Transition to IFRS

Renold PLC
23 November 2005


                                                                23 November 2005

                                  RENOLD plc

                RESTATEMENT OF COMPARATIVE FINANCIAL INFORMATION
                            FOLLOWING THE ADOPTION OF
              INTERNATIONAL FINANCIAL REPORTING STANDARDS ('IFRS')

Renold plc today announces the publication of its second statement ('the
Statement') on the transition to IFRS. The Statement provides a quantitative
follow-up assessment of the impact of IFRS adoption on the Group's historic
financial statements.

Provided below is the narrative extract from the Statement, which can be read in
full, together with detailed appendices, on the Group's website, www.renold.com.
Alternatively, copies can be obtained from the Company Secretary
at Renold House, Styal Road, Wythenshawe, Manchester M22 5WL.


INTRODUCTION

On 10 August 2005 the Group issued a statement entitled 'Update on IFRS'. This
provided a narrative explanation as to how the more significant matters arising
from the adoption of IFRS were expected to impact the historic financial
statements of the Renold plc Group. It also set out how the Group will treat the
various options and exemptions available when first adopting IFRS. The purpose
of this second statement on IFRS is to provide the quantitative follow-up
assessment of the impact of IFRS, and should be read in conjunction with the
interpretations provided within the first update on IFRS.

Basis for information presented

As set out in the Group's first IFRS statement the historic financial data of
the Renold Group has been presented in accordance with UK Generally Accepted
Accounting Practice ('UK GAAP'). European law requires that Renold's next annual
financial statements, being those to 31 March 2006, are prepared under IFRS, as
endorsed by the European Union (EU). At this preliminary stage it should be
appreciated that the International Standards currently in issue and adopted by
the EU are subject to interpretation issued from time to time by the
International Financial Reporting Interpretations Committee (IFRIC). Further
standards may be issued by the International Accounting Standards Board that
will be adopted for financial years ending on or after 31 March 2006.
Additionally, IFRS is currently being applied in the United Kingdom and in a
large number of countries simultaneously for the first time. In an environment
of new and revised Standards, included within the body of the Standards that
comprise IFRS, there is not yet a significant body of established practice on
which to draw in forming options regarding interpretation and application.
Accordingly, practice is continuing to evolve. At this stage, therefore, the
full financial effect of reporting under IFRS, as it will be applied and
reported on in the Group's first IFRS Financial Statements for the year ended 31
March 2006, may be subject to change.

In general, the information provided in this document is designed to provide a
bridge between the Renold financial statements that have been published
previously under UK GAAP, and the same statements as they appear following the
application of IFRS. This 'reconciliation bridge' between the UK GAAP basis and
the IFRS basis is provided for each of the following balance sheets or income
statements:

(a) the Group's balance sheet as at the date of transition to IFRS, being 4
April 2004 (the final period under UK GAAP having ended on 3 April 2004);

(b) the Group's balance sheet as at the end of the first half year (30 September
2004) following the adoption of IFRS;

(c) the Group's balance sheet as at the end of the first full financial year (31
March 2005) following the adoption of IFRS;

(d) the Group's income statement for the six month period ended 30 September
2004;

(e) the Group's income statement for the year to 31 March 2005.

OVERVIEW OF THE IMPACT OF ADOPTING IFRS ON THE RESULTS PUBLISHED IN RESPECT OF
THE YEAR ENDED 31 MARCH 2005

Within the body of this document a more detailed explanation is provided of how
the implementation of IFRS has resulted in a change to the UK GAAP financial
statements. However, set out below is a high level summary of the impact of IFRS
adoption on the last Group accounts published under UK GAAP;
+----------------------------+-------------------------------------------------+
              |                            |Year end 31 March 2005|
|                            |                                                 |
|                            +---------------+--------------------+------------+
|                            |UK GAAP basis  |Change due to IFRS  |IFRS basis  |
|                            +---------------+--------------------+------------+
|                            |           £m  |                £m  |        £m  |
+----------------------------+---------------+--------------------+------------+
|Revenue                     |        197.0  |                 -  |     197.0  |
+----------------------------+---------------+--------------------+------------+
|Operating profit before     |               |                    |            |
|goodwill and                |          3.7  |              (0.3) |       3.4  |
|exceptional items           |               |                    |            |
+----------------------------+---------------+--------------------+------------+
|Operating (loss)/profit     |               |                    |            |
|after goodwill and          |         (4.2) |               5.2  |       1.0  |
|exceptional items           |               |                    |            |
+----------------------------+---------------+--------------------+------------+
|Loss before tax             |         (6.8) |               5.2  |      (1.6) |
+----------------------------+---------------+--------------------+------------+
|Basic EPS(p)                |         (7.5)p|                 -  |      (0.2)p|
+----------------------------+---------------+--------------------+------------+
|Net assets                  |         40.3  |              15.8  |      56.1  |
+----------------------------+---------------+--------------------+------------+

                                                                     £m     £m
UK GAAP operating profit before goodwill and exceptional items        -    3.7
                                                                      
Additional depreciation on freehold properties                     (0.1)     - 
Employee benefits                                                  (0.1)     - 
Cost associated with share-based payments                          (0.1)     -
                                                                  -------    
                                                                      -   (0.3)
                                                                          -----
IFRS operating profit before goodwill and exceptional items           -    3.4
                                                                          =====
 
UK GAAP operating loss after goodwill and exceptional items           -   (4.2)

Operating profit adjustments shown above                           (0.3)     -  
Elimination of goodwill amortisation charges made under UK GAAP     1.2      - 
Additional goodwill impairment charge (arising from the reversal
of related amortisation charges made in the year under UK GAAP)    (0.2)     -
Release of negative goodwill                                        4.5      -
                                                                    -----
                                                                      -    5.2
                                                                          -----
IFRS operating profit after goodwill and exceptional items            -    1.0
                                                                          ===== 

The primary increase in net assets arises from the revaluation of the Group's
freehold properties (being £11.5 million, net of associated deferred tax
provisions). The changes in the goodwill held by the Group, as set out above,
have contributed a £5.5m increase in net assets, which is offset by the
recognition of additional employee benefit liabilities. A detailed
reconciliation of the Group's balance sheet is set out in Appendix VI.

SUMMARY OF KEY DIFFERENCES BETWEEN UK GAAP AND IFRS THAT IMPACT THE RENOLD GROUP
ACCOUNTS

Appendix I includes a statement of the Group accounting policies under IFRS.
Provided below is a summary of how the application of those policies has
impacted the restatement of the Group's UK GAAP financial statements.

(a) Freehold Property - Fair value as deemed cost

Under the options available within IFRS 1 ('First-time Adoption of International
Financial Reporting Standards') the Group has chosen to measure its freehold
properties on a fair value basis and adopt this valuation as deemed cost as at
the date of transition, 4 April 2004. The valuation was undertaken by Colliers
CRE, Chartered Surveyors.

Under UK GAAP the Group's freehold properties, at 4 April 2004, had a carrying
value of £7.6 million. Following the revaluation, the deemed cost of freehold
properties at this date is £22.8 million, an increase of £15.2 million. In
accordance with IAS12 ('Income taxes') a deferred tax liability of £3.7 million
has been recognised as a result of the increase in the value of freehold
property. This treatment of freehold properties is a one-off optional change at
the date of transition.

In view of the fact that freehold land is not depreciated, the change in the
annual depreciation charge for freehold properties is less significant than
would otherwise be expected and the impact on the full year to 31 March 2005 is
to increase the depreciation change by £0.1 million.

(b) Goodwill

Under UK GAAP capitalised goodwill was amortised over its estimated economic
life. Under IFRS goodwill is no longer subject to amortisation but it is tested
annually for impairment.

In the first half of 2004 the reversal of goodwill amortisation has resulted in
a credit of £0.6 million and a credit of £1.2 million for the full year. For the
year to 2005 an impairment charge of £2.4 million was booked under UK GAAP. This
has increased to £2.6 million under IFRS as a result of the change in the
practice of goodwill amortisation, which reverses the amortisation charged in
the 2005 financial year up to the point at which the impairment was recognised.

The acquisition of Sachs Automotive France SAS in the final month of the 2005
financial year resulted in a surplus of fair value of assets acquired over the
consideration paid ('negative goodwill'). Following a review of the acquisition
accounting for the purposes of IFRS adoption it has been concluded that the
negative goodwill recognised in the Group's balance sheet under UK GAAP is also
appropriate under IFRS. However, IFRS requires immediate recognition in the
income statement of the entire amount of negative goodwill arising on the
acquisition. Therefore, the amount previously retained in the UK GAAP balance
sheet at 31 March 2005 has been released to income, being an additional credit
of £4.5 million for the year.

(c) Employee benefits

(i) Pensions

Under UK GAAP, in the annual financial statements for 2005 Renold accounted for
pensions in accordance with FRS 17 ('Retirement Benefits'), having adopted that
standard in advance of mandatory requirements. Under FRS 17 the assets and
liabilities of defined benefit pension schemes were recognised at fair value in
the balance sheet; operating and financing costs were recognised in the income
statement, and actuarial variations were recognised in the Statement of Total
Recognised Gains and Losses ('STRGL'). Under IFRS, applying the option under the
respective standard (IAS 19 - 'Employee Benefits') to take actuarial gains and
losses through a Statement of Recognised Income and Expense ('SORIE'), the
accounting requirements are similar to those of FRS 17. There are, however, a
number of technical differences under IAS 19 that give rise to variations in the
figures previously reported under FRS 17. This includes using a government bond
rate as the discount rate for calculating pension liabilities in territories
where no suitable AA corporate bond rate exists and the requirement to use a bid
value to measure plan assets rather than the mid-market value applied under FRS
17.

(ii) Other employment benefits

In addition to specifying the accounting treatment of pension schemes IAS 19
introduces more prescriptive guidance on the treatment of other employee
benefits. The adoption of IAS 19 has resulted in the recognition of certain
Jubilee and other potential service awards.

(d) Share based payments

Under UK GAAP no cost was required to be recognised in the income statement for
options granted under the respective share option schemes operated by the Group
as options were granted at a market price at the date of grant. Under IFRS the
cost of employee share schemes is based on the fair value of share options
granted to employees. Adopting the option available under IFRS 1, IFRS 2
('Share-Based Payments') only applies to awards made after 7 November 2002 and
which vest after 1 January 2005. The implementation of IFRS 2 has resulted in a
charge to the income statement of £0.1 million for the year ended 31 March 2005.

(e) Cumulative foreign currency translation differences

Under both UK GAAP and IFRS the foreign currency translation differences arising
on the retranslation into Sterling of the Group's net investment in foreign
entities are taken to reserves. However, IAS 21 ('The Effects of Changes in
Foreign Exchange Rates') requires that such differences are recognised in a
separate component of equity and brought into account when calculating the
profit or loss on disposal of a foreign entity. A separate reserve has therefore
been created and the necessary reclassification made.

(f) Proposed dividends

It was established practice under UK GAAP to recognise proposed dividends as a
liability in the period to which they related. In accordance with IAS 10
('Events After the Balance Sheet Date') a dividend can only be recognised as a
liability in the period it is declared. In practice, this translates to interim
dividends being recognised in the financial statements when they are paid and
final dividends recognised when they are approved at the Annual General Meeting.
Therefore, the accrued final dividend for 2004, in the UK GAAP balance sheet has
been reversed, increasing net assets at that date by £2.1 million. The interim
dividend accrued at 30 September 2004 (£1.1 million) has been reversed for the
same reasons. No final dividend was proposed at 31 March 2005 and therefore
there is no cumulative difference in net assets as at 31 March 2005 as a result
of the change in the recognition of dividends.

(g) Software

Under UK GAAP purchased software was generally capitalised within tangible fixed
assets. Under IFRS software that is not an integral part of the related hardware
should be treated as an intangible asset.

This requirement has resulted in the reclassification of software from property,
plant and equipment to intangible assets amounting to £0.4 million in the
opening IFRS balance sheet. The reclassification at 31 March 2005 was £0.3
million. There is no change to the depreciation charge made under UK GAAP.

(h) Cash flow statements

The adoption of IFRS has no impact on the actual cash flows of the underlying
businesses. However, IAS 7 'Cash Flow Statements' does introduce some changed
definitions and therefore revised presentation from a UK GAAP statement. The
Group's cash flow statements for the six months to 30 September 2004 and for the
year to 31 March 2005 have been restated into an IFRS format and are presented
in Appendix VIII and Appendix IX respectively. The movements that result from
other IFRS adoption adjustments are shown in the reconciliation of the 'profit/
loss before taxation to the cash generated from operations', which as stated
above, in net terms remains unchanged from that reported under UK GAAP.


PROSPECTIVE ADOPTION OF IAS 32 AND IAS 39

As permitted under IFRS 1 the Group has adopted IAS 32 ('Financial Instruments:
Disclosure and Presentation') and IAS 39 ('Financial Instruments: Recognition
and Measurement') prospectively from 1 April 2005. Therefore, in respect of the
matters dealt with under these two standards, the comparative information for
periods up to and including 31 March 2005 remains accounted for on a UK GAAP
basis. The accounting policy of the Group in respect of financial instruments
from 1 April 2005 is included in Appendix 1.

There are three principal areas impacted by the adoption of IAS 32 and 39:-

Derivative financial instruments

It has been the practice of the Group to manage its exposures to movements in
currency exchange rates and interest rates by use of derivative contracts,
namely forward currency contracts and interest rate swaps. Under IFRS such
contracts must be recognised as assets and liabilities on the balance sheet
measured at fair value, which is in contrast to UK GAAP accounting. The
resultant adjustment to opening net assets is shown in Appendix X and relates
primarily to the effect of the interest rate swap taken out by the Group in
relation to its US dollar borrowing costs.

Trade receivable provisions

IAS 39 provides guidance on the impairment of financial assets (which include
trade receivables), specifying the need for objective evidence of impairment,
arising from past events, to support the booking of an impairment provision.
Under UK GAAP the Group practice was to calculate a provision from a formulaic
assessment of the aged profile of trade receivable balances. Through this
mechanism a provision was established on a consistent basis that, when viewed at
a single point in time, contained an element that was general rather than
specific in nature. Accordingly, trade receivable impairment provisions have
been reassessed on a basis that is consistent with the new criteria established
by IAS 39.

Preference shares

In accordance with UK GAAP the preference shares of the Group have been included
as a non-equity component of shareholders' funds. Under IAS 32 the preference
shares are required to be re-classified as liabilities in the balance sheet.
Dividends payable on the preference shares (which amount to £35,000 per annum)
will in future be treated as interest costs.

The financial impact of each of the above components on the opening balance
sheet at 1 April 2005 is illustrated in Appendix X. It is noted that the
reclassification of preference shares increases the Group's net debt from £17.0
million at 31 March 2005 to £17.6 million at 1 April 2005.



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