 55 101 100 84 84
Hepatitis 90 90 31 31 42 42 17 17
Infanrix, Pediarix 76 76 24 24 35 35 17 17
ONCOLOGY AND EMESIS 222 222 160 160 42 42 20 20
Zofran 180 180 132 132 32 32 16 16
Hycamtin 24 24 16 16 7 7 1 1
CARDIOVASCULAR AND UROGENITAL 200 200 129 129 49 49 22 22
Coreg 94 94 91 91 - - 3 3
Levitra 17 17 11 11 5 5 1 1
Avodart 10 10 6 6 4 4 - -
OTHER 260 258 22 22 79 77 159 159
Zantac 68 68 17 17 20 20 31 31
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 4,180 4,168 2,093 2,093 1,246 1,234 841 841
-------------- -------------- ------------- -------------
Turnover includes co-promotion income.
PHARMACEUTICAL TURNOVER
Three months ended 30th June 2004
Total USA Europe International
--------------- --------------- --------------- ---------------
UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS
£m £m £m £m £m £m £m £m
------- ----- ------- ----- ------- ----- ------- -----
RESPIRATORY 1,086 1,080 511 511 403 397 172 172
Seretide/Advair, 852 847 405 405 329 324 118 118
Flixotide/Flovent, Serevent
Seretide/Advair 603 598 304 304 240 235 59 59
Flixotide/Flovent 156 156 65 65 48 48 43 43
Serevent 93 93 36 36 41 41 16 16
Flixonase/Flonase 133 133 100 100 19 19 14 14
CENTRAL NERVOUS SYSTEM 877 877 579 579 191 191 107 107
Depression 477 477 337 337 67 67 73 73
Seroxat/Paxil 284 284 146 146 67 67 71 71
Wellbutrin 193 193 191 191 - - 2 2
Migraine 176 176 117 117 44 44 15 15
Imigran/Imitrex 158 158 109 109 36 36 13 13
Lamictal 171 171 104 104 56 56 11 11
Requip 29 29 13 13 14 14 2 2
Zyban 14 14 5 5 7 7 2 2
ANTI-VIRALS 595 595 296 296 183 183 116 116
HIV 368 368 191 191 141 141 36 36
Combivir 141 141 69 69 56 56 16 16
Trizivir 87 87 49 49 34 34 4 4
Epivir 77 77 39 39 29 29 9 9
Ziagen 37 37 18 18 15 15 4 4
Agenerase, Lexiva 15 15 12 12 3 3 - -
Herpes 182 182 97 97 35 35 50 50
Valtrex 145 145 95 95 23 23 27 27
Zovirax 37 37 2 2 12 12 23 23
Zeffix 33 33 2 2 5 5 26 26
ANTI-BACTERIALS 386 382 89 89 169 165 128 128
Augmentin 178 178 53 53 75 75 50 50
Zinnat/Ceftin 52 48 2 2 31 27 19 19
METABOLIC 339 338 233 233 31 30 75 75
Avandia, Avandamet 307 306 233 233 25 24 49 49
VACCINES 278 278 67 67 116 116 95 95
Hepatitis 105 105 35 35 51 51 19 19
Infanrix, Pediarix 86 86 32 32 38 38 16 16
ONCOLOGY AND EMESIS 237 237 172 172 44 44 21 21
Zofran 192 192 141 141 34 34 17 17
Hycamtin 25 25 16 16 7 7 2 2
CARDIOVASCULAR AND UROGENITAL 220 220 141 141 53 53 26 26
Coreg 113 113 112 112 - - 1 1
Levitra 9 9 1 1 5 5 3 3
Avodart 14 14 7 7 6 6 1 1
OTHER 248 248 24 24 73 73 151 151
Zantac 70 70 20 20 18 18 32 32
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 4,266 4,255 2,112 2,112 1,263 1,252 891 891
-------------- -------------- ------------- -------------
Turnover includes co-promotion income.
PHARMACEUTICAL TURNOVER
Six months ended 30th June 2004
Total USA Europe International
--------------- --------------- --------------- ---------------
UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS
£m £m £m £m £m £m £m £m
------- ----- ------- ----- ------- ----- ------- -----
RESPIRATORY 2,172 2,162 1,059 1,059 777 767 336 336
Seretide/Advair, 1,676 1,667 821 821 630 621 225 225
Flixotide/Flovent, Serevent
Seretide/Advair 1,184 1,175 621 621 451 442 112 112
Flixotide/Flovent 310 310 128 128 96 96 86 86
Serevent 182 182 72 72 83 83 27 27
Flixonase/Flonase 290 290 226 226 33 33 31 31
CENTRAL NERVOUS SYSTEM 1,791 1,791 1,191 1,191 384 384 216 216
Depression 989 989 702 702 138 138 149 149
Seroxat/Paxil 575 575 294 294 138 138 143 143
Wellbutrin 414 414 408 408 - - 6 6
Migraine 368 368 252 252 88 88 28 28
Imigran/Imitrex 330 330 235 235 71 71 24 24
Lamictal 324 324 195 195 107 107 22 22
Requip 55 55 25 25 27 27 3 3
Zyban 33 33 12 12 16 16 5 5
ANTI-VIRALS 1,157 1,157 567 567 366 366 224 224
HIV 716 716 363 363 281 281 72 72
Combivir 280 280 137 137 112 112 31 31
Trizivir 168 168 92 92 68 68 8 8
Epivir 148 148 72 72 58 58 18 18
Ziagen 75 75 36 36 30 30 9 9
Agenerase, Lexiva 24 24 18 18 5 5 1 1
Herpes 356 356 186 186 72 72 98 98
Valtrex 278 278 181 181 45 45 52 52
Zovirax 78 78 5 5 27 27 46 46
Zeffix 63 63 5 5 10 10 48 48
ANTI-BACTERIALS 812 804 200 200 363 355 249 249
Augmentin 382 382 131 131 157 157 94 94
Zinnat/Ceftin 115 107 6 6 72 64 37 37
METABOLIC 609 607 418 418 62 60 129 129
Avandia, Avandamet 545 543 418 418 47 45 80 80
VACCINES 518 517 122 122 217 216 179 179
Hepatitis 195 195 66 66 93 93 36 36
Infanrix, Pediarix 162 162 56 56 73 73 33 33
ONCOLOGY AND EMESIS 459 459 332 332 86 86 41 41
Zofran 372 372 273 273 66 66 33 33
Hycamtin 49 49 32 32 14 14 3 3
CARDIOVASCULAR AND UROGENITAL 420 420 270 270 102 102 48 48
Coreg 207 207 203 203 - - 4 4
Levitra 26 26 12 12 10 10 4 4
Avodart 24 24 13 13 10 10 1 1
OTHER 508 506 46 46 152 150 310 310
Zantac 138 138 37 37 38 38 63 63
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 8,446 8,423 4,205 4,205 2,509 2,486 1,732 1,732
-------------- -------------- ------------- -------------
Turnover includes co-promotion income.
CONSUMER HEALTHCARE TURNOVER
Year ended 31st December 2003
UK GAAP IFRS
£m £m
-------- --------
Over-the-counter medicines 1,556 1,472
Analgesics 342 328
Dermatological 237 225
Gastrointestinal 283 267
Respiratory tract 151 144
Smoking control 325 315
Natural wellness support 166 148
Other 52 45
Oral care 1,082 915
Nutritional healthcare 622 569
-------- --------
Total 3,260 2,956
-------- --------
CONSUMER HEALTHCARE TURNOVER
2004
Three months ended Three months ended Six months ended
31st March 2004 30th June 2004 30th June 2004
-------------------- -------------------- -------------------
UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS
£m £m £m £m £m £m
-------- -------- -------- -------- -------- --------
Over-the-counter medicines 353 332 357 335 710 667
Analgesics 85 81 89 85 174 166
Dermatological 45 42 53 50 98 92
Gastrointestinal 63 59 63 59 126 118
Respiratory tract 35 34 26 25 61 59
Smoking control 77 73 78 74 155 147
Natural wellness support 38 34 37 32 75 66
Other 10 9 11 10 21 19
Oral care 260 220 267 226 527 446
Nutritional healthcare 150 135 174 155 324 290
-------- -------- -------- -------- -------- --------
Total 763 687 798 716 1,561 1,403
-------- -------- -------- -------- -------- --------
Balance sheet
Explanation of IFRS balance sheet adjustments
At 31st December 2003
At 31st March 2004
At 31st June 2004
Explanation of IFRS balance sheet adjustments
(a) Dividend deferred
The practice under UK GAAP is to account for dividends proposed relating to any given accounting period in that period.
IFRS only recognises the liability for a dividend when it is declared, which is usually after the accounting period
to which it relates. Accordingly, there is an adjustment to the balance sheet at 31st December 2003 as the liability
for the fourth quarter dividend of £808 million is not recognised until the first quarter of 2004. Subsequent balance
sheets contain a similar adjustment.
(b) Share-based payments
The present UK GAAP approach to share-based payments is to record any intrinsic loss on grant suffered by the company.
This means that for share options granted at the market price there is no charge to the income statement. Where shares
or options are granted at no cost to the employee (e.g. under long-term incentive plans) the income statement is
charged with an amount equal to the market price on the date of the award, subject to meeting any performance targets,
spread over the performance period (usually three years). IFRS 2, Share-based Payment, requires the fair value of the
equity instruments issued to be charged to the income statement.
The shares held in the ESOP Trusts are matched to share options and awards granted. Under both UK GAAP and IFRS shares
held in the ESOP Trusts are recorded in equity and transfers are made between the carrying value of the shares and
retained earnings to reflect the value of the expected proceeds receivable on the exercise of options by employees.
However, there is a timing adjustment relating to this transfer arising from the different income statement treatments
of the cost of the share options and awards.
GlaxoSmithKline receives a tax credit, as appropriate, which relates to share options and awards when exercised, based
on the gains the option or award holders make. The deferred tax asset represents an estimate of future tax relief for
this gain and is based on the potential gains available to the option or award holders at the balance sheet date.
(c) Coreg capitalisation and amortisation
The North American rights to Coreg were acquired at the time of the GW/SB merger as partial consideration for the
required disposal of Kytril to Roche. Under UK GAAP this was accounted for as an exchange of assets with no value being
attributed to Coreg on the balance sheet. IFRS, however, requires the acquired rights to Coreg to be added to
intangible assets at their fair value on the date of acquisition of $400 million, and then amortised over their
remaining useful life of eight years.
(d) Other intangible assets amortisation
Under UK GAAP, GlaxoSmithKline amortises intangible assets over their estimated expected useful lives from acquisition,
which can be up to a maximum of 15 years. IFRS only permits amortisation to commence when the asset becomes available
for use, with annual impairment testing required before this point. GlaxoSmithKline has determined that the point at
which amortisation of product-related assets commences under IFRS will normally be regulatory approval. The majority
of GlaxoSmithKline's intangible assets relates to the acquisition of rights to compounds in development and so has not
reached the point at which amortisation commences. This has led to an increase in the carrying value of intangible
assets at the balance sheet dates.
(e) Goodwill amortisation reversal
UK GAAP requires goodwill to be amortised over its estimated expected useful life, which GlaxoSmithKline has determined
to be normally no longer than 20 years. Under IFRS, however, goodwill is considered to have an indefinite life and so
is not amortised, but is subject to annual impairment testing. This adjustment therefore reverses the goodwill
amortisation charged under UK GAAP, including that recorded in the investments in associates line relating to the
acquisition of the Group's interest in Quest Diagnostics, Inc. Under the business combinations exemption of IFRS 1,
goodwill previously written off direct to reserves under UK GAAP is not recycled to the income statement on the
disposal or part-disposal of the subsidiary or associate, as it would be under UK GAAP.
(f) Pensions and other post employment benefits
GlaxoSmithKline accounts under UK GAAP for pensions and other post-employment benefits (OPEBs) in accordance with SSAP
24, which spreads the costs of providing the benefits over the estimated average service lives of the employees. The
additional FRS 17 disclosures give the pension fund surpluses and deficits and the liabilities for OPEBs based on the
valuation methodologies required by that Standard.
IAS 19 takes a similar valuation approach to FRS 17, and in accordance with the transitional provisions of IAS 19 the
surpluses and deficits have been recognised on the balance sheet at the transition date of 1st January 2003. However,
whereas FRS 17 would recognise any movements in the surpluses or deficits immediately in subsequent balance sheets, IAS
19 permits a smoothing approach to be adopted. This means that only actuarial movements outside a "corridor" are
required to be recognised, but even then they are recognised through the income statement over the estimated average
service lives of the employees concerned. This means that, except on initial adoption, the balance sheet does not show
the true surplus or deficit positions of the funds.
(g) Other adjustments
There are a number of other less significant adjustments and reclassifications, which include:
• Computer software: All computer software is included within tangible fixed assets on the UK GAAP balance
sheet, but under IFRS only computer software which is integral to another fixed asset, such as an operating
system for a complex piece of machinery, is included in tangible fixed assets. All other computer software
is required to be recorded as an intangible asset.
• Deferred tax on intercompany profit in inventory: Under UK GAAP deferred tax on the provision for
intercompany profit held in inventory is calculated at the supplying company's effective tax rate. IFRS,
however, takes a balance sheet approach to the recognition of deferred tax which results in the tax rate of
the company holding the inventory at the balance sheet date being applied to the provision. As the
companies in the Group that hold the majority of the inventory tend to be in relatively higher tax rate
countries than the Group's manufacturing companies there is an increase in the deferred tax asset
recognised.
• Deferred tax on acquired brands: On acquisition of a company, where there is a difference between the fair
value of the brands and their tax cost in that company, a taxable temporary difference is created under IFRS
which has resulted in a reduction in the deferred tax asset balance.
• Cash equivalents reclassification: On the IFRS balance sheet liquid investments with maturities of less
than three months at acquisition are reclassified into cash and cash equivalents.
• Provisions reclassification: IFRS requires the elements of provisions which are expected to be paid within
one year of the balance sheet date to be presented on the balance sheet within current liabilities as short
term provisions.
BALANCE SHEET
At 31st December 2003
IFRS
Adjustments
UK GAAP (Note) IFRS
£m £m £m
ASSETS ---- ---- ----
Non-current assets
Property, plant and equipment 6,441 (285) 6,156
Goodwill 143 12 155
Other intangible assets 1,697 533 2,230
Investments in associates and joint ventures 196 14 210
Other investments 262 - 262
Deferred tax assets 1,441 377 1,818
Other non-current assets 522 9 531
---- ---- ----
Total non-current assets 10,702 660 11,362
---- ---- ----
Current assets
Inventories 2,109 - 2,109
Trade and other receivables 4,934 (439) 4,495
Liquid investments 2,493 (1,024) 1,469
Cash and cash equivalents 962 1,024 1,986
---- ---- ----
Total current assets 10,498 (439) 10,059
---- ---- ----
TOTAL ASSETS 21,200 221 21,421
---- ---- ----
LIABILITIES
Current liabilities
Short-term borrowings (1,452) - (1,452)
Trade and other payables (5,561) 844 (4,717)
Current tax payable (1,458) - (1,458)
Short-term provisions - (968) (968)
---- ---- ----
Total current liabilities (8,471) (124) (8,595)
---- ---- ----
Non-current liabilities
Long-term borrowings (3,651) - (3,651)
Deferred tax provision (618) 449 (169)
Pensions and other post-employment benefits (807) (1,702) (2,509)
Other provisions (1,617) 962 (655)
Other non-current liabilities (232) - (232)
---- ---- ----
Total non-current liabilities (6,925) (291) (7,216)
---- ---- ----
TOTAL LIABILITIES (15,396) (415) (15,811)
---- ---- ----
NET ASSETS 5,804 (194) 5,610
---- ---- ----
EQUITY
Share capital 1,487 - 1,487
Share premium account 264 - 264
Shares held by ESOP Trusts (2,729) 11 (2,718)
Other reserves 1,925 - 1,925
Retained earnings 4,112 (203) 3,909
---- ---- ----
5,059 (192) 4,867
Non equity minority interests 503 - 503
Equity minority interests 242 (2) 240
---- ---- ----
5,804 (194) 5,610
---- ---- ----
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS balance sheet adjustments
At 31st December 2003
Coreg Other
Share- capitalisation intangible Goodwill Pensions
Dividend based and assets amortisation and IFRS
deferred payments amortisation amortisation reversal OPEBs Other adjust-
(a) (b) (c) (d) (e) (f) (g) ments
£m £m £m £m £m £m £m £m
--- --- --- --- --- --- -- ---
ASSETS
Non-current assets
Property, Plant & - - - - - - (285) (285)
Equipment
Goodwill - - - - 12 - - 12
Other intangible assets - - 140 108 - - 285 533
Investments in associates - - - 1 13 - - 14
and
joint ventures
Other investments - - - - - - - -
Deferred tax assets - 72 (45) (18) - 213 155 377
Other non-current assets - - - - - 9 - 9
--- --- --- --- --- --- -- ---
Total non-current assets - 72 95 91 25 222 155 660
--- --- --- --- --- --- -- ---
Current assets
Inventories - - - - - - - -
Trade and other - - - - - (439) - (439)
receivables
Liquid investments - - - - - - (1,024) (1,024)
Cash and cash equivalents - - - - - - 1,024 1,024
--- --- --- --- --- --- -- ---
Total current assets - - - - - (439) - (439)
--- --- --- --- --- --- -- ---
TOTAL ASSETS - 72 95 91 25 (217) 155 221
--- --- --- --- --- --- -- ---
LIABILITIES
Current liabilities
Short-term borrowings - - - - - - - -
Trade and other payables 808 - - - - 36 - 844
Current tax payable - - - - - - - -
Short-term provisions - - - - - - (968) (968)
--- --- --- --- --- --- -- ---
Total current liabilities 808 - - - - 36 (968) (124)
Non-current liabilities
Long-term borrowings - - - - - - - -
Deferred tax provision - - - (19) - 453 15 449
Pensions and other post- - - - - - (1,702) - (1,702)
employment benefits
Other provisions - - - - - (6) 968 962
Other non-current - - - - - - - -
liabilities
--- --- --- --- --- --- -- ---
Total non-current - - - (19) - (1,255) 983 (291)
liabilities
--- --- --- --- --- --- -- ---
TOTAL LIABILITIES 808 - - (19) - (1,219) 15 (415)
--- --- --- --- --- --- -- ---
TOTAL NET ASSETS 808 72 95 72 25 (1,436) 170 (194)
--- --- --- --- --- --- -- ---
EQUITY
Share capital - - - - - - - -
Share premium account - - - - - - - -
Shares held by ESOP - 11 - - - - - 11
Trusts
Other reserves - - - - - - - -
Retained earnings 808 61 95 72 25 (1,434) 170 (203)
--- --- --- --- --- --- -- ---
808 72 95 72 25 (1,434) 170 (192)
Non-equity minority - - - - - - - -
interests
Equity minority interests - - - - - (2) - (2)
--- --- --- --- --- --- -- ---
TOTAL EQUITY 808 72 95 72 25 (1,436) 170 (194)
--- --- --- --- --- --- -- ---
BALANCE SHEET
At 31st March 2004
IFRS
Adjustments
UK GAAP (Note) IFRS
£m £m £m
ASSETS ---- ---- ----
Non-current assets
Property, plant and equipment 6,261 (275) 5,986
Goodwill 133 14 147
Other intangible assets 1,642 519 2,161
Investments in associates and joint ventures 200 16 216
Other investments 260 - 260
Deferred tax assets 1,480 398 1,878
Other non-current assets 281 9 290
---- ---- ----
Total non-current assets 10,257 681 10,938
---- ---- ----
Current assets
Inventories 2,110 - 2,110
Trade and other receivables 5,076 (430) 4,646
Liquid investments 2,319 (859) 1,460
Cash and cash equivalents 667 859 1,526
---- ---- ----
Total current assets 10,172 (430) 9,742
---- ---- ----
TOTAL ASSETS 20,429 251 20,680
---- ---- ----
LIABILITIES
Current liabilities
Short-term borrowings (1,394) - (1,394)
Trade and other payables (5,395) 607 (4,788)
Current tax payable (1,759) - (1,759)
Short-term provisions - (759) (759)
---- ---- ----
Total current liabilities (8,548) (152) (8,700)
---- ---- ----
Non-current liabilities
Long-term borrowings (3,595) - (3,595)
Deferred tax provision (545) 444 (101)
Pensions and other post-employment benefits (797) (1,702) (2,499)
Other provisions (1,396) 755 (641)
Other non-current liabilities (244) - (244)
---- ---- ----
Total non-current liabilities (6,577) (503) (7,080)
---- ---- ----
TOTAL LIABILITIES (15,125) (655) (15,780)
---- ---- ---
NET ASSETS 5,304 (404) 4,900
---- ---- ----
EQUITY
Share capital 1,484 - 1,484
Share premium account 273 - 273
Shares held by ESOP Trusts (2,677) 9 (2,668)
Other reserves 1,929 - 1,929
Retained earnings 4,033 (410) 3,623
---- ---- ----
5,042 (401) 4,641
Non equity minority interests 49 - 49
Equity minority interests 213 (3) 210
---- ---- ----
5,304 (404) 4,900
---- ---- ----
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS balance sheet adjustments
At 31st March 2004
Coreg Other
Share- capitalisation intangible Goodwill Pensions
Dividend ased and assets amortisation and IFRS
deferred payments amortisation amortisation reversal OPEBs Other adjust-
(a) (b) (c) (e) (e) (f) (g) ments
£m £m £m £m £m £m £m £m
--- --- --- --- --- --- -- ---
ASSETS
Non-current assets
Property, plant & - - - - - - (275) (275)
equipment
Goodwill - - - - 14 - - 14
Other Intangible assets - - 129 115 - - 275 519
Investments in associates - - - 1 14 - 1 16
and
joint ventures
Other investments - - - - - - - -
Deferred tax assets - 79 (43) (21) - 216 167 398
Other non-current assets - - - - - 9 - 9
--- --- --- --- --- --- -- ---
Total non-current assets - 79 86 95 28 225 168 681
--- --- --- --- --- --- -- ---
Current assets
Inventories - - - - - - - -
Trade and other - - - - - (430) - (430)
receivables
Liquid investments - - - - - - (859) (859)
Cash and cash equivalents - - - - - - 859 859
--- --- --- --- --- --- -- ---
Total current assets - - - - - (430) - (430)
--- --- --- --- --- --- -- ---
TOTAL ASSETS - 79 86 95 28 (205) 168 251
--- --- --- --- --- --- -- ---
LIABILITIES
Current liabilities
Short-term borrowings - - - - - - - -
Trade and other payables 575 - - - - 32 - 607
Current tax payable - - - - - - - -
Short-term provisions - - - - - - (759) (759)
--- --- --- --- --- --- -- ---
Total current liabilities 575 - - - - 32 (759) (152)
--- --- --- --- --- --- -- ---
Non-current liabilities
Long-term borrowings - - - - - - - -
Deferred tax provision - - - (19) - 453 10 444
Pensions and other post- - - - - - (1,702) - (1,702)
employment benefits
Other provisions - - - - - (4) 759 755
Other non-current - - - - - - - -
liabilities
--- --- --- --- --- --- -- ---
Total non-current - - - (19) - (1,253) 769 (503)
liabilities
--- --- --- --- --- --- -- ---
TOTAL LIABILITIES 575 - - (19) - (1,221) 10 (655)
--- --- --- --- --- --- -- ---
TOTAL NET ASSETS 575 79 86 76 28 (1,426) 178 (404)
--- --- --- --- --- --- -- ---
EQUITY
Share capital - - - - - - - -
Share premium account - - - - - - - -
Shares held by ESOP - 9 - - - - - 9
Trusts
Other reserves - - - - - - - -
Retained earnings 575 70 86 76 28 (1,423) 178 (410)
--- --- --- --- --- --- -- ---
575 79 86 76 28 (1,423) 178 (401)
Non-equity minority - - - - - - - -
interests
Equity minority interests - - - - - (3) - (3)
--- --- --- --- --- --- -- ---
TOTAL EQUITY 575 79 86 76 28 (1,426) 178 (404)
--- --- --- --- --- --- -- ---
BALANCE SHEET
At 30th June 2004
IFRS
Adjustments
UK GAAP (Note) IFRS
£m £m £m
ASSETS ---- ---- ----
Non-current assets
Property, plant and equipment 6,350 (258) 6,092
Goodwill 135 17 152
Other intangible assets 1,662 510 2,172
Investments in associates and joint ventures 208 19 227
Other investments 309 - 309
Deferred tax assets 1,520 406 1,926
Other non-current assets 272 14 286
---- ---- ----
Total non-current assets 10,456 708 11,164
---- ---- ----
Current assets
Inventories 2,133 - 2,133
Trade and other receivables 5,107 (431) 4,676
Liquid investments 2,946 (1,494) 1,452
Cash and cash equivalents 1,035 1,494 2,529
---- ---- ----
Total current assets 11,221 (431) 10,790
---- ---- ----
TOTAL ASSETS 21,677 277 21,954
---- ---- ----
LIABILITIES
Current liabilities
Short-term borrowings (1,096) - (1,096)
Trade and other payables (5,093) 601 (4,492)
Current tax payable (1,807) - (1,807)
Short-term provisions - (996) (996)
---- ---- ----
Total current liabilities (7,996) (395) (8,391)
---- ---- ----
Non-current liabilities
Long-term borrowings (4,908) - (4,908)
Deferred tax provision (550) 448 (102)
Pensions and other post-employment benefits (808) (1,726) (2,534)
Other provisions (1,450) 993 (457)
Other non-current liabilities (265) - (265)
---- ---- ----
Total non-current liabilities (7,981) (285) (8,266)
---- ---- ----
TOTAL LIABILITIES (15,977) (680) (16,657)
---- ---- ----
NET ASSETS 5,700 (403) 5,297
---- ---- ----
EQUITY
Share capital 1,483 - 1,483
Share premium account 279 - 279
Shares held by ESOP Trusts (2,657) 6 (2,651)
Other reserves 1,930 - 1,930
Retained earnings 4,441 (406) 4,035
---- ---- ----
5,476 (400) 5,076
Non equity minority interests - - -
Equity minority interests 224 (3) 221
---- ---- ----
5,700 (403) 5,297
---- ---- ----
Note: The analysis of these adjustments is shown on the next page.
Analysis of IFRS balance sheet adjustments
At 30th June 2004
Coreg Other
Share- capitalisation intangible Goodwill Pensions
Dividend based and assets amortisation and IFRS
deferred payments amortisation amortisation reversal OPEBs Other adjust-
(a) (b) (c) (d) (e) (f) (g) ments
£m £m £m £m £m £m £m £m
--- --- --- --- --- --- -- ---
ASSETS
Non-current assets
Property, plant & - - - - - - (258) (258)
equipment
Goodwill - - - - 17 - - 17
Other intangible assets - - 124 128 - - 258 510
Investments in associates - - - 1 18 - - 19
and
joint ventures
Other investments - - - - - - - -
Deferred tax assets - 84 (41) (25) - 222 166 406
Other non-current assets - - - - - 14 - 14
--- --- --- --- --- --- -- ---
Total non-current assets - 84 83 104 35 236 166 708
--- --- --- --- --- --- -- ---
Current assets
Inventories - - - - - - - -
Trade and other - - - - - (431) - (431)
receivables
Liquid investments - - - - - - (1,494) (1,494)
Cash and cash equivalents - - - - - - 1,494 1,494
--- --- --- --- --- --- -- ---
Total current assets - - - - - (431) - (431)
--- --- --- --- --- --- -- ---
TOTAL ASSETS - 84 83 104 35 (195) 166 277
--- --- --- --- --- --- -- ---
Current liabilities
Short-term borrowings - - - - - - - -
Trade and other payables 573 - - - - 28 - 601
Current tax payable - - - - - - - -
Short-term provisions - - - - - - (996) (996)
--- --- --- --- --- --- -- ---
Total current liabilities 573 - - - - 28 (996) (395)
--- --- --- --- --- --- -- ---
Non-current liabilities
Long-term borrowings - - - - - - - -
Deferred tax provision - - - (19) - 453 14 448
Pensions and other post- - - - - - (1,726) - (1,726)
employment benefits
Other provisions - - - - - (3) 996 993
Other non-current - - - - - - - -
liabilities
--- --- --- --- --- --- -- ---
Total non-current - - - (19) - (1,276) 1,010 (285)
liabilities
--- --- --- --- --- --- -- ---
TOTAL LIABILITIES 573 - - (19) - (1,248) 14 (680)
--- --- --- --- --- --- -- ---
TOTAL NET ASSETS 573 84 83 85 35 (1,443) 180 (403)
--- --- --- --- --- --- -- ---
EQUITY
Share capital - - - - - - - -
Share premium account - - - - - - - -
Shares held by ESOP Trusts - 6 - - - - - 6
Other reserves - - - - - - - -
Retained earnings 573 78 83 85 35 (1,440) 180 (406)
--- --- --- --- --- --- -- ---
573 84 83 85 35 (1,440) 180 (400)
Non-equity minority - - - - - - - -
interests
Equity minority interests - - - - - (3) - (3)
--- --- --- --- --- --- -- ---
TOTAL EQUITY 573 84 83 85 35 (1,443) 180 (403)
--- --- --- --- --- --- -- ---
Cash flow statements
Explanation of IFRS cash flow statement adjustments
2003 Full year
2004 Quarter 1
2004 Quarter 2
2004 Half-year
Explanation of IFRS cash flow statement adjustments
The move from UK GAAP to IFRS does not change any of the cash flows of the Group. The IFRS cash flow format is similar
to UK GAAP but presents various cash flows in different categories and in a different order from the UK GAAP cash flow
statement. All of the IFRS accounting adjustments net out within cash generated from operations except for the
intangible assets reclassification and the inclusion of liquid investments with a maturity of less than three months on
acquisition within cash and cash equivalents under IFRS.
CASH FLOW STATEMENT
Year ended 31st December 2003
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Cash flows from operating activities
Cash generated from operations 7,005 - 7,005
Taxation paid (1,917) - (1,917)
---- ---- ----
Net cash inflow from operating activities 5,088 - 5,088
---- ---- ----
Cash flow from investing activities
Purchase of tangible fixed assets (869) 123 (746)
Proceeds from sale of tangible fixed assets 46 - 46
Purchase of intangible assets (193) (123) (316)
Purchase of equity investments (63) - (63)
Proceeds from sale of equity investments 125 - 125
Purchase of businesses, net of cash acquired (12) - (12)
Disposal of businesses 3 - 3
Investment in joint ventures and associated undertakings (3) - (3)
Interest received 65 - 65
Dividends from joint ventures and associated undertakings 1 - 1
---- ---- ----
Net cash outflow from investing activities (900) - (900)
---- ---- ----
Cash flow from financing activities
Increase in liquid investments (1,336) 963 (373)
Proceeds from own shares for employee share options 26 - 26
Issue of share capital 41 - 41
Share capital purchased for cancellation (980) - (980)
Other financing cash flows 82 - 82
Increase in long-term loans 1,046 - 1,046
Repayment of long-term loans (23) - (23)
Net repayment of short-term loans (442) - (442)
Interest paid (197) - (197)
Dividends paid to GSK shareholders (2,333) - (2,333)
Dividends paid to minority interests (84) - (84)
Dividends paid on preference shares (15) - (15)
---- ---- ----
Net cash outflow from financing activities (4,215) 963 (3,252)
---- ---- ----
Exchange adjustments (25) (85) (110)
---- ---- ----
Increase in cash and cash equivalents in the year (52) 878 826
Cash and cash equivalents at beginning of year 859 146 1,005
---- ---- ----
Cash and cash equivalents at end of year (Note) 807 1,024 1,831
---- ---- ----
Note: Cash and cash equivalent ts comprise:
Cash and cash equivalents 962 1,024 1,986
Overdrafts (155) - (155)
---- ---- ----
807 1,024 1,831
---- ---- ----
CASH FLOW STATEMENT
Three months ended 31st March 2004
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Cash flows from operating activities
Cash generated from operations 1,332 - 1,332
Taxation paid (271) - (271)
---- ---- ----
Net cash inflow from operating activities 1,061 - 1,061
---- ---- ----
Cash flow from investing activities
Purchase of tangible fixed assets (130) 9 (121)
Proceeds from sale of tangible fixed assets 2 - 2
Purchase of intangible assets (16) (9) (25)
Purchase of equity investments (4) - (4)
Proceeds from sale of equity investments 3 - 3
Interest received 17 - 17
Dividends from joint ventures and associated undertakings 2 - 2
---- ---- ----
Net cash outflow from investing activities (126) - (126)
---- ---- ----
Cash flow from financing activities
Decrease/(increase) in liquid assets 128 (135) (7)
Proceeds from own shares for employee share options 4 - 4
Issue of share capital 10 - 10
Share capital purchased for cancellation (178) - (178)
Other financing cash flows 33 - 33
Purchase of Treasury shares (90) - (90)
Redemption of preference shares issued by subsidiary (440) - (440)
Repayment of long-term loans (4) - (4)
Net repayment of short-term loans (10) - (10)
Interest paid (53) - (53)
Dividends paid to GSK shareholders (520) - (520)
Dividends paid to minority interests (51) - (51)
Dividends paid on preference shares (2) - (2)
---- ---- ----
Net cash outflow from financing activities (1,173) (135) (1,308)
---- ---- ----
Exchange adjustments (17) (30) (47)
---- ---- ----
Decrease in cash and cash equivalents in the period (255) (165) (420)
Cash and cash equivalents at beginning of period 807 1,024 1,831
---- ---- ----
Cash and cash equivalents at end of period (Note) 552 859 1,411
---- ---- ----
Note: Cash and cash equivalents comprise:
Cash and cash equivalents 667 859 1,526
Overdrafts (115) - (115)
---- ---- ----
552 859 1,411
---- ---- ----
CASH FLOW STATEMENT
Three months ended 30th June 2004
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Cash flows from operating activities
Cash generated from operations 1,783 - 1,783
Taxation paid (454) - (454)
---- ---- ----
Net cash inflow from operating activities 1,329 - 1,329
---- ---- ----
Cash flow from investing activities
Purchase of tangible fixed assets (197) 8 (189)
Proceeds from sale of tangible fixed assets 12 - 12
Purchase of intangible assets (40) (8) (48)
Purchase of equity investments (67) - (67)
Proceeds from sale of equity investments 34 - 34
Disposal of interests in associates 56 - 56
Investment in joint ventures and associated undertakings (2) - (2)
Interest received 29 - 29
Dividends from joint ventures and associated undertakings 2 - 2
---- ---- ----
Net cash outflow from investing activities (173) - (173)
---- ---- ----
Cash flow from financing activities
(Increase) /decrease in liquid assets (608) 618 10
Proceeds from own shares for employee share options 8 - 8
Issue of share capital 6 - 6
Share capital purchased for cancellation (23) - (23)
Other financing cash flows (58) - (58)
Purchase of Treasury shares (195) - (195)
Redemption of preference shares issued by a subsidiary (49) - (49)
Increase in long-term loans 1,373 - 1,373
Net repayment of short-term loans (475) - (475)
Interest paid (70) - (70)
Dividends paid to GSK shareholders (807) - (807)
Dividends paid to minority interests (9) - (9)
---- ---- ----
Net cash outflow from financing activities (907) 618 (289)
---- ---- ----
Exchange adjustments 3 17 20
---- ---- ----
Increase in cash and cash equivalents in the period 252 635 887
Cash and cash equivalents at beginning of period 552 859 1,411
---- ---- ----
Cash and cash equivalents at end of period (Note) 804 1,494 2,298
---- ---- ----
Note: Cash and cash equivalents comprise:
Cash and cash equivalents 1,035 1,494 2,529
Overdrafts (231) - (231)
---- ---- ----
804 1,494 2,298
---- ---- ----
CASH FLOW STATEMENT
Six months ended 30th June 2004
IFRS IFRS
UK GAAP adjustments statutory
£m £m £m
---- ---- ----
Cash flows from operating activities
Cash generated from operations 3,115 - 3,115
Taxation paid (725) - (725)
---- ---- ----
Net cash inflow from operating activities 2,390 - 2,390
---- ---- ----
Cash flow from investing activities
Purchase of tangible fixed assets (327) 17 (310)
Proceeds from sale of tangible fixed assets 14 - 14
Purchase of intangible assets (56) (17) (73)
Purchase of equity investments (71) - (71)
Proceeds from sale of equity investments 37 - 37
Disposal of interests in associates 56 - 56
Investment in joint ventures and associated undertakings (2) - (2)
Interest received 46 - 46
Dividends from joint ventures and associated undertakings 4 - 4
---- ---- ----
Net cash outflow from investing activities (299) - (299)
---- ---- ----
Cash flow from financing activities
(Increase) / decrease in liquid assets (480) 483 3
Proceeds from own shares for employee share options 12 - 12
Issue of share capital 16 - 16
Share capital purchased for cancellation (201) - (201)
Other financing cash flows (25) - (25)
Purchase of Treasury shares (285) - (285)
Redemption of preference shares issued by a subsidiary (489) - (489)
Increase in long-term loans 1,373 - 1,373
Repayment of long-term loans (4) - (4)
Net repayment of short-term loans (485) - (485)
Interest paid (123) - (123)
Dividends paid to GSK shareholders (1,327) - (1,327)
Dividends paid to minority interests (60) - (60)
Dividends paid on preference shares (2) - (2)
---- ---- ----
Net cash outflow from financing activities (2,080) 483 (1,597)
---- ---- ----
Exchange adjustments (14) (13) (27)
---- ---- ----
Increase in cash and cash equivalents in the period (3) 470 467
Cash and cash equivalents at beginning of period 807 1,024 1,831
---- ---- ----
Cash and cash equivalents at end of period (Note) 804 1,494 2,298
---- ---- ----
Note: Cash and cash equivalents comprise:
Cash and cash equivalents 1,035 1,494 2,529
Overdrafts (231) - (231)
---- ---- ----
804 1,494 2,298
---- ---- ----
Reconciliation of movements in equity
At 31st December 2003
At 31st March 2004
At 31st June 2004
Reconciliation by component of equity at 1st January 2003
RECONCILIATION OF MOVEMENTS IN EQUITY
At 31st December 2003
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Total equity at 1st January 2003 4,647 (345) 4,302
Share capital issued 41 - 41
Exchange movements 113 14 127
Tax on exchange movements and unrealised gains (92) 2 (90)
Shares purchased for cancellation (980) - (980)
Profit attributable to shareholders 4,478 (277) 4,201
Loss from own shares for employee share schemes (39) - (39)
Credit in respect of employee share schemes 7 - 7
ESOT shares issued at cost 65 - 65
Share based payments - 368 368
Dividends (2,374) 48 (2,326)
Profit on disposal of Intellectual property 7 (7) -
Revaluation of goodwill due to exchange (7) - (7)
Minority interests (62) 3 (59)
---- ---- ----
Total equity at 31st December 2003 5,804 (194) 5,610
---- ---- ----
RECONCILIATION OF MOVEMENTS IN EQUITY
At 31st March 2004
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Total equity at 1st January 2004 5,804 (194) 5,610
Share capital issued 10 - 10
Exchange movements (245) 5 (240)
Tax on exchange movements and unrealised gains (56) - (56)
Shares purchased for cancellation (179) - (179)
Shares purchased and held as Treasury shares (100) - (100)
Profit attributable to shareholders 1,119 (85) 1,034
Loss from own shares for employee share schemes (21) - (21)
Credit in respect of employee share schemes 4 - 4
ESOT shares issued at cost 25 - 25
Share based payments - 104 104
Dividends (575) (233) (808)
Revaluation of goodwill due to exchange 1 - 1
Minority interests (483) (1) (484)
---- ---- ----
Total equity at 31st March 2004 5,304 (404) 4,900
---- ---- ----
RECONCILIATION OF MOVEMENTS IN EQUITY
At 30th June 2004
IFRS
UK GAAP adjustments IFRS
£m £m £m
---- ---- ----
Total equity at 1st January 2004 5,804 (194) 5,610
Share capital issued 16 - 16
Exchange movements (218) 7 (211)
Tax on exchange movements and unrealised gains (46) - (46)
Shares purchased for cancellation (201) - (201)
Shares purchased and held as Treasury shares (299) - (299)
Profit attributable to shareholders 2,276 (156) 2,120
Loss from own shares for employee share schemes (37) - (37)
Credit in respect of employee share schemes 10 - 10
ESOT shares issued at cost 49 - 49
Share based payments - 181 181
Dividends (1,148) (235) (1,383)
Goodwill written back 5 (5) -
Revaluation of goodwill due to exchange 10 - 10
Minority interests (521) (1) (522)
---- ---- ----
Total equity at 30th June 2004 5,700 (403) 5,297
---- ---- ----
At 30th June 2004 GlaxoSmithKline held 26.4 million shares as Treasury shares at a cost of £299 million which has been
deducted from retained earnings.
RECONCILIATION OF OPENING EQUITY BY COMPONENT OF EQUITY
At 1st January 2003
Shares
Share held by Total
Share premium ESOP Other Retained shareholders' Minority Total
capital account Trusts reserves earnings equity interests equity
£m £m £m £m £m £m £m £m
--- --- --- --- --- ---- --- ---
UK GAAP 1,506 224 (2,826) 1,905 3,031 3,840 807 4,647
IFRS adjustments (net of tax):
Pensions - - - - (1,456) (1,456) - (1,456)
Deferred profit on stock - - - - 249 249 - 249
Dividends - - - - 760 760 - 760
Deferred tax on Block - - - - (105) (105) - (105)
assets
Coreg - - - - 126 126 - 126
Other intangible assets - - - - 45 45 - 45
Share-based payments - - (5) - 5 - - -
Tax on share-based - - - - 48 48 - 48
payments
Other - - - - (7) (7) (5) (12)
--- --- --- --- --- ---- --- ---
Total IFRS adjustments - - (5) - (335) (340) (5) (345)
--- --- --- --- --- ---- --- ---
IFRS 1,506 224 (2,831) 1,905 2,696 3,500 802 4,302
--- --- --- --- --- ---- --- ---
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