Adoption of IFRS
Anglo American PLC
09 May 2005
PART 1
News Release
9th May 2005
International Financial Reporting Standards (IFRS) restatements for 2004 and
update on adoption of IFRS
For 2004 and previous years, Anglo American has prepared its Group financial
statements under UK Generally Accepted Accounting Principles (UK GAAP). In
accordance with EU regulations, the Group is required to adopt International
Financial Reporting Standards (IFRS) from 1 January 2005 and prepare its Group
financial statements on an IFRS basis. Anglo American will report under IFRS for
the first time in its interim results for the six months to 30 June 2005 and the
Group's first annual report under IFRS will be for the 2005 financial year. The
IFRS results for the six months to 30 June 2005 and the year to
31 December 2005 will include comparative IFRS information for the relevant
corresponding period in 2004.
This news release includes the Group's 2004 results, for both the half year and
the full year, restated under IFRS and explains how Anglo American's results are
affected by the change to IFRS.
The headline impacts are:
IFRS RESTATEMENT FOR THE YEAR TO Year ended IFRS Year ended
31 DECEMBER 2004 31.12.04 adjustments(1) 31.12.04
UK GAAP IFRS
US$ million, except per share amounts
Group turnover including share of joint ventures(2) 26,125 143 26,268
Total profit from operations and associates before
exceptional items(3) 4,193 105 4,298
Profit for the year attributable to equity shareholders 2,913 588 3,501
Headline earnings for the year(4) 2,689 (117) 2,572
Net operating assets(5) 37,601 2,540 40,141
EBITDA(6) 7,110 (79) 7,031
Cash flow from operating activities 4,773 518 5,291
Basic earnings per share (US$):
Profit for the year attributable to equity shareholders 2.03 0.41 2.44
Headline earnings for the year 1.88 (0.09) 1.79
(1) IFRS adjustments exclude the impact of IAS 32 Financial Instruments: Disclosure and Presentation and IAS
39 Financial Instruments: Recognition and Measurement. IAS 32 and IAS 39 are adopted prospectively from 1
January 2005, however pro forma 2004 information adjusted for these two standards is provided in Appendix I
of this news release.
(2) In the news release announcing the results for 2004 under UK GAAP, turnover of $31,795 million included
the Group's share of joint ventures and associates. The 2004 UK GAAP amount of $26,125 million shown above
includes the Group's share of joint ventures' turnover of $1,195 million but excludes associates' turnover
of $5,670 million.
(3) The UK GAAP result of $4,193 million shown here includes associates' share of tax, finance charges and
minority interest to ensure comparability. See note 3 in section 4.1.7 for further detail.
(4) See note 5 in section 4.1.7 for basis of calculation of headline earnings.
(5) See note 1 in section 4.1.7 for definition of net operating assets.
(6) EBITDA is operating profit before exceptional items plus depreciation and amortisation of subsidiaries
and joint ventures and share of EBITDA of associates.
6 months IFRS 6 months ended
ended adjustments(1) 30.06.04
IFRS RESTATEMENT FOR THE SIX MONTHS ENDED 30.06.04
30 JUNE 2004 IFRS
UK GAAP
US$ million, except per share amounts
Group turnover including share of joint ventures(2) 12,282 64 12,346
Total profit from operations and associates before exceptional
items(3) 2,017 69 2,086
Profit for the period attributable to equity shareholders 1,709 517 2,226
Headline earnings for the period(4) 1,304 (56) 1,248
Net operating assets(5) 34,486 2,433 36,919
EBITDA(6) 3,433 (33) 3,400
Cash inflow from operating activities 2,075 167 2,242
Basic earnings per share (US$):
Profit for the period attributable to equity shareholders 1.20 0.36 1.56
Headline earnings for the financial period 0.91 (0.04) 0.87
(1) IFRS adjustments exclude the impact of IAS 32 and IAS 39. IAS 32 and IAS 39 are adopted prospectively
from 1 January 2005, however pro forma 2004 information adjusted for these two standards is provided in
Appendix I of this news release.
(2) In the interim news release announcing the 2004 half year results under UK GAAP, turnover of $15,235
million included the Group's share of joint ventures and associates. The 2004 UK GAAP amount of $12,282
million shown above includes the Group's share of joint ventures' turnover of $496 million but excludes
associates' turnover of $2,953 million.
(3) The UK GAAP result of $2,017 million shown here includes associates' share of tax, finance charges and
minority interest to ensure comparability. See note 3 in section 4.2.7 for further detail.
(4) See note 5 in section 4.2.7 for basis of calculation of headline earnings.
(5) See note 1 in section 4.2.7 for definition of net operating assets.
(6) EBITDA is operating profit before exceptional items plus depreciation and amortisation of subsidiaries
and joint ventures and share of EBITDA of associates.
Tony Lea, Finance Director, commented:
"Transparency and consistency of financial reporting were prime objectives for
the Group's transition project. IFRS has not changed how we as a Group do
business, and the presentation and accounting changes made will not detract from
our underlying business performance".
The principal changes to the Group's reported financial information from the
adoption of IFRS are:
Changes in presentation of financial information:
• proportional consolidation of joint venture entities
• presentation of minority interests within equity
• reporting of some unrealised gains through the income statement; and
• net income from associates, after tax, interest and underlying minority
interest, is now reported on one line in the income statement.
Changes in accounting policies:
• treatment of the US dollar preference shares held in De Beers
• provision of deferred tax on additional items
• replacement of goodwill amortisation with an annual impairment test
• recognition of proposed dividends in the period they are declared
• recognition of all assets and liabilities for employee benefit schemes
operated under defined benefit arrangements
• recording biological assets, primarily forests within our Paper and
Packaging business, at fair value
• recording the fair value of share options granted in employee remuneration
schemes over the vesting period; and
• inclusion of cumulative currency translation adjustments in the
calculation of profits on disposal of foreign operations.
For further information:
Anglo American - London
Investor Relations Media Relations
Charles Gordon Kate Aindow
Tel: +44 207 968 8933 Tel: +44 207 968 8619
Anglo American - Johannesburg
Investor Relations Media Relations
Anne Dunn Daniel Ngwepe
Tel: +27 11 638 4730 Tel: +27 11 638 2267
Notes to Editors:
Anglo American plc is one of the world's largest mining and natural resource
groups. With its subsidiaries, joint ventures and associates, it is a global
leader in platinum group metals, gold and diamonds, with significant interests
in coal, base and ferrous metals, industrial minerals and paper and packaging.
The group is geographically diverse, with operations in Africa, Europe, South
and North America, Australia and Asia. (www.angloamerican.co.uk)
Note: Throughout this news release '$' denotes United States dollars.
Webcast:
A webcast of the IFRS presentation starting at 10am GMT on 9th May 2005 can be
accessed through the Anglo American website at www.angloamerican.co.uk.
Pictures:
High resolution images can be downloaded by the media at www.vismedia.com
CONTENTS
Page
1. Introduction 6
2. Impact of IFRS on Group results 8
3. Basis of preparation 15
4. Group Financial Information restated for IFRS
4.1 Consolidated financial information for year ended 31 December 2004:
4.1.1 Consolidated income statement 17
4.1.2 Consolidated balance sheet 18
4.1.3 Consolidated cash flow statement 19
4.1.4 Reconciliation of equity 20
4.1.5 Statement of changes in equity 21
4.1.6 Statement of recognised income and expense 21
4.1.7 Notes to financial information 22
4.2 Consolidated financial information for six months ended 30 June 2004:
4.2.1 Consolidated income statement 29
4.2.2 Consolidated balance sheet 30
4.2.3 Consolidated cash flow statement 31
4.2.4 Reconciliation of equity 32
4.2.5 Statement of changes in equity 33
4.2.6 Statement of recognised income and expense 33
4.2.7 Notes to financial information 33
4.3 Consolidated financial information as at 1 January 2004
4.3.1 Consolidated balance sheet (Opening Balance Sheet) 39
4.3.2 Reconciliation of equity 40
5. Accounting policies 41
6. Audit report from Deloitte & Touche LLP on the
preliminary and pro forma IFRS financial
information for the year ended 31 December 2004 48
7. Review report from Deloitte & Touche LLP on the
preliminary and pro forma IFRS financial
information for the six months ended 30 June 2004 50
8. Audit report from Deloitte & Touche LLP on the
preliminary IFRS financial information
as at 1 January 2004 52
Page
Appendices
I Pro forma IAS 32 and IAS 39 financial information 55
• Accounting policies
• Consolidated income statement for year ended 31 December 2004
• Consolidated balance sheet as at 31 December 2004
• Consolidated income statement for 6 months ended 30 June 2004
• Consolidated balance sheet as at 30 June 2004
• Reconciliation from IFRS excluding IAS 32 and 39 to pro forma IFRS
with detailed adjustments for year ended 31 December 2004
and six months ended 30 June 2004.
II Reconciliation from UK GAAP to IFRS with detailed adjustments
for year ended 31 December 2004, six months ended 30 June 2004 and
as at 1 January 2004, where appropriate 63
• Consolidated income statement
• Consolidated net assets
• Operating profit by business
• EBITDA by business
• Headline earnings by business.
1. INTRODUCTION
The Council of the European Union announced in June 2002 that listed companies
in Europe would be required to adopt International Financial Reporting Standards
(IFRS) for accounting periods beginning on or after 1 January 2005. In line with
this requirement, the Group has adopted IFRS as its accounting basis from the
beginning of 2005. The adoption of IFRS will be first reflected in the Group's
financial statements for the half year to 30 June 2005 and year to 31 December
2005.
This news release sets out how the adoption of IFRS affects the 2004 results and
financial position of the Group previously reported under UK GAAP. The document
includes:
• A summary of the most significant adjustments arising from the adoption of
IFRS
• Detail on the basis of preparation of the financial statements under IFRS
• IFRS consolidated financial information (income statement, balance sheet,
cash flow statement, Statement of Changes in Equity and Statement of
Recognised Income and Expense) including supplementary notes but excluding
the impact of IAS 32 and 39 for the year ended 31 December 2004
• IFRS financial information including supplementary notes but excluding the
impact of IAS 32 and 39 for the 6 months ended 30 June 2004
• IFRS consolidated balance sheet and reconciliation of equity at 1 January
2004, the opening balance sheet, excluding the impact of IAS 32 and 39
• Reconciliations between UK GAAP and IFRS financial information showing
adjustments in detail; and
• An appendix pro forma IFRS 2004 consolidated income statement and balance
sheet, for both half year and full year 2004, showing the impact of IAS 32
and 39 had it been adopted at 1 January 2004, rather than at 1 January 2005.
The IFRS consolidated balance sheet as at 1 January 2004 and the IFRS financial
information, pro forma information and supplementary notes for the year ended 31
December 2004 have been audited by Deloitte & Touche LLP. The IFRS financial
information, pro forma information and supplementary notes for the 6 months
ended 30 June 2004 have been reviewed by Deloitte & Touche LLP.
The International Accounting Standards adopted by the Group are subject to
ongoing review and endorsement by the EU and possible amendment by
interpretative guidance from the International Financial Reporting
Interpretations Committee (IFRIC) and the accounting profession. The IFRS
information presented in this document has been prepared on the basis of current
interpretations of standards and assumes that the proposed amendment to IAS 19
will be adopted by the European Union prior to 31 December 2005.
Items of income and expense that are material and require separate disclosure,
in accordance with IAS 1.87, are classified as "exceptional items" on the face
of the income statement. Exceptional items that relate to the underlying
performance of the business are classified as "operating exceptional items" and
include impairment charges and reversals. Exceptional items not relating to
underlying business performance are classified as "non-operating exceptional
items" and are presented below "Total profit from operations and associates" on
the income statement. Non-operating exceptional items include profits and
losses on disposals of investments, fixed assets and businesses, and costs of,
or reversals of, provisions for fundamental reorganisations or restructuring.
An analysis of exceptional items is provided in the notes to the financial
information.
The Group anticipates that it will continue to publish certain additional
performance measures under IFRS:
• "Headline earnings" and "headline earnings per share", calculated in
accordance with the definition in the Institute of Investment Management and
Research ("IIMR") statement of Investment Practice No 1, "The Definition of
IIMR Headline earnings", which the directors consider to be a useful
additional measure of the Group's performance and which allows an
understanding of the underlying performance of the business. Headline
earnings represents profit for the year excluding any exceptional items and
excluding any related tax or minority interests. Exceptional items are
defined above as items of income and expense that are material and require
separate disclosure in accordance with IAS 1.87. These typically comprise
impairment charges and reversals and profits and losses on disposals of
investments and businesses.
Headline earnings and headline earnings per share restated for IFRS are shown in
notes 5 and 6 to the financial information in sections 4.1.7 and 4.2.7.
• 'EBITDA', which is defined as operating profit before exceptional items
plus depreciation of subsidiaries of joint ventures and share of EBITDA of
associates.
EBITDA restated for IFRS is shown in note 8 to the financial information in
sections 4.1.7 and 4.2.7.
2. IMPACT OF IFRS ON GROUP RESULTS
The more significant areas of our Group financial information that have been
impacted by the move to IFRS include:
Presentation:
• IAS 1 - presentation of minority interests within equity
• IAS 1 - reporting of some unrealised gains (such as gains on deemed
disposals) through the income statement
• IAS 7 - presentation of "cash equivalents" as cash, net of overdrafts, for
purposes of the cash flow statement
• IAS 28 - net income after tax and interest from associates reported on one
line in the income statement, previously gross disclosure of turnover and
operating profit with tax and interest recorded in the relevant headings was
permitted under UK GAAP
• IAS 31 - proportional consolidation of joint venture entities
Accounting:
• IAS 10 - recognition of dividends in the period declared and not in the
period to which they relate
• IAS 12 - provision of deferred taxation on temporary differences arising
on fair value adjustments at acquisition and subsequent changes reflected in
the income statement
• IAS 19 (revised) - recognition of all assets and liabilities for employee
benefit schemes, particularly post retirement benefits
• IAS 21 - recycling of cumulative currency translation adjustments from non
US dollar operations on their disposal
• IAS 21 - translation of non US dollar goodwill arising on acquisitions
after 1 January 2004 to the closing exchange rate
• IAS 28 and 21 - US dollar preference shares held in De Beers are no longer
considered part of the net investment in the associate
• IAS 36 - replacement of goodwill amortisation with an annual impairment
test
• IAS 41 - recording biological assets at fair value throughout the period
of growth, previously held at the lower of historical cost and net
realisable value
• IFRS 2 - fair valuing share options granted in employee share based
remuneration schemes.
Although the majority of accounting standards to be applied in the Group's first
full IFRS financial statements have been finalised, the principles may still be
subject to possible amendment as a result of additional interpretative guidance
from IFRIC and the accounting profession.
The impact on the Group's earnings, net of tax and minority interest, for the
year to 31 December 2004 from the IFRS restatement exercise (pre IAS 32 and IAS
39) is:
Total profit Retained Headline
US$ million pre dividends profit earnings
UK GAAP 2,913 1,906 2,689
Reclassification of unrealised gains 427 427 -
Proposed dividend adjustment - 180 -
Deferred tax on fair value adjustments 41 41 41
Defined benefit pension schemes - - -
Recycling of currency translation adjustments 30 30 -
Treatment of De Beers' preference shares (69) (69) (112)
Reversal of goodwill amortisation 205 205 -
Fair value of biological assets (21) (21) (20)
Share based payments (21) (21) (21)
Net impact of other IFRS adjustments (4) (4) (5)
Restated IFRS results 3,501 2,674 2,572
Net impact from IFRS restatement 588 768 (117)
The impact on the Group's earnings, net of tax and minority interest, for the
period to 30 June 2004 from the IFRS restatement exercise (pre IAS 32 and IAS
39) is:
Total profit Retained Headline
US$ million pre dividends earnings
profit
UK GAAP 1,709 1,436 1,304
Reclassification of unrealised gains 424 424 -
Proposed dividend adjustment - (281) -
Deferred tax on fair value adjustments 2 2 2
Defined benefit pension schemes 8 8 8
Treatment of De Beers' preference shares (5) (5) (49)
Reversal of goodwill amortisation 104 104 -
Fair value of biological assets (4) (4) (3)
Share based payments (14) (14) (14)
Net impact of other IFRS adjustments 2 2 -
Restated IFRS results 2,226 1,672 1,248
Net impact from IFRS restatement 517 236 (56)
The impact on the Group's net assets, gross of minority interest and currency
translation effects, as at
1 January 2004 (transition date), 30 June 2004 and 31 December 2004 from the
IFRS restatement exercise (pre IAS 32 and IAS 39) is:
Net assets Net assets Net assets
US$ million 1 Jan 04 30 Jun 04 31 Dec 04
UK GAAP 19,772(1) 22,531 24,998
Reclassification of UK GAAP minority interests within equity 3,396 4,160 4,620
Proposed dividend adjustment 622 349 815
Recognition of deferred tax on fair value adjustments (1,485) (1,552) (1,655)
Defined benefit pension obligations (576) (585) (628)
Translation of goodwill arising post 1 January 2004 - - 21
Treatment of De Beers' preference shares (130) (143) (218)
Net impairment of goodwill (214) (214) (214)
Reversal of goodwill amortisation - 112 221
Fair value of biological assets 26 24 14
Share based payments 6 14 1
Net impact of other IFRS adjustments 6 (1) (18)
Restated IFRS results 21,423 24,695 27,957
Net impact from IFRS restatement (including minority interest
reclassification)
1,651 2,164 2,959
Net impact from IFRS restatement (excluding minority interest
reclassification) (1,745) (1,996) (1,661)
(1) As restated for the 2004 UK GAAP reclassification of treasury shares into
equity.
A summary of the more significant accounting policy changes that have arisen,
based on current interpretations of the standards within each of these areas, is
provided below. Our assessment may be subject to revision as a result of new
accounting developments and interpretations that may arise prior to publication
of the Group's first full financial statements for the year ending 31 December
2005.
The more significant areas of presentation change are:
IAS 1 - Presentation of minority interest in equity
Minority interests have been reclassified from "long-term liabilities" to "
equity" in accordance with IAS 1. Although this has increased reported net
assets by $4.6 billion at 31 December 2004, $4.2 billion at 30 June 2004 and
$3.4 billion at 1 January 2004, it has no impact on total shareholders' equity.
IAS 1 - Reporting of unrealised gains through the income statement
The international accounting framework provides no distinction between
unrealised and realised gains for financial reporting. As such, all unrealised
gains, with the exception of actuarial gains or losses on post-retirement
schemes and currency translation differences, will be recorded through the
income statement and not through the statement of total recognised gains and
losses, as was required under UK GAAP.
Although this reclassification has increased reported profit for the year to 31
December 2004 by $0.4 billion, there is no change to net assets.
IAS 7 - Presentation of "cash equivalents" as cash for the purposes of the cash
flow statement and balance sheet
Short-term cash investments previously disclosed as "current asset investments"
that mature within 90 days of deposit are now classified as "cash equivalents"
in accordance with IAS 7. Consequently $0.6 billion of cash equivalents were
reclassified from current asset investments as at 31 December 2004, $1.3 billion
as at 30 June 2004 and $1.0 billion as at 1 January 2004.
The $0.4 billion cash movement on cash equivalents for the year to 31 December
2004 was previously recorded as the "management of liquid resources" in the UK
GAAP cash flow statement. The IFRS cash flow reconciles the movement in cash and
cash equivalents combined.
Cash and cash equivalents in the IFRS cash flow statement are now shown net of
overdrafts. Previously the movement of overdrafts was included within the net
debt reconciliation as "movements in debt due less than one year".
Reclassifying the cash movement of overdrafts from financing activities has
increased cash outflows by $143 million for the year ended 31 December 2004 and
$47 million for the period ended 30 June 2004.
IAS 28 - Reporting net income from associates
Net income from associates is reported after tax and net finance costs on one
line in the consolidated income statement. Previously associates' revenue and
operating profit were disclosed separately on the face of the income statement
and associates' net finance cost and tax were included within the respective
headings in the income statement.
This reclassification has no impact on the reported total profit of the Group.
IAS 31 - Proportional consolidation of joint venture entities
Results of joint venture entities are incorporated on an individual line-by-line
basis in the Group financial statements, in accordance with proportional
consolidation rules set out in IAS 31. This is a change in presentation and does
not impact reported net assets or earnings' performance measures of the Group.
The accounting policies for Joint Arrangements Not Entities ("JANEs") and joint
venture operations are fundamentally the same under both UK and international
accounting standards.
The more significant areas of accounting change are:
IAS 10 - Recognition of dividends proposed in the period approved for payment
Dividends proposed are recognised in the period in which they are formally
approved for payment. This is also in accordance with the Companies Act 1985
(International Accounting Standards and Other Accounting Amendments) Regulations
2004, which will be effective for financial years commencing on or after 1
January 2005.
The change in timing of recognising proposed dividends and the related tax,
thereon, has increased reported net assets of the Group as at 31 December 2004
by $815 million, being the final 2004 proposed dividends to the Group's
shareholders and its minority interests, and by $349 million as at 30 June 2004,
being the 2004 interim proposed dividends.
IAS 12 - Recognition of deferred tax on temporary differences arising on
acquisition
Deferred tax is recognised at acquisition as part of the assessment of the fair
value of assets and liabilities acquired and is provided on balances previously
excluded from provision under UK GAAP such as revaluations of tangible fixed
assets. The largest temporary difference requiring additional deferred tax
provision on transition arises between the carrying value of mineral reserves
and the respective tax base.
Upon adoption of IFRS, the Group has recognised a deferred tax liability of $1.5
billion in respect of additional temporary differences arising on previous
acquisitions. In accordance with IFRS 1 the Group has taken the exemption from
restating acquisitions prior to 1 January 2004, and as such this adjustment was
made to reserves at 1 January 2004. Deferred tax provided on temporary
differences for acquisitions made after 1 January 2004 has either increased the
value attributed to mineral reserves or increased goodwill, depending on the
nature of the temporary difference giving rise to it.
Any deferred tax raised will unwind through the consolidated income statement as
the underlying temporary difference is amortised. The net impact from the
recognition of additional temporary differences on acquisitions is to increase
profit after tax by $41 million for the year ended 31 December 2004 and $2
million for the period to 30 June 2004.
IAS 19 - Post retirement benefit schemes
IAS 19 requires companies to recognise the full deficit (or surplus, subject to
restrictions) of post-retirement benefits under defined benefit arrangements on
the balance sheet. The Group has early adopted the proposed amendment to IAS 19
which assumes it will be endorsed by the European Union prior to 31 December
2005, and has recognised all actuarial gains or losses directly through equity.
This accounting change has reduced consolidated net assets by approximately $0.6
billion (net of deferred tax) as at 31 December 2004, 30 June 2004 and 1 January
2004 as the full actuarial gains and losses of defined benefit arrangements are
now reflected in reserves. There is no material impact on net profit for the
year ended 31 December 2004 and an $8 million increase in net profit for the
period ended 30 June 2004.
IAS 21 - Recycling of consolidated currency translation adjustments from non US
dollar operations on their disposal
IAS 21 requires cumulative currency translation adjustments ("CTA") arising on
translation of a foreign operation to be recycled through the income statement
when that entity is disposed of. Currently, under UK GAAP, the CTA is not
included in the gain or loss calculated if that operation is sold. In
accordance with IFRS 1, the Group has taken the exemption from recycling foreign
currency gains or losses arising before 1 January 2004.
The accounting policy change has increased reported profit on disposal of non US
dollar operations by $30 million for the year to 31 December 2004 which
represented recycled CTA gains arising since 1 January 2004. There was no
material impact on reported results for the period to 30 June 2004.
This accounting change has no impact on consolidated net assets, as it is
effectively recycling gains and losses reported previously in reserves back
through the income statement.
IAS 21 - Translation of non US dollar goodwill arising on acquisitions after 1
January 2004 to the closing exchange rate
In accordance with IFRS 1, the Group is required to translate non US dollar
goodwill arising on acquisitions after 1 January 2004 to the closing US dollar
exchange rate. This accounting adjustment has increased net assets at 31
December 2004 by $21 million; there is no material impact on net assets as at 30
June 2004. The resulting foreign exchange gain arising on consolidation has been
taken to the CTA reserve.
IAS 28 and 21 - US dollar preference shares held in De Beers
Under UK GAAP, US dollar preference shares held in De Beers with a redemption
value of $701 million were considered part of the Group's long-term equity
ownership in the entity. As such, the preference shares were held at historical
cost and included in the total carrying value of the associate in the
consolidated balance sheet.
The US dollar preference shares, which are held by a Rand functional currency
entity and are redeemable by 2010, no longer qualify as quasi-equity and
consequently have been reclassified as "non current investments" and are
retranslated at each period end. The resulting Rand:US dollar foreign exchange
gains and losses are reported through the income statement. Under IAS 21 a
currency loss of $49 million has been recorded for the six months ended 30 June
2004, and a total of $112 million for the year ended 31 December 2004.
Consequently the $44 million exceptional currency loss recognised on the partial
redemption of preference shares under UK GAAP reporting has been reversed.
The net impact from this accounting policy difference also reduced net assets by
$130 million as at 1 January 2004.
After the partial redemption in June 2004 of 25% of the shares, the residual
carrying value of the remaining US dollar preference shares held as at 31
December 2004 was $526 million.
IAS 36 - Replacement of goodwill amortisation with an annual impairment test and
elimination of centrally held goodwill
IFRS does not permit the amortisation of goodwill, but requires the carrying
amount to be supported by an annual impairment test.
For the purposes of impairment testing, goodwill is allocated to cash-generating
units ("CGUs"), or groups of CGUs, that are expected to benefit from the
synergies of the combination. The group of CGUs to which the goodwill is
allocated represents the lowest level at which the goodwill is monitored for
internal management purposes and is not larger than a geographical or business
segment.
On transition to IFRS as at 1 January 2004, approximately $260 million of "
strategic" goodwill arising on the formation of Anglo American plc in 1999 was
eliminated. In accordance with FRS 11, this goodwill reflected the increase in
future shareholder value arising from the merger of the AACSA and Minorco
companies and not the intrinsic value of Minorco assets existing at the date of
restructure and was held centrally. IFRS, however, requires that all goodwill
is allocated to cash generating units. On making this allocation, the goodwill
has been reduced as a result of disposals or impairments.
In addition, approximately $50 million of negative goodwill was written back in
accordance with IFRS 3 in the opening balance sheet. Together these adjustments
give rise to a net reduction to the carrying value of goodwill on transition of
$0.2 billion.
The replacement of goodwill amortisation with an annual impairment test has
increased reported profits for the Group by $0.2 billion for the year to 31
December 2004 and $0.1 billion for the period to 30 June 2004. This accounting
change does not impact headline earnings, as headline earnings were stated
before goodwill amortisation for UK GAAP.
IAS 41 - Fair value of biological assets
Afforestation and other agricultural assets, primarily forests within our Paper
and Packaging business, were previously held at historical cost. These assets
are now recorded at fair value in accordance with IAS 41, with fair value
changes reported through the income statement up until the point at which the
assets are harvested. The historical cost of such assets was previously
classified within fixed assets.
This accounting change has resulted in the reclassification of afforestation and
other agricultural asset costs from fixed assets to the separate asset category
"biological assets", and the resultant fair value has increased net assets by
$14 million as at 31 December 2004, $24 million as at 30 June 2004 and $26
million as at 1 January 2004.
The effect of recognising fair value gains from growing afforestation and other
agricultural assets earlier than under UK GAAP has reduced reported net profit
for the year ended 31 December 2004 by approximately $21 million and by $4
million for the period ended 30 June 2004.
IFRS 2 - Share based remuneration schemes
IFRS 2 Share-based payments requires options granted by the Group to employees,
for example under Employee Share Option Schemes and Save As You Earn schemes, to
be fair valued at grant date using an option pricing model and charged through
the income statement over the vesting period of the options.
UK GAAP required the "intrinsic valuation" method to be applied whereby a charge
was made if the exercise price of the option at grant date was below the market
price.
This accounting change has reduced consolidated net profit by $21 million for
the year to 31 December 2004 and $14 million for the period to 30 June 2004.
Group employee remuneration schemes have now replaced option schemes with share
schemes. Consequently the impact of this accounting policy change will
diminish.
IAS 32 and 39 - pro forma information
Pro forma 2004 IFRS numbers including the impact of IAS 32 and 39 have been
prepared, although the full adoption of both of these standards is not mandatory
until 1 January 2005.
The basis of preparation for the pro forma information including IAS 32 and 39
is set out in section 3 of this news release. The standards have not been
applied to 2004 transactions within entities that were fully disposed of in
2004, or to contracts containing embedded derivatives that no longer existed as
at 1 January 2005.
The impact of IAS 32 and 39 on the Group's earnings, net of minority interest
and tax, for the six months to
30 June 2004 and the year to 31 December 2004 is as follows:
Period ended Year ended
30 June 2004 31 December 2004
Total Headline Total Headline
profit earnings profit earnings
US$ million
IFRS pre IAS 32 and 39 2,226 1,248 3,501 2,572
Derivatives(1) (47) (47) (63) (63)
Impairment of assets(2) - - (64) 2
Cash flow hedges 18 18 15 15
Convertible debt(3) 8 8 (12) (12)
Fair value of equity investments (43) (2) (46) (3)
Deemed disposal of Anglogold 30 - 30 -
Other adjustments (2) (1) 1 3
Pro forma IFRS results post IAS 32 and 39 2,190 1,224 3,362 2,514
Pro forma impact of IAS 32 and 39 (36) (24) (139) (58)
The indicative impact on the Group's restated IFRS (pre IAS 32 and 39) net
assets, gross of minority interest and currency translation, as at 30 June 2004
and 31 December 2004 is:
Net assets Net assets
US$ million 30 Jun 04 31 Dec 04
IFRS pre IAS 32 and 39 24,695 27,957
Derivatives(1) 81 72
Impairment of assets(2) (69) (140)
Cash flow hedges (168) (159)
Convertible debt(3) 90 60
Fair value of equity investments 52 57
Other adjustments (1) (3)
Restated IFRS net assets post IAS 32 and 39 24,680 27,844
Pro forma impact of IAS 32 and 39 (15) (113)
(1) "Derivatives" comprise the mark to market of derivatives, including
embedded derivatives, that have not been designated as hedges.
(2) Recognition of an embedded derivative asset arising in a commercial purchase
contract within a Base Metals' operation, has increased the carrying
value of total assets over their recoverable amount. As a consequence, an
impairment has been recognised in the pro forma financial information.
On adoption of IAS 32 and IAS 39 at 1 January 2005 any resulting writedown will
be taken through brought forward reserves at that date.
(3) Convertible debt is restated in accordance with the Group's accounting
policy, as set out in Appendix I.
3. BASIS OF PREPARATION
Basis of preparation
The consolidated financial information for the six months ended 30 June 2004 and
the year ended 31 December 2004 and the opening balance sheet at 1 January 2004
("the financial information") have been prepared in accordance with
International Financial Reporting Standards (IFRS) for the first time.
The financial information has been prepared applying the requirements of IFRS 1
First-time adoption of International Financial Reporting Standards. Where
estimates were not previously required under UK GAAP, they have been based only
on those factors existing on the balance sheet date. This is consistent with
treating information received after the balance sheet date as non-adjusting
events under IAS 10 Events after the Balance Sheet Date. Estimates not
previously required under UK GAAP primarily relate to financial instruments,
embedded derivatives, share based payments and biological assets.
The Group has made the following first-time accounting policy choices, in
accordance with IFRS 1:
• Business combinations - acquisitions prior to 1 January 2004 have not been
restated;
• Goodwill - the requirement to retranslate goodwill balances at the
exchange rate at reporting date in accordance with IAS 21 The effects of
Changes in Foreign Exchange Rates have been applied prospectively to
goodwill balances arising on acquisitions after 1 January 2004;
• Post-retirement benefits - deficits and surpluses (subject to
restrictions) of post-retirement schemes under defined benefit arrangement
have been recognised in full at 1 January 2004. From 1 January 2004 the
Group has applied the full provision accounting method, as permitted by the
proposed amendment to IAS 19 Employee Benefits, and as such, subsequent
actuarial gains and losses are recorded directly in equity;
• Currency translation differences - translation differences relating to
foreign currency investments in subsidiaries, associates and joint ventures
in existence at the transition date are deemed to be zero at the date of
transition, and as such the gain or loss on subsequent disposal of any
foreign operation excludes translation differences that arose before that
date;
• Financial instruments - IAS 32 Financial Instruments: Disclosure and
Presentation and IAS 39 Financial Instruments: Recognition and Measurement
will be applied prospectively from 1 January 2005 and as such the 2004
restated information presented excludes any adjustments required on adoption
of these standards;
• Share based payments - IFRS 2 Share-Based Payment is applied to all share
based rewards made after 7 November 2002 that did not vest before 1 January
2005.
In addition, the Group has chosen to proportionally consolidate joint venture
entities in accordance with IAS 31 Interests in Joint Ventures.
The Group, as a first-time reporter, has adopted early the following standards
and interpretations that are not mandatory as at 31 December 2005, the reporting
date of the Group's first IFRS financial statements.
The following standards and interpretations have been applied with effect from 1
January 2004:
• IAS 19 Employee Benefits including the proposed amendments thereto
• IFRS 6 Exploration for and Evaluation of Mineral Resources. The standard
does not impact the Group's existing policy for exploration and evaluation
expenditure
• IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar
Liabilities
• IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments
• IFRIC 3 Emission Rights
• IFRIC 4 Determining Whether an Arrangement Contains a Lease
• IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds
Early adoption of these standards and interpretations assumes the EU will
endorse them by 31 December 2005, the Group's first full annual IFRS reporting
date.
The following standards will be applied with effect from 1 January 2005:
• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The
2004 restated IFRS information therefore applies the requirements of IAS 35
Discontinuing Operations.
• IAS 32 and 39 - Pro forma consolidated income statements and balance
sheets including the application of IAS 32 and 39 prospectively from 1
January 2004 have been presented in Appendix I to this report. The basis of
preparation of the pro forma information is explained in more detail below.
The financial statements have been prepared in accordance with the historical
cost convention, as modified by the revaluation of certain financial instruments
for pro forma information as discussed below and certain biological assets.
Items of income and expense that are material and require separate disclosure,
in accordance with IAS 1.87, are classified as "exceptional items" on the face
of the income statement. Exceptional items that relate to the underlying
performance of the business are classified as "operating exceptional items" and
include impairment charges and reversals. Exceptional items that do not relate
to underlying business performance are classified as "non-operating exceptional
items" and are presented below "Total profit from operations and associates" on
the income statement. Non-operating exceptional items include profits and
losses on disposals of investments, fixed assets and businesses, and costs of,
or reversal of, provisions for reorganisations or restructuring.
The adjustment for items not relating to underlying business performance is
broadly equivalent to the current UK GAAP classification of exceptional
non-operating items.
Pro forma IAS 32 and 39 financial information
Pro forma IFRS consolidated income statements and balance sheets including the
effects of applying IAS 32 and 39 for the period ended 30 June 2004 and the year
ended 31 December 2004 have been provided in Appendix I to this report. The
full adoption of both these standards is not mandatory until January 2005.
IAS 32 and 39 have not been applied to 2004 transactions within entities that
were fully disposed of in 2004, or to contracts containing embedded derivatives
that no longer existed as at 1 January 2005.
In accordance with the transition rules applicable for first-time adopters,
documentation and effectiveness calculations required for hedge accounting were
put in place as at 1 January 2005. Where hedge accounting has been applied with
effect from 1 January 2005, 2004 pro forma financial information has been stated
on the same basis as if necessary documentation had been in place.
AngloGold Ashanti, a Rand functional currency entity, issued a US dollar
convertible bond in February 2004. The pro forma financial information
classifies the equity conversion option within this debt as a derivative within
liabilities, marked to market through the income statement. This is in
accordance with the recent clarification of IAS 32 by IFRIC set out in their
published update following their April 2005 meeting. This may be subject to
change as a result of future discussions between IFRIC and the IASB.
4. GROUP FINANCIAL INFORMATION RESTATED FOR IFRS
4.1 CONSOLIDATED FINANCIAL INFORMATION FOR THE YEAR ENDED
31 DECEMBER 2004
4.1.1 Consolidated income statement for the year ended 31 December 2004
As previously Proportional UK GAAP IFRS IFRS
consolidation adjustments
reported under of joint revised (1)
Notes UK GAAP ventures
US$ million
Turnover 31,795 - 31,795 (5,527) 26,268
Share of joint ventures' turnover (1,195) 1,195 - - -
Share of associates' turnover (5,670) - (5,670) 5,670 -
Group turnover 1 24,930 1,195 26,125 143 26,268
Total operating costs (21,869) (749) (22,618) (9) (22,627)
Operating exceptional items 25 - 25 - 25
Group operating profit(2) 1 3,086 446 3,532 134 3,666
Share of joint ventures' operating profit 446 (446) - - -
Share of associates' operating profit 1,065 - 1,065 (1,065) -
Share of associates' exceptional items (117) - (117) 117 -
Net income from associates(3) 1 - - - 550 550
Total profit from operations and associates 4,480 - 4,480 (264) 4,216
(4)
Non-operating exceptional items 520 - 520 495 1,015
Net finance costs (359) - (359) (8) (367)
Profit before tax 4,641 - 4,641 223 4,864
Income tax expense 4 (1,279) - (1,279) 356 (923)
Profit for the financial year 3,362 - 3,362 579 3,941
Attributable to
Minority interests 449 - 449 (9) 440
Equity shareholders of the Company 2,913 - 2,913 588 3,501
Total dividends paid and proposed (1,007) - (1,007) 180 (827)
Retained profit 1,906 - 1,906 768 2,674
Basic earnings per share (US$):
Profit for the year attributable to equity 6 2.03 - 2.03 0.41 2.44
shareholders
Diluted earnings per share (US$)
Profit for the year attributable to equity 6 1.96 - 1.96 0.39 2.35
shareholders
(1) IFRS adjustments exclude IAS 32 and IAS 39. Pro forma financial information including IAS 32 and 39 is set out in
Appendix I to this release.
(2) Group operating profit disclosed on the face of the income statement is presented on an IFRS presentation basis.
This excludes the operating profit from associates.
(3) $550 million includes the Group's share of associates' operating exceptional charges of $117 million, and is stated
net of interest and tax in accordance with IAS 28.
(4) Under UK GAAP, $4,480 million shown above represented operating profit, excluding all associates' interest, tax and
underlying minority interest.
4.1.2 Consolidated balance sheet as at 31 December 2004
Proportional UK GAAP IFRS IFRS
consolidation adjustments
As previously of joint revised (1)
Notes reported under ventures
UK GAAP
US$ million
Intangible fixed assets 2,590 17 2,607 37 2,644
Tangible fixed assets 31,155 1,534 32,689 483 33,172
Biological assets - - - 374 374
Environmental rehabilitation - - - 237 237
trusts
Investments in associates 4,346 1 4,347 (861) 3,486
Fixed asset investments 889 (21) 868 216 1,084
Deferred tax assets - - - 128 128
Other non current assets - - - 66 66
Share of joint ventures 1,496 (1,496) - - -
Total non current assets 40,476 35 40,511 680 41,191
Stocks 3,401 137 3,538 11 3,549
Trade and other receivables 5,449 219 5,668 (134) 5,534
Current tax assets 219 1 220 - 220
Current asset investments 575 - 575 (573) 2
Cash and cash equivalents 2,086 296 2,382 573 2,955
Total current assets 11,730 653 12,383 (123) 12,260
Total assets 52,206 688 52,894 557 53,451
Short term borrowings 3,333 50 3,383 - 3,383
Trade and other payables 5,984 129 6,113 (745) 5,368
Current tax liabilities 836 15 851 (20) 831
Total creditors due within one 10,153 194 10,347 (765) 9,582
year
Medium and long term 7,449 368 7,817 - 7,817
borrowings
Retirement benefit obligations 753 5 758 443 1,201
Deferred tax liabilities 2,908 130 3,038 2,528 5,566
Provisions for liabilities and 1,325 (9) 1,316 12 1,328
charges
Total long term liabilities 12,435 494 12,929 2,983 15,912
Total liabilities 22,588 688 23,276 2,218 25,494
Minority Interests 4,620 - 4,620 (4,620) -
Net assets 24,998 - 24,998 2,959 27,957
Equity
Called-up share capital 747 - 747 - 747
Share premium account 1,633 - 1,633 - 1,633
Other reserves 4.1.4 1,205 - 1,205 1,886 3,091
Retained earnings 4.1.4 21,413 - 21,413 (3,515) 17,898
Total shareholders' equity 24,998 - 24,998 (1,629) 23,369
Minority interests 4.1.4 - - - 4,588 4,588
Total equity 24,998 - 24,998 2,959 27,957
(1) IFRS adjustments exclude IAS 32 and IAS 39. Pro forma financial information including IAS 32 and 39 is set out
in Appendix I.
4.1.3 Consolidated cash flow statement for the year ended 31 December 2004
As previously Proportional UK GAAP IFRS IFRS
presented consolidation adjustments
under of joint revised (1)
Notes UK GAAP ventures
US$ million
Cash flows from operating activities 7 4,773 518 5,291 - 5,291
Dividends from associates 368 - 368 - 368
Dividends from fixed asset investments 28 - 28 - 28
Dividends from joint ventures 40 (40) - - -
Income tax paid (478) (22) (500) - (500)
Net cash flow from/(used in) operating 4,731 456 5,187 - 5,187
activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash (1,119) (16) (1,135) - (1,135)
acquired
Investment in joint ventures (21) 21 - - -
Purchases of property, plant and equipment (3,129) (104) (3,233) - (3,233)
Purchases of fixed asset investments (142) 34 (108) - (108)
Loans granted to related parties - 6 6 - 6
Disposal of subsidiaries, net of cash disposed 402 (110) 292 (18) 274
Sale of interests in joint ventures 37 - 37 - 37
Repayment of loans and capital from/(to) joint 77 (77) - - -
ventures
Sale of interests in associates 1,424 - 1,424 - 1,424
Repayment of loans and capital from associates 299 - 299 - 299
Proceeds from sale of fixed asset investments 263 - 263 - 263
Proceeds from disposal of tangible fixed assets 151 - 151 - 151
Other adjustments - (3) (3) (1) (4)
Net cash used in investing activities (1,758) (249) (2,007) (19) (2,026)
Cash flows from financing activities
Movement on current asset investments - - - 23 23
Issue of share capital 192 - 192 - 192
Interest received and other investment income 270 (75) 195 - 195
Interest paid (572) (29) (601) - (601)
Dividends paid to minority interests (238) (1) (239) - (239)
Issue of convertible debt - - - 990 990
Repayment of short term borrowings (1,664) (23) (1,687) (143) (1,830)
Receipt/(repayment) of medium and long term 305 87 392 (990) (598)
borrowings
Movement in minority loans (2) - (2) - (2)
Other financing activity - 13 13 - 13
Dividends paid to Company Shareholders (818) - (818) - (818)
Net cash used in financing activities (2,527) (28) (2,555) (120) (2,675)
Management of liquid resources 456 - 456 (456) -
Net increase/(decrease) in cash and cash equivalents 902 179 1,081 (595) 486
Cash and cash equivalents at start of year(2) 9,10 1,094 114 1,208 978 2,186
Cash movements in year 902 179 1,081 (595) 486
Effects of exchange rate changes 90 1 91 18 109
Cash and cash equivalents at end of year(2) 9,10 2,086 294 2,380 401 2,781
(1) IFRS adjustments exclude IAS 32 and IAS 39.
(2) Cash and cash equivalents per the cash flow statement is reconciled to the balance sheet in note 10.
4.1.4 Reconciliation of equity as at 31 December 2004
Total Total
shareholders'
share Retained Other equity Minority Total
US$ million capital earnings reserves equity
(1) (2) interest
UK GAAP at 31 December 2004 2,380 21,413 1,205 24,998 4,620 29,618
CTA transfer from retained earnings(3) - (2,500) 2,500 - - -
IFRS opening balance sheet adjustments - (1,335) (379) (1,714) (31) (1,745)
Movements arising in the year
Reversal of goodwill amortisation - 205 - 205 16 221
Recycling of CTA on disposal - 30 (30) - - -
Fair value of biological assets - (21) 3 (18) 6 (12)
Deferred tax on fair value adjustments - 41 (193) (152) (18) (170)
Defined benefit arrangements - (16) (31) (47) (5) (52)
Translation of De Beers' preference shares - (69) (19) (88) - (88)
Share based payments(4) - (38) 32 (6) 1 (5)
Removal of proposed dividend - 180 2 182 11 193
Retranslation of goodwill acquired in 2004 - - 21 21 - 21
Other adjustments - (21) 9 (12) (12) (24)
Other transfers - 29 (29) - - -
Total IFRS adjustments - (3,515) 1,886 (1,629) (32) (1,661)
IFRS at 31 December 2004 2,380 17,898 3,091 23,369 4,588 27,957
(1) Total share capital comprises called-up share capital and the share premium account.
(2) Detailed analysis is provided below.
(3) Cumulative currency translation differences are deemed to be zero as at 1 January 2004. The currency translation
adjustment ("CTA") transferred is therefore the UK GAAP currency translation gains/(losses) arising since that date.
(4) Share based payments include $12 million reclassified from retained earnings to share based payment reserve.
Total other reserves are further analysed as:
Cumulative
Share based translation
Merger payment adjustment Other Total other
reserve reserve reserves(1) reserves
US$ million reserve
UK GAAP reserves at 31 December 2004 489 - - 716 1,205
CTA transfer from retained earnings(2) - - 2,500 - 2,500
IFRS opening balance sheet adjustments (460) 25 - 56 (379)
Movements arising in the year
Recycling of CTA on disposal - - (30) - (30)
Fair value of biological assets - - 3 - 3
Deferred tax on fair value adjustments - - (193) - (193)
Defined benefit arrangements - - (31) - (31)
Translation of De Beers' preference shares - - (19) - (19)
Share based payments - 30 2 - 32
Removal of proposed dividend - - 2 - 2
Retranslation of goodwill acquired in 2004 - - 21 - 21
Other adjustments - - 9 - 9
Other transfers to retained earnings (29) - - - (29)
Total IFRS adjustments (489) 55 2,264 56 1,886
IFRS reserves at 31 December 2004 - 55 2,264 772 3,091
(1) Other reserves comprise $685 million legal reserve and $87 million capital
redemption reserve.
(2) Currency translation differences transferred are those UK GAAP differences
arising since 1 January 2004.
4.1.5 Statement of changes in shareholders' equity for the year ended 31
December 2004
Share Cumulative
based translation Total
Total adjustment shareholders'
share Retained payment reserve Other equity Minority Total
US$ million capital reserves equity
(1) earnings reserve interest
IFRS at 1 January 2004 2,022 15,239 25 - 772 18,058 3,365 21,423
Net IFRS profit for the year - 3,501 - - - 3,501 440 3,941
Dividends paid - (827) - - - (827) - (827)
Shares issued 358 - - - - 358 - 358
Share based payments - 12 30 - - 42 3 45
Actuarial losses(2) - (16) - - - (16) (4) (20)
Subsidiary shares issued - - - - - - 890 890
Minority interest acquired - - - - - - (402) (402)
Deemed disposal of AngloGold - - - - - - 155 155
Dividend received by minority - - - - - - (178) (178)
interest
Cumulative translation differences - - - 2,294 - 2,294 340 2,634
Recycled CTA(3) - - - (30) - (30) - (30)
Other movements - (11) - - - (11) (21) (32)
IFRS at 31 December 2004 2,380 17,898 55 2,264 772 23,369 4,588 27,957
(1) Total share capital comprises called-up share capital and the share premium account.
(2) Stated net of deferred tax of $6 million.
(3) Currency translation adjustments.
4.1.6 Statement of recognised income and expense for the year ended 31
December 2004
US$ million 2004
IFRS profit for the year attributable to equity shareholders 3,501
Actuarial gains and losses on defined benefit retirement schemes (22)
Deferred tax on actuarial losses 6
Other movements (11)
Total recognised income and expense for the financial year 3,474
4.1.7 Notes to the IFRS financial information for the year ended 31 December
2004
1. Segmental information
By business segment
Operating profit
before Net operating
US$ million Turnover exceptional Operating profit assets(1)
items
Group subsidiaries and joint ventures(2)
Platinum 3,065 527 527 7,607
Gold 2,396 296 295 7,459
Coal 1,914 321 321 2,546
Base Metals 3,232 1,280 1,160 5,180
Industrial Minerals 3,833 416 407 4,864
Ferrous Metals and Industries 5,137 591 746 5,592
Paper and Packaging 6,691 575 575 6,879
Exploration - (120) (120) -
Corporate Activities - (245) (245) 14
Total 26,268 3,641 3,666 40,141
(1) Net operating assets consist of tangible and intangible assets, biological assets,
stocks and operating debtors less non interest bearing current liabilities.
(2) Joint ventures are proportionally consolidated.
Net income from associates is shown in the income statement. Group turnover excludes the Group's share of
turnover of associates. As additional disclosure, turnover and operating profit of associates is given
below, together with the reconciliation from associates' operating profit to "net income from associates".
Operating profit
before
US$ million Turnover exceptional Operating profit
items
Associates
Platinum 55 9 9
Gold 13 - -
Diamonds 3,177 573 573
Coal 468 176 176
Base Metals 88 (4) (121)
Industrial Minerals 25 5 5
Ferrous Metals and Industries 1,526 296 296
Paper and Packaging 228 (6) (6)
Exploration - - -
Corporate Activities 90 7 7
Total 5,670 1,056 939(1)
(1) Including an exceptional charge of $117 million.
Operating profit from associates is reconciled to "Net income from associates"
as follows:
US$ million IFRS
Operating profit 939
Non-operating exceptional items 10
Net finance charge (100)
Income tax expense (280)
Underlying minority interests (19)
Net income from associates 550
By geographic segment (by origin)
US$ million Turnover Operating profit Net operating assets
Group subsidiaries and joint ventures
South Africa 10,279 1,116 18,258
Rest of Africa 804 44 4,184
Europe 9,449 774 9,756
North America 1,018 176 603
South America 3,176 1,398 4,564
Australia and Asia 1,542 158 2,776
Total 26,268 3,666 40,141
Group turnover and operating profit does not include the Group's share of associates. As additional
information, the Group's share of associates' turnover and operating profit is shown below:
US$ million Turnover Operating profit
Associates
South Africa 1,565 170
Rest of Africa 1,972 356
Europe 969 166
North America 461 32
South America 447 132
Australia and Asia 256 83
Total 5,670 939(1)
(1) Operating profit from associated is reconciled to "Net income from
associates" as shown above.
By geographic segment (by destination)
US$ million Turnover
Group subsidiaries and joint ventures
South Africa 4,768
Rest of Africa 485
Europe 12,610
North America 3,062
South America 1,355
Australia and Asia 3,988
Total 26,268
For information, the Group's share of associates' turnover by geographic segment, by destination, is set
out below:
US$ million Turnover
Associates
South Africa 340
Rest of Africa 21
Europe 1,476
North America 2,222
South America 66
Australia and Asia 1,545
Total 5,670
2. Reconciliation of UK GAAP operating profit to IFRS operating profit
UK GAAP
US$ million IFRS adjustments
revised (1) IFRS
Group subsidiaries and joint ventures(2)
Platinum 529 (2) 527
Gold 262 33 295
Coal 315 6 321
Base Metals 1,159 1 1,160
Industrial Minerals 332 75 407
Ferrous Metals and Industries 753 (7) 746
Paper and Packaging 565 10 575
Exploration (120) - (120)
Corporate Activities (263) 18 (245)
Group operating profit - subsidiaries and joint ventures 3,532 134 3,666
Associates
Platinum 8 1 9
Diamonds 586 (13) 573
Coal 172 4 176
Base Metals (121) - (121)
Industrial Minerals 5 - 5
Ferrous Metals and Industries 297 (1) 296
Paper and Packaging (6) - (6)
Corporate Activities 7 - 7
Total associates' operating profit 948 (9) 939
Total Group operating profit, including associates 4,480 125 4,605
(1) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS adjustments is provided in
Appendix II.
(2) These are the consolidated results for group subsidiaries and joint ventures, as joint venture
entities are now proportionally consolidated.
3. Exceptional items
Items of income and expense that are material and require separate disclosure,
in accordance with IAS 1.87, are classified as "exceptional items" on the face
of the income statement. Exceptional items that relate to the underlying
performance of the business are classified as "operating exceptional items" and
include impairment charges and reversals. Exceptional items that do not relate
to underlying business performance are classified as "non-operating exceptional
items" and are presented below "Total profit from operations and associates" on
the income statement.
Non-operating exceptional items include profits and losses on disposals of
investments, fixed assets and businesses, and costs of, or reversal of,
provisions for reorganisations or restructuring.
US$ million
Operating exceptional items under UK GAAP 25
Share of operating exceptional items of associate under UK GAAP (117)
Total operating exceptional items disclosed under UK GAAP (92)
IFRS adjustments -
Total IFRS operating exceptional items (92)
Disclosed as:
Operating exceptional items 25
Included in net income from associates (117)
Total IFRS operating exceptional items (92)
US$ million
Non-operating exceptional items under UK GAAP 520
IFRS adjustments(1) 505
Total IFRS non-operating exceptional items 1,025
Disclosed as:
Non-operating exceptional items 1,015
Included in net income from associates 10
1,025
((1)) IFRS adjustments comprise:
Unrealised gains on deemed disposal of AngloGold 410
Recycling of CTA on deemed disposal of AngloGold 5
Reversal of exceptional loss on redemption of De Beers' preference 44
shares
Adjustment to loss on disposal of Hudson Bay 32
Unrealised gains on disposal of Pandora in Platinum 15
Other items (1)
505
Total profit from operations and associates before exceptional items is set out
below:
US$ million UK GAAP(1)
revised
IFRS
Total profit from operations and associates 4,480 4,216
Operating exceptional items (25) (25)
Group's share of exceptional items of associate 117 117
Share of associates' tax (296) -
Share of associates' finance charge (64) -
Share of associates' underlying minority interests (19) -
Share of associates' non-operating exceptional items - (10)
Total profit from operations and associates before exceptionals 4,193 4,298
(1) The UK result of $4,193 million includes associates' share of tax, finance
charges and minority interests to enable comparability with the restated
IFRS number.
4. Tax on profit on ordinary activities
Analysis of charge for the year
US$ million IFRS
United Kingdom corporation tax at 30% 61
South Africa corporation tax at 30% 253
Other overseas taxation 347
Current tax on exceptional items 59
Total current tax 720
Deferred tax charge for the period 260
Deferred tax on exceptional items (57)
Total deferred tax 203
Total tax charge 923
Reconciliation from UK GAAP tax charge to IFRS tax charge
US$ million Current tax Deferred tax Total
UK GAAP tax charge 1,038 241 1,279
Fair value of biological assets - (6) (6)
Removal of tax on dividends proposed (10) - (10)
Reclassification of associates' UK GAAP tax (308) 12 (296)
Deferred tax on fair value adjustments - (69) (69)
Defined benefit arrangements - 1 1
Share based payments - 1 1
Other adjustments - 23 23
IFRS tax charge 720 203 923
5. Headline earnings
US$ million IFRS
Profit attributable to equity shareholders 3,501
Operating exceptional charges (see note 3) 92
Non-operating exceptional gains (see note 3) (1,025)
Related tax 2
Related minority interests 2
Headline earnings for the financial year 2,572
Reconciliation of UK GAAP headline earnings to IFRS headline earnings
IFRS
US$ million UK GAAP adjustments(1) IFRS
By business segment
Platinum 239 1 240
Gold 158 (19) 139
Diamonds 381 (113) 268
Coal 351 6 357
Base Metals 1,042 (6) 1,036
Industrial Minerals 267 21 288
Ferrous Metals and Industries 480 (4) 476
Paper and Packaging 381 (14) 367
Exploration (91) - (91)
Corporate Activities (519) 11 (508)
Headline earnings 2,689 (117) 2,572
(1) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS
adjustments is provided in Appendix II.
6. Earnings per share
IFRS
Basic number of ordinary shares outstanding (million) 1,434
Potentially dilutive ordinary shares (million) 66
Diluted number of ordinary shares outstanding (million) 1,500
Profit for the financial year:
Basic earnings per share (US$) 2.44
Diluted earnings per share (US$) 2.35
Headline earnings for the financial year:
Basic earnings per share (US$) 1.79
Diluted earnings per share (US$) 1.73
7. Reconciliation of Group profit to cash inflow from operating activities
US$ million IFRS
Profit for the year before tax 4,864
Depreciation and amortisation 2,107
Share option expense 50
Exceptional items of subsidiaries and joint ventures (1,040)
Net finance costs 367
Share of profit of associates (550)
Provisions 17
Increase in stocks (279)
Increase in operating debtors (444)
Increase in operating creditors 113
Other adjustments 86
Cash inflow from operating activities 5,291
8. Reconciliation of UK GAAP EBITDA to IFRS EBITDA
IFRS
US$ million UK GAAP IFRS
adjustments(1)
By business segment
Platinum 867 (14) 853
Gold 701 (7) 694
Diamonds 688 (33) 655
Coal 686 1 687
Base Metals 1,626 (1) 1,625
Industrial Minerals 624 14 638
Ferrous Metals and Industries 1,249 (18) 1,231
Paper and Packaging 996 (18) 978
Exploration (120) - (120)
Corporate Activities (207) (3) (210)
EBITDA 7,110 (79) 7,031
(1) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS
adjustments is provided in Appendix II.
9. Movement in net debt
Debt due Debt due after
within 1 year -
Cash and cash 1 year - carrying value Current Total
US$ million equivalents carrying value (1) asset net debt
investments
Opening balance at 1 January 2004 2,186 (4,143) (6,997) 25 (8,929)
Cash flow 486 1,830 (392) (23) 1,901
Acquisitions excluding cash and cash
equivalents - -
(249) (314) (563)
Disposals excluding cash and cash
equivalents - -
6 23 29
Other non cash movements - (4) (15) - (19)
Reclassifications - (309) 309 - -
Exchange movements 109 (340) (431) - (662)
Closing balance at 31 December 2004 2,781 (3,209) (7,817) 2 (8,243)
(1) Debt due after 1 year includes convertible debt.
10. Reconciliation from UK GAAP cash to IFRS cash and cash equivalents
US$ million 1 January 31 December
2004 2004
Cash defined under UK GAAP 1,094 2,086
Share of cash in joint ventures 116 296
Cash equivalents 1,007 573
Cash and cash equivalents per the balance sheet 2,217 2,955
Overdrafts (excluding joint ventures) (29) (172)
Share of overdrafts in joint ventures (2) (2)
IFRS cash and cash equivalents per the cash flow 2,186 2,781
11. Reconciliation from EBITDA to cash inflow from operating activities
US$ million IFRS
EBITDA 7,031
Share of operating profit of associates, before (1,056)
exceptionals
Underlying depreciation in associates (227)
Share option expense 50
Provisions 17
Increase in stocks (279)
Increase in operating debtors (444)
Increase in operating creditors 113
Other adjustments 86
Cash inflow from operating activities 5,291
4.2 CONSOLIDATED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED
30 JUNE 2004
4.2.1 Consolidated income statement for the six months ended 30 June 2004
As Proportional UK GAAP IFRS IFRS
previously consolidation adjustments
of joint revised (1)
Note reported ventures
under
US$ million UK GAAP
Turnover 15,235 - 15,235 (2,889) 12,346
Share of joint ventures' turnover (496) 496 - - -
Share of associates' turnover (2,953) - (2,953) 2,953 -
Group turnover 1 11,786 496 12,282 64 12,346
Total operating costs (10,279) (329) (10,608) 20 (10,588)
Operating exceptional items - - - - -
Group operating profit(2) 1 1,507 167 1,674 84 1,758
Share of joint ventures' operating profit 167 (167) - - -
Share of associates' operating profit 574 - 574 (574) -
Net income from associates(3) 1 - - - 330 330
Total profit from operations and associates(4) 2,248 - 2,248 (160) 2,088
Non-operating exceptional items 535 - 535 470 1,005
Net finance costs (191) - (191) 30 (161)
Profit before tax 2,592 - 2,592 340 2,932
Income tax expense 4 (686) - (686) 170 (516)
Profit for the financial period 1,906 - 1,906 510 2,416
Attributable to
Minority interests 197 - 197 (7) 190
Equity shareholders of the Company 1,709 - 1,709 517 2,226
Total dividends paid and proposed (273) - (273) (281) (554)
Retained profit 1,436 - 1,436 236 1,672
Basic earnings per share (US$):
Profit for the period attributable to equity 6 1.20 - 1.20 0.36 1.56
shareholders
Diluted earnings per share (US$)
Profit for the period attributable to equity 6 1.14 - 1.14 0.36 1.50
shareholders
(1) IFRS adjustments exclude IAS 32 and IAS 39. Pro forma financial information including IAS 32 and IAS 39 is set out
in Appendix I.
(2) Group operating profit disclosed above on the face of the income statement is presented on an IFRS presentation
basis. This excludes the operating profit from associates.
(3) $330 million includes the Group's share of associates' non-operating exceptional gains of $2 million, and is stated
net of interest and tax in accordance with IAS 28.
(4) Under UK GAAP, $2,248 million shown above represented operating profit, excluding all associates' interest, tax and
underlying minority interest.
4.2.2 Consolidated balance sheet as at 30 June 2004
As Proportional UK GAAP IFRS IFRS
previously consolidation adjustments
of joint revised (1)
Note reported ventures
under
US$ million UK GAAP
Intangible fixed assets 2,600 14 2,614 (113) 2,501
Tangible fixed assets 28,227 1,544 29,771 456 30,227
Biological assets - - - 374 374
Environmental rehabilitation trusts - - - 182 182
Investments in associates 4,217 (9) 4,208 (822) 3,386
Fixed asset investments 844 17 861 336 1,197
Deferred tax assets - - - 97 97
Share of joint ventures 1,371 (1,371) - - -
Total non current assets 37,259 195 37,454 510 37,964
Stocks 2,986 131 3,117 31 3,148
Trade and other receivables 5,034 122 5,156 (115) 5,041
Current tax assets 191 1 192 - 192
Current asset investments 1,393 4 1,397 (1,322) 75
Cash and cash equivalents 1,039 134 1,173 1,322 2,495
Total current assets 10,643 392 11,035 (84) 10,951
Total assets 47,902 587 48,489 426 48,915
Short term borrowings 3,196 70 3,266 - 3,266
Trade and other payables 4,908 107 5,015 (283) 4,732
Current tax liabilities 677 6 683 (4) 679
Total creditors due within one year 8,781 183 8,964 (287) 8,677
Medium and long term borrowings 7,966 290 8,256 2 8,258
Retirement benefit obligations 703 6 709 372 1,081
Deferred tax liabilities 2,606 99 2,705 2,344 5,049
Provisions for liabilities and 1,155 9 1,164 (9) 1,155
charges
Total long term liabilities 12,430 404 12,834 2,709 15,543
Total liabilities 21,211 587 21,798 2,422 24,220
Minority interests 4,160 - 4,160 (4,160) -
Net assets 22,531 - 22,531 2,164 24,695
Equity
Called-up share capital 746 - 746 - 746
Share premium account 1,609 - 1,609 - 1,609
Other reserves 4.2.4 1,176 - 1,176 124 1,300
Retained earnings 4.2.4 19,000 - 19,000 (2,100) 16,900
Total shareholders' equity 22,531 - 22,531 (1,976) 20,555
Minority interests 4.2.4 - - - 4,140 4,140
Total equity 22,531 - 22,531 2,164 24,695
(1) IFRS adjustments exclude IAS 32 and IAS 39. Pro forma financial information including IAS 32
and IAS 39 is set out in Appendix I.
4.2.3 Consolidated cash flow statement for six months ended 30 June 2004
As previously Proportional UK GAAP IFRS IFRS
adjustments
presented consolidation revised (1)
under
of joint
UK GAAP
US$ million Notes ventures
Cash flows from operating activities 7 2,075 167 2,242 - 2,242
Dividends from associates 136 - 136 - 136
Dividends from fixed asset investments 15 - 15 - 15
Dividends from joint ventures 11 (11) - - -
Income tax paid (246) (12) (258) - (258)
Net cash flow from/(used in) operating 1,991 144 2,135 - 2,135
activities
Cash flows from investing activities - -
Acquisition of subsidiaries, net of cash (953) - (953) - (953)
acquired
Investment in joint ventures (1) 1 - - -
Investment in associates (1) - (1) - (1)
Purchases of property, plant and equipment (1,397) (59) (1,456) - (1,456)
Purchases of fixed asset investments (3) - (3) - (3)
Disposal of subsidiaries, net of cash disposed 16 - 16 - 16
Sale of interests in joint ventures 37 - 37 - 37
Repayment of loans and capital from joint 41 (41) - - -
ventures
Sale of interests in associates 1,180 - 1,180 - 1,180
Repayment of loans and capital from associates 220 - 220 - 220
Proceeds from sale of fixed asset investments 82 - 82 - 82
Proceeds from disposal of tangible fixed 56 - 56 - 56
assets
Loan repayments from related parties - 16 16 - 16
Other adjustments 4 1 5 - 5
Net cash used in investing activities (719) (82) (801) - (801)
Cash flows from financing activities
Movement on current asset investments - (4) (4) (46) (50)
Issue of share capital 165 - 165 - 165
Interest received and other investment income 137 6 143 - 143
Interest paid (292) (22) (314) - (314)
Dividends paid to minority interests (139) (1) (140) - (140)
Issue of convertible debt - - - 990 990
(Repayment)/receipt of short term borrowings (1,490) (2) (1,492) (47) (1,539)
(Repayment)/receipt of medium and long term
borrowings
1,176 (12) 1,164 (990) 174
Movement in minority loans 7 - 7 - 7
Other financing activity - (11) (11) - (11)
Dividends paid to Company Shareholders (547) - (547) - (547)
Net cash used in financing activities (983) (46) (1,029) (93) (1,122)
Management of liquid resources (344) - (344) 344 -
Net (decrease)/increase in cash and cash
equivalents
(55) 16 (39) 251 212
Cash and cash equivalents at start of year(2) 9,10 1,094 114 1,208 978 2,186
Cash movements in year (55) 16 (39) 251 212
Effects of exchange rate changes - 2 2 17 19
Calculated cash and cash equivalents at end of
period(2) 9,10 1,039 132 1,171 1,246 2,417
(1) IFRS adjustments exclude IAS 32 and IAS 39.
(2) Cash and cash equivalents per the cash flow statement is reconciled to the
balance sheet in note 10.
4.2.4 Reconciliation of equity as at 30 June 2004
Total Total
shareholders'
share Retained Other equity Minority Total
capital(1) earnings reserves
US$ million (2) interest equity
UK GAAP at 30 June 2004 2,355 19,000 1,176 22,531 4,160 26,691
CTA transfer from retained earnings(3) - (580) 580 - - -
IFRS opening balance sheet adjustments (1,335) (379) (1,714) (31) (1,745)
Movements arising in the year
Reversal of goodwill amortisation - 104 - 104 8 112
Deferred tax on fair value adjustments - 2 (65) (63) (4) (67)
Defined benefit arrangements - 1 (10) (9) - (9)
Translation of De Beers preference shares - (5) (8) (13) - (13)
Share based payments (9) 21 12 (4) 8
Removal of proposed dividend - (281) - (281) 8 (273)
Other adjustments - 3 (15) (12) 3 (9)
Total IFRS adjustments (2,100) 124 (1,976) (20) (1,996)
IFRS at 30 June 2004 2,355 16,900 1,300 20,555 4,140 24,695
(1) Total share capital comprises called-up share capital and the share premium
account.
(2) Detailed analysis is provided below.
(3) Cumulative currency translation differences are deemed to be zero as at 1
January 2004. The currency translation adjustment ("CTA") transferred is
therefore the UK GAAP currency translation gains/(losses) arising since that
date.
Total other reserves are further analysed as:
Cumulative
translation
Share based adjustment
Merger payment reserve
reserve reserve Other Total
US$ million reserves other
(1) reserves
UK GAAP reserves at 30 June 2004 460 - - 716 1,176
CTA transfer from retained earnings(2) - - 580 - 580
IFRS opening balance sheet adjustments (460) 25 - 56 (379)
Movements arising in the year
Deferred tax on fair value adjustments - - (65) - (65)
Defined benefit pension adjustment - - (10) - (10)
Translation of De Beers' preference shares - - (8) - (8)
Share based payments - 19 2 21
Other adjustments - - (15) - (15)
Total IFRS adjustments (460) 44 484 56 124
IFRS reserves at 30 June 2004 - 44 484 772 1,300
((1)) Other reserves comprise $685 million legal reserve and $87 million capital
redemption reserve.
(2) Currency translation differences transferred are those arising since 1
January 2004.
4.2.5 Statement of changes in shareholders' equity for the six months ended
30 June 2004
Share Cumulative
based translation
Total payment adjustment Total
US$ million reserve reserve Other shareholders'
share Retained reserves equity Minority Total
capital earnings interest equity
(1)
Restated IFRS at 1 January 2004 2,022 15,239 25 - 772 18,058 3,365 21,423
Net IFRS profit for the period - 2,226 - - - 2,226 190 2,416
Dividends paid - (554) - - - (554) - (554)
Shares issued 333 - - - - 333 - 333
Share based payments(2) - 5 19 - - 24 3 27
Actuarial losses(3) - (8) - - (8) - (8)
Subsidiary shares issued - - - - - - 890 890
Minority interest acquired - - - - - - (425) (425)
Deemed disposal of AngloGold - - - - - - 155 155
Dividend received by minority - - - - - - (100) (100)
interest
Cumulative translation adjustment - - - 489 - 489 62 551
Recycled CTA(4) - - - (5) - (5) - (5)
Other movements - (8) - - - (8) - (8)
Balance at 30 June 2004 2,355 16,900 44 484 772 20,555 4,140 24,695
(1) Total share capital comprises called-up share capital and the share premium
account.
(2) Stated net of deferred tax of $3 million.
(3) Stated net of deferred tax of $3 million.
(4) Currency translation adjustment.
4.2.6 Statement of recognised income and expense for the six months ended 30
June 2004
US$ million IFRS
IFRS profit for the period attributable to equity shareholders 2,226
Actuarial gains and losses on defined benefit retirement schemes (11)
Deferred tax on actuarial losses 3
Other movements (8)
Total recognised income and expense for the six months ended June 2004 2,210
4.2.7 Notes to the IFRS financial information for the six months ended 30
June 2004
1. Segmental information
By business segment
Operating profit
before Net
US$ million Turnover exceptional items Operating profit operating assets
(1)
Group subsidiaries and joint ventures(2)
Platinum 1,446 308 308 6,618
Gold 1,051 156 156 6,971
Coal 828 115 115 2,105
Base Metals 1,548 576 576 5,473
Industrial Minerals 1,831 179 179 4,535
Ferrous Metals and Industries 2,380 266 266 5,017
Paper and Packaging 3,262 322 322 6,166
Exploration - (56) (56) -
Corporate Activities - (108) (108) 34
Total 12,346 1,758 1,758 36,919
(1) Net operating assets consist of tangible and intangible assets, biological
assets, stocks and operating debtors less non interest bearing current
liabilities.
(2) Joint ventures are proportionately consolidated.
Net income from associates is shown in the income statement. Group turnover
excludes the Group's share of associates' turnover. As additional disclosure,
turnover and operating profit of associates is given below, together with
reconciliation from associates' operating profit to "net income from associates".
Operating profit
before
US$ million Turnover exceptional items Operating profit
Associates
Platinum 29 6 6
Gold 7 - -
Diamonds 1,647 340 340
Coal 212 86 86
Base Metals 44 (8) (8)
Industrial Minerals 12 2 2
Ferrous Metals and Industries 803 128 128
Paper and Packaging 109 6 6
Exploration - - -
Corporate Activities 90 7 7
Total 2,953 567 567
Operating profit from associates is reconciled to "Net income from associates"
as follows:
US$ million IFRS
Operating profit 567
Non-operating exceptional gains 2
Income tax expense (164)
Net finance charge (66)
Underlying minority interest (9)
Net income from associates 330
By geographic segment (by origin)
Net
US$ million Turnover Operating profit operating
assets
Group subsidiaries and joint ventures
South Africa 4,920 640 16,039
Rest of Africa 259 29 4,065
Europe 4,645 395 9,002
North America 437 21 853
South America 1,430 609 4,460
Australia and Asia 655 64 2,500
Total 12,346 1,758 36,919
Group turnover and operating profit does not include the Group's share of
associates. As additional information, the Group's share of associates'
turnover and operating profit is show below.
US$ million Turnover Operating profit
Associates
South Africa 838 130
Rest of Africa 1,042 215
Europe 461 91
North America 288 29
South America 202 72
Australia and Asia 122 30
Total 2,953 567(1)
(1) Operating profit from associates is reconciled to "Net income from
associates" as shown above.
2. Reconciliation of UK GAAP operating profit to IFRS operating profit
UK GAAP IFRS adjustments(1) IFRS
revised
US$ million
Group subsidiaries and joint ventures(2)
Platinum 314 (6) 308
Gold 133 23 156
Coal 112 3 115
Base Metals 573 3 576
Industrial Minerals 143 36 179
Ferrous Metals and Industries 260 6 266
Paper and Packaging 314 8 322
Exploration (56) - (56)
Corporate Activities (119) 11 (108)
Group operating profit - subsidiaries and joint ventures 1,674 84 1,758
Associates
Platinum 6 - 6
Diamonds 350 (10) 340
Coal 84 2 86
Base Metals (8) - (8)
Industrial Minerals 2 - 2
Ferrous Metals and Industries 127 1 128
Paper and Packaging 6 - 6
Corporate Activities 7 - 7
Total associates' operating profit 574 (7) 567
Total Group operating profit, including associates 2,248 77 2,325
(1) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS
adjustments is provided in Appendix II.
(2) These are aggregated results for Group subsidiaries and joint ventures, as
joint venture entities are now proportionally consolidated.
3. Exceptional items
Items of income and expense that are material and require separate disclosure,
in accordance with IAS 1.87, are classified as "exceptional items" on the face
of the income statement. Exceptional items that relate to the underlying
performance of the business are classified as "operating exceptional items" and
include impairment charges and reversals. Exceptional items that do not relate
to underlying business performance are classified as "non-operating exceptional
items" and are presented below "Total profit from operations and associates" on
the income statement. Non-operating exceptional items include profits and
losses on disposals of investments, fixed assets and businesses, and costs of,
or reversal of, provisions for reorganisations or restructuring.
US$ million
Operating exceptional items under UK GAAP -
IFRS adjustments -
Total IFRS operating exceptional charges -
US$ million
Non-operating exceptional items under UK GAAP 535
IFRS adjustments(1) 472
Total IFRS non-operating exceptional gains 1,007
Disclosed as:
Non-operating exceptional items 1,005
Included in "Net income from associates" 2
Total IFRS non-operating exceptional gains 1,007
((1)) IFRS adjustments comprise:
Unrealised gain on deemed disposal of AngloGold 410
Recycling of CTA gain on deemed disposal of AngloGold 5
Reversal of exceptional loss on redemption of De Beers' preference shares 44
Unrealised gains on disposal of Pandora in Platinum 15
Other items (2)
Total IFRS adjustments 472
Total profit from operations and associates before exceptional items is set out
below:
US$ million UK GAAP(1) IFRS
revised
Total profit from operations and associates 2,248 2,088
Share of associates' tax (173) -
Share of associates' finance charge (48) -
Share of associates' underlying minority interests (10) -
Share of associates' non-operating exceptional items - (2)
Total profit from operations and associates before exceptionals 2,017 2,086
(1) The UK result of $2,017 million shown here includes associates' share of
tax, finance charges and minority interests to enable comparability with
the IFRS number.
4. Tax on profit on ordinary activities
Analysis of charge for the six months
US$ million IFRS
United Kingdom corporation tax at 30% 55
South Africa corporation tax at 30% 97
Other overseas taxation 132
Current tax on exceptional items 30
Total current tax 314
Deferred tax charge for the period 200
Deferred tax on exceptional items 2
Total deferred tax 202
Total tax charge 516
Reconciliation from UK GAAP tax charge to IFRS tax charge
US$ million Current tax Deferred tax Total
UK GAAP tax charge 493 193 686
Fair value of biological assets - (1) (1)
Removal of tax on dividends proposed (10) - (10)
Reclassification of associates' tax (169) (4) (173)
Deferred tax on fair value adjustments - (5) (5)
Defined benefit arrangements - 3 3
Share based payments - (2) (2)
Other adjustments - 18 18
IFRS tax charge 314 202 516
5. Headline earnings
US$ million IFRS
Profit for period attributable to equity shareholders 2,226
Operating exceptional charges (see note 3) -
Non-operating exceptional gains (see note 3) (1,007)
Related tax on exceptional items 32
Related minority interest (3)
Headline earnings for the financial period 1,248
Reconciliation of UK GAAP headline earnings to IFRS restated
IFRS
US$ million UK GAAP adjustments(1) IFRS
By business segment
Platinum 139 (2) 137
Gold 66 1 67
Diamonds 217 (48) 169
Coal 147 1 148
Base Metals 455 (21) 434
Industrial Minerals 114 6 120
Ferrous Metals and Industries 207 1 208
Paper and Packaging 226 (3) 223
Exploration (42) - (42)
Corporate Activities (225) 9 (216)
Headline earnings 1,304 (56) 1,248
((1)) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS
adjustments is provided in Appendix II.
6. Earnings per share
IFRS
Basic number of ordinary shares outstanding (million) 1,429
Potentially dilutive ordinary shares (million) 67
Diluted number of ordinary shares outstanding (million) 1,496
Profit for the period attributable to equity shareholders
Basic earnings per share (US$) 1.56
Diluted earnings per share (US$) 1.50
Headline earnings for the period attributable to equity shareholders
Basic earnings per share (US$) 0.87
Diluted earnings per share (US$) 0.84
7. Reconciliation of Group profit to cash inflow from operating activities
US$ million IFRS
Profit for the period before tax 2,932
Depreciation and amortisation 963
Exceptional items of subsidiaries and joint ventures (1,005)
Share option expense 32
Net finance costs 161
Share of profit of associates (330)
Provisions 2
Increase in stocks (61)
Increase in operating debtors (418)
Decrease in operating creditors (42)
Other adjustments 8
Cash inflow from operating activities 2,242
8. Reconciliation of UK GAAP EBITDA to IFRS EBITDA
UK GAAP IFRS IFRS
adjustments(1)
US$ million
By business segment
Platinum 479 (14) 465
Gold 317 2 319
Diamonds 395 (20) 375
Coal 286 - 286
Base Metals 718 2 720
Industrial Minerals 281 6 287
Ferrous Metals and Industries 562 2 564
Paper and Packaging 532 (9) 523
Exploration (56) - (56)
Corporate Activities (81) (2) (83)
EBITDA 3,433 (33) 3,400
(1) IFRS adjustments exclude IAS 32 and IAS 39. Further analysis of the IFRS
adjustments is provided in Appendix II.
9. Movement in net debt
Debt due within Debt due after
1 year - 1 year -
Cash and carrying value carrying value Current Total
US$ million cash (1) asset
equivalents investments net debt
Opening balance at 1 January 2004 2,186 (4,143) (6,997) 25 (8,929)
Cash flow 212 1,539 (1,164) 50 637
Acquisitions excluding cash and cash
equivalents - -
(275) (268) (543)
Reclassifications - (279) 279 - -
Exchange movements 19 (30) (108) - (119)
Closing balance at 30 June 2004 2,417 (3,188) (8,258) 75 (8,954)
(1) Debt due after 1 year includes convertible debt.
10. Reconciliation of UK GAAP cash to IFRS cash and cash equivalents
1 January 30 June
US$ million 2004 2004
Cash defined under UK GAAP 1,094 1,039
Share of cash in joint ventures 116 134
Cash equivalents 1,007 1,322
Cash and cash equivalents per the balance sheet 2,217 2,495
Overdrafts (excluding joint ventures) (29) (76)
Share of overdrafts in joint ventures (2) (2)
IFRS cash and cash equivalents per the cash flow 2,186 2,417
11. Reconciliation from EBITDA to cash inflow from operating activities
US$ million IFRS
EBITDA 3,400
Share of operating profit of associates, before exceptionals (567)
Underlying depreciation in associates (112)
Share option expense 32
Provisions 2
Increase in stocks (61)
Increase in operating debtors (418)
Increase in operating creditors (42)
Other adjustments 8
Cash inflow from operating activities 2,242
4.3 CONSOLIDATED FINANCIAL INFORMATION AS AT 1 JANUARY 2004
4.3.1 Consolidated balance sheet as at 1 January 2004 (Opening balance
sheet)
As Proportional UK GAAP IFRS IFRS
previously consolidation adjustments
reported of joint revised (2)
Notes under ventures
UK GAAP
US$ million (restated
(1))
Intangible fixed assets 2,267 127 2,394 (224) 2,170
Tangible fixed assets 24,379 1,700 26,079 (283) 25,796
Biological assets - - - 346 346
Environmental rehabilitation trusts - - - 190 190
Investments in associates 4,804 44 4,848 (1,010) 3,838
Fixed asset investments 772 9 781 501 1,282
Deferred tax assets - - - 100 100
Share of joint ventures 1,630 (1,630) - - -
Total non current assets 33,852 250 34,102 (380) 33,722
Stocks 2,744 125 2,869 (1) 2,868
Trade and other receivables 4,334 146 4,480 (119) 4,361
Current tax assets 49 - 49 - 49
Current asset investments 1,032 - 1,032 (1,007) 25
Cash and cash equivalents 1,094 116 1,210 1,007 2,217
Total current assets 9,253 387 9,640 (120) 9,520
Total assets 43,105 637 43,742 (500) 43,242
Short term borrowings 4,094 80 4,174 - 4,174
Trade and other payables 4,777 123 4,900 (570) 4,330
Current tax liabilities 447 5 452 (8) 444
Total creditors due within one year 9,318 208 9,526 (578) 8,948
Medium and long term borrowings 6,665 330 6,995 2 6,997
Retirement benefit obligations 681 6 687 359 1,046
Deferred tax liabilities 2,330 80 2,410 1,464 3,874
Provisions for liabilities and 943 13 956 (2) 954
charges
Total long term liabilities 10,619 429 11,048 1,823 12,871
Total liabilities 19,937 637 20,574 1,245 21,819
Minority interests 3,396 - 3,396 (3,396) -
Net assets 19,772 - 19,772 1,651 21,423
Equity
Called-up share capital 738 - 738 - 738
Share premium account 1,284 - 1,284 - 1,284
Other reserves 4.3.2 1,176 - 1,176 (379) 797
Retained earnings 4.3.2 16,574 - 16,574 (1,335) 15,239
Total shareholders' equity 19,772 - 19,772 (1,714) 18,058
Minority interests 4.3.2 - - - 3,365 3,365
Total equity 19,772 - 19,772 1,651 21,423
(1) In 2004 the Group adopted UITF38 'Accounting for ESOP trusts'. As required
by this abstract, own shares held by employee trusts were reclassified from
other investment and recorded as a reduction in shareholders' funds.
(2) IFRS adjustments exclude IAS 32 and IAS 39.
4.3.2 Reconciliation of equity as at 1 January 2004
Total Total
share Retained Other shareholders' Minority Total
capital earnings reserves equity equity
US$ million (1) (2) interest
UK GAAP at 1 January 2004 2,022 16,574 1,176 19,772 3,396 23,168
Net impairment of goodwill - (221) - (221) 7 (214)
Deferred tax on fair value adjustments - (1,389) - (1,389) (96) (1,485)
Reclassification of other reserves - 404 (404) - - -
Fair value of biological assets - 29 - 29 (3) 26
Defined benefit arrangements - (568) - (568) (8) (576)
Share based payments (19) 25 6 6
Removal of proposed dividend - 552 - 552 70 622
Retranslation of De Beers' preference - (130) - (130) - (130)
shares
Other adjustments - 7 - 7 (1) 6
Total IFRS adjustments - (1,335) (379) (1,714) (31) (1,745)
IFRS at 1 January 2004 2,022 15,239 797 18,058 3,365 21,423
((1)) Total share capital comprises called-up share capital and the share
premium account.
(2) Detailed analysis is provided below.
Total other reserves are further analysed as follows:
Merger Share Cumulative
reserve
based translation
US$ million payment adjustment Other Other
reserve reserve(1) reserves reserves
(2)
UK GAAP share capital at 1 January 2004 460 - - 716 1,176
Reclassification to retained earnings (460) - - 56 (404)
Share based payments - 25 - - 25
Total IFRS adjustments (460) 25 - 56 (379)
IFRS reserves at 1 January 2004 - 25 - 772 797
((1)) UK GAAP at 1 January 2004 is deemed to be zero.
(2) Other reserves comprise $685 million legal reserve and $87 million capital
redemption reserve.
5. ACCOUNTING POLICIES
Basis of consolidation
The financial statements incorporate a consolidation of the financial statements
of the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the results of subsidiaries, joint
ventures and associates to bring their accounting policies into line with those
used by the Group. All intra-group transactions, balances, income and expenses
are eliminated on consolidation, where appropriate.
The interest of minority shareholders is initially stated at the minority's
proportion of the fair values of the assets and liabilities recognised on
acquisition. Subsequently, any losses applicable to the minority interest in
excess of the minority interest are allocated against the interests of the
parent.
Associates
Associates are investments over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation
in the financial and operating policy decisions of the investee. Typically the
Group owns between 20% and 50% of the voting equity of its associates.
Investments in associates are accounted for using the equity method of
accounting except when classified as held for sale (see below).
Any excess of the cost of acquisition over the Group's share of the fair values
of the identifiable net assets of the associate at the date of acquisition is
recognised as goodwill. Where the Group's share of the fair values of the
identifiable net assets of the associate at the date of acquisition exceeds the
cost of the acquisition, the surplus, which represents the discount on the
acquisition, is credited to the income statement in the period of acquisition.
The Group's share of associates' profit or loss is based on their most recent
audited financial statements or unaudited interim statements drawn up to the
Group's balance sheet date.
The total carrying values of investments in associates represent the cost of
each investment including the carrying value of goodwill, the share of
post-acquisition retained earnings, any other movements in reserves and any
long-term debt interests which in substance form part of the Group's net
investment. The carrying values of associates are reviewed on a regular basis
and if an impairment in value has occurred, it is written off in the period in
which those circumstances are identified. The Group's share of an associate's
losses in excess of its interest in that associate is not recognised unless the
Group has an obligation to fund such losses.
Joint venture entities
A joint venture entity is an entity in which the Group holds a long-term
interest and shares joint control over the strategic financial and operating
decisions with one or more other venturers under a contractual arrangement.
The Group's share of the assets, liabilities, income, expenditure and cash flows
of jointly controlled entities are accounted for using proportionate
consolidation. Proportionate consolidation combines the Group's share of the
results of the joint venture entity on a line by line basis with similar items
in the Group's financial statements.
Joint venture operations
The Group has contractual arrangements with other participants to engage in
joint activities other than through a separate entity. The Group includes its
assets, liabilities, expenditure and its share of revenue in such joint venture
operations with similar items in the Group's financial statements.
Revenue recognition
Turnover amounts are measured at the fair value of consideration received or
receivable, after deducting discounts, volume rebates, value added tax and other
sales taxes. A sale is recognised when the significant risks and rewards of
ownership have passed. This is when title and insurance risk has passed to the
customer, and the goods have been delivered to a contractually agreed location.
Turnover from metal mining activities is based on the payable metal sold.
Revenues from the sale of material by-products are included within turnover.
Where a by-product is not regarded as significant revenue may be credited
against the cost of sales. The amount credited to cost of sales for the year
ended 31 December 2004 was $81 million and $40 million for the period ended 30
June 2004 and relates principally to AngloGold Ashanti which credits uranium and
silver to cost of sales in accordance with the Gold Industry Standard on
production costs.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
Acquisitions and goodwill arising thereon
At the date of acquisition, the identifiable assets, liabilities and contingent
liabilities of a subsidiary, joint venture entity or an associate are measured
at their provisional fair values at the date of acquisition. Any excess of the
cost of acquisition over the fair values of the identifiable net assets acquired
is attributed to goodwill. Provisional fair values are finalised within 12
months of the acquisition date.
Goodwill in respect of subsidiaries and joint ventures is included within
intangible fixed assets. Goodwill relating to associates is included within the
carrying value of the associate.
Where the fair values of the identifiable net assets acquired exceeds the cost
of the acquisition, the surplus (ie the discount on the acquisition) is credited
to income statement in the period of acquisition.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP carrying value subject to being tested for
impairment at that date. Subsequent impairment tests are performed in accordance
with the "impairment policy" set out below.
Goodwill that was eliminated against reserves under UK GAAP prior to 1998 has
not been reinstated and will not be included in determining any profit or loss
on disposal.
Negative goodwill arising on acquisitions prior to 31 December 2003 has been
eliminated against the income statement reserve at that date.
Tangible fixed assets
Mining properties and leases include the cost of acquiring and developing mining
properties and mineral rights.
Mining properties are depreciated down to their residual values using the
unit-of-production method based on proven and probable reserves. Depreciation is
charged on new mining ventures from the date that the mining property is capable
of commercial production. When there is little likelihood of a mineral right
being exploited, or the value of the exploitable mineral right has diminished
below cost, a write-down to the recoverable amount is charged to the income
statement.
Stripping costs incurred during the production phase to remove additional
overburden or waste ore are deferred and charged to operating costs using the
expected average stripping ratio over the average life of the area being mined.
Land and properties in the course of construction are carried at cost, less any
recognised impairment. Depreciation commences when the assets are ready for
their intended use. Buildings, plant and equipment are depreciated down to their
residual values at varying rates, on the straight-line basis over their
estimated useful lives. Estimated useful lives normally vary up to 20 years for
items of plant and equipment and up to a maximum of 50 years for buildings.
Residual values are reviewed at least annually.
Assets held under finance leases are depreciated over the shorter of the lease
term and the expected useful lives of the assets.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets are impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment is
recognised immediately as an expense.
Where an impairment subsequently reverses, the carrying amount of the asset (or
cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment been recognised for the
asset (or cash-generating unit) in prior years. A reversal of an impairment is
recognised as income immediately.
Impairment of goodwill
Goodwill arising on acquisition is allocated to the group of cash-generating
units that are expected to benefit from the synergies of the combination and
represents the lowest level at which goodwill is monitored by the Group's board
of directors for internal management purposes. The recoverable amount of the
group of cash-generating units to which goodwill has been allocated is tested
for impairment annually on a consistent date during each financial year, or when
such events or changes in circumstances indicate that it may be impaired.
Any impairment is recognised immediately in the income statement. Impairments
of goodwill are not subsequently reversed.
Research and exploration expenditure
Research and exploration expenditure is written off in the year in which it is
incurred. When a decision is taken that a mining property should be developed
for commercial production, all further directly attributable, pre-production
expenditure is capitalised. Capitalisation of pre-production expenditure ceases
when the mining property is capable of commercial production.
Capitalised pre-production expenditure is assessed for impairment in accordance
with the group accounting policy stated above.
Afforestation and other agricultural activity
Afforestation and other agricultural assets are measured at their fair values
less estimated selling costs during the period of biological transformation,
from initial recognition up to the point of harvest. The fair values are
determined based on current market prices for the assets in their present
location and condition.
Changes in fair value are recognised in the income statement within operating
costs for the period between planting and harvest. At point of harvest, the
carrying value of afforestation and other agricultural assets is transferred to
inventory.
Inventory
Inventory and work-in-progress are valued at the lower of cost and net
realisable value. The production cost of inventory includes an appropriate
proportion of depreciation and production overheads. Cost is determined on the
following bases:
- raw materials and consumables are valued at cost on a first-in, first-out
(FIFO) basis;
metal, coal and coke stocks are valued at average cost; and
- finished products are valued at raw material cost, labour cost and a
proportion of manufacturing overhead expenses.
Retirement benefits
The Group operates both defined benefit and defined contribution schemes for its
employees. For defined contribution schemes the amount charged to the income
statement account is the contributions paid or payable during the year.
For defined benefit pension and post-retirement medical plans, full actuarial
valuations are carried out every three years using the projected unit credit
method and updates are performed for each financial year end. The average
discount rate for the plans' liabilities is based on AA rated corporate bonds of
a suitable duration and currency. Pension plans' assets are measured using
market values.
The Group has adopted the proposed amendment to IAS 19, and as such actuarial
gains and losses, which can arise from differences between expected and actual
outcomes or changes in actuarial assumptions, are recognised immediately in the
consolidated statement of changes in equity. Any increase in the present value
of plans' liabilities expected to arise from employee service during the period
is charged to operating profit. The expected return on the plans' assets and the
expected increase during the period in the present value of the plans'
liabilities arising are included in other finance income.
Past service cost is recognised immediately to the extent that the benefits are
already vested, and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised
past service costs, and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus the
present value of available refunds and reductions in future contributions to the
plan.
Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs
arises when environmental disturbance is caused by the development or ongoing
production of a mining property. Such costs arising from the installation of
plant and other site preparation work, discounted to its net present value, are
provided for and capitalised at the start of each project, as soon as the
obligation to incur such costs arises. These costs are charged against profits
over the life of the operation, through the depreciation of the asset and the
unwinding of the discount on the provision. Costs for restoration of subsequent
site damage which is created on an ongoing basis during production are provided
for at their net present values and charged against profits as extraction
progresses.
Changes in the measurement of a liability relating to the decommissioning of
plant or other site preparation work that result from changes in the estimated
timing or amount of the cash flow, or a change in the discount rate, are added
to, or deducted from, the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the asset, the excess
shall be recognised immediately in the income statement. If the asset value is
increased and there is an indication that the revised carrying value is not
recoverable, an impairment test is performed in accordance with the accounting
policy above.
Environmental rehabilitation trusts holding monies committed for use in
satisfying environmental obligations are presented separately on the balance
sheet as non current assets.
Exceptional items
Items of income and expense that are material and require separate disclosure,
in accordance with IAS 1.87, are classified as "exceptional items" on the face
of the income statement. Exceptional items that relate to the underlying
performance of the business are classified as "operating exceptional items" and
include impairment charges and reversals. Exceptional items that do not relate
to underlying business performance are classified as "non-operating exceptional
items" and are presented below "Total profit from operations and associates" on
the income statement. Non-operating exceptional items include profits and
losses on disposals of investments, fixed assets and businesses, and costs of,
or reversal of, provisions for reorganisations or restructuring.
Taxation
The tax expense represents the sum of the current tax charge and the movement in
deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are not taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition (other than in a
business combination) of an asset or liability in a transaction that affects
neither the tax profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, joint ventures, and associates, except
where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and is adjusted to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
taken directly to equity.
Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Leases
Rental costs under operating leases are charged to the income statement account
in equal annual amounts over the lease term.
Assets held under finance leases are recognised as assets of the Group on
inception of the lease at the lower of fair value or the present value of the
minimum lease payments derived by discounting at the interest rate implicit in
the lease. The interest element of the rental is charged against profit so as
to produce a constant periodic rate of interest on the remaining balance of the
liability, unless it is directly attributable to qualifying assets, in which
case it is capitalised in accordance with the Group's general policy on
borrowing costs (see below).
Foreign currency transactions and translation
Foreign currency transactions by Group companies are booked in their functional
currencies at the exchange rate ruling on the date of transaction. At each
balance sheet date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on the balance sheet
date. Gains and losses arising on retranslation are included in net profit or
loss for the period.
On consolidation, the assets and liabilities of the Group's overseas operations
are translated into the presentation currency of the Group at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the period where these approximate the rates at
the dates of transactions. Exchange differences arising, if any, are classified
within equity and transferred to the Group's currency translation reserve. The
Group elected to set the currency translation reserve to zero at 1 January 2004
in accordance with IFRS 1. Exchange differences on foreign currency loans
financing these overseas operations are offset in the currency translation
reserve in accordance with net investment hedge accounting rules.
Cumulative translation differences arising after the transition date to IFRS are
recognised as income or as expenses in the period in which the operation they
relate to is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets of the foreign entity and translated at the closing
rate. Where applicable, the Group has elected to treat goodwill arising on
acquisitions before the date of transition to IFRS as US dollar denominated
assets.
Borrowing costs
Interest on borrowings directly relating to the financing of qualifying capital
projects under construction is added to the capitalised cost of those projects
during the construction phase, until such time as the assets are substantially
ready for their intended use or sale which, in the case of mining properties, is
when they are capable of commercial production. Where funds have been borrowed
specifically to finance a project, the amount capitalised represents the actual
borrowing costs incurred. Where the funds used to finance a project form part of
general borrowings, the amount capitalised is calculated using a weighted
average of rates applicable to relevant general borrowings of the Group during
the period.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Employee share awards
The Group has applied the requirements of IFRS 2 Share based payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that had not vested as at 1
January 2005.
The Group makes equity-settled share based payments to certain employees, which
are measured at fair value at the date of grant. For those share schemes which
do not include non market vesting conditions, the fair value is determined at
the grant date and expensed on a straight-line basis over the vesting period,
based on the Group's estimate of shares that will eventually vest. The fair
value of share options issued with non market vesting conditions has been
calculated using the Black Scholes model. The fair value of share awards with
market related vesting conditions has been calculated using the Monte Carlo
method. For all other share awards, the fair value is determined by reference
to the market value of the share at the date of grant. For all share schemes
with non-market related vesting conditions, the likelihood of vesting has been
taken into account when determining the IFRS charge. Vesting assumptions are
reviewed during each reporting period to ensure they reflect current
expectations.
Employee benefit trust
The carrying value of shares held by the employee benefit trust are recorded as
a reduction in retained earnings within shareholders' equity.
Reporting currency
As permitted by UK company law, the Group reports in US dollars, the currency in
which most of its business is conducted.
6. INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF
ANGLO AMERICAN PLC ON THE PRELIMINARY FINANCIAL INFORMATION AND PRO FORMA
FINANCIAL INFORMATION FOR THE YEAR ENDED
31 DECEMBER 2004
In accordance with our engagement letter dated 6th May 2005, we have audited:
• the accompanying preliminary International Financial Reporting
Standards ("IFRS") consolidated financial information of Anglo American plc for
the year ended 31 December 2004, excluding the impact of IAS 32 and IAS 39,
which comprises the consolidated income statement, the consolidated balance
sheet, the consolidated cash flow statement, the reconciliation of equity, the
statement of changes in equity, the statement of recognised income and expense
and related notes 1 to 11, (hereinafter referred to as "the preliminary
financial information"); and
• the pro forma consolidated financial information, including the impact
of IAS 32 and IAS 39, which comprises the consolidated income statement and
consolidated balance sheet (hereinafter referred to as "the pro forma financial
information").
This preliminary financial information and pro forma financial information is
the responsibility of the Company's directors. They have been prepared by
management as part of the Company's conversion to IFRS in accordance with the "
Basis of Preparation" set out in Section 3, which describes how IFRSs have been
applied under IFRS 1, including the assumptions management has made about the
standards and interpretations expected to be effective, and Section 5 which
describes the accounting policies expected to be adopted, when management
prepares its first complete set of IFRS financial statements as at 31 December
2005. In preparing that first complete set of IFRS financial statements
management expects to take the option in IFRS 1 not to restate the 2004
comparatives for IAS 32 and IAS 39. However, in order to provide comparable
information management has chosen to prepare the pro forma financial information
which assumes the application of IAS 32 and IAS 39 to transactions and financial
instruments to entities other than those disposed of in 2004 and to contracts
other than those containing embedded derivatives that no longer existed as at 1
January 2005 and the application of hedge accounting where management believes
it is appropriate to assume the relevant accounting criteria regarding
documentation and testing of effectiveness could have been met even though the
necessary documentation was not in place.
Our report has been prepared solely for the exclusive use of the directors and
solely for the purpose of assisting them in connection with Anglo American plc's
conversion of the basis of the preparation of the financial statements to IFRS.
Our work has been undertaken so that we might state to the directors those
matters we are required to state to them in an auditors' report and for no other
purpose. We do not accept or assume responsibility to anyone other than the
directors for our work, for this report, or for the opinions we have formed.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing standards
issued by the Auditing Practices Board. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the preliminary
financial information and pro forma financial information are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the preliminary financial information and pro
forma financial information. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the preliminary financial information and
pro forma financial information. We believe that our audit provides a
reasonable basis for our opinion.
Emphasis of matter
Without qualifying our audit opinion, we draw attention to the fact that there
is a possibility that the accompanying preliminary financial information and pro
forma financial information may require adjustment before constituting the final
financial information and final pro forma financial information for inclusion in
IFRS financial statements for the year ending 31 December 2005. This is
because, as set out in section 1, International Accounting Standards are subject
to on going review and possible amendment. Moreover, we draw attention to the
fact that, under IFRSs, only a complete set of financial statements comprising
an income statement, balance sheet, statement of changes in equity, cash flow
statement, together with comparative financial information and explanatory
notes, can provide a fair presentation of the group's financial position,
results of operations and cash flows in accordance with IFRSs.
Opinion
In our opinion, the accompanying preliminary financial information and pro forma
financial information for the year ended 31 December 2004 has been prepared, in
all material respects, in accordance with the basis set out in the "Basis of
preparation" set out in Section 3 and accounting policies set out in Section 5.
Deloitte & Touche LLP
Chartered Accountants
London
9th May 2005
This information is provided by RNS
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