IFRS Statement

Carr's Milling Industries PLC
26 April 2006


 

                         CARR'S MILLING INDUSTRIES PLC                          
                          
                RESTATEMENT OF FINANCIAL INFORMATION UNDER IFRS 


Following regulations passed by the European Parliament in July 2002, Carr's
Milling Industries PLC ('Carr's') is required to prepare its consolidated
accounts for the 52 weeks ending 2 September 2006 (2005/06) under International
Financial Reporting Standards (IFRS), as endorsed by the EU. Carr's previously
prepared its consolidated accounts under UK Generally Accepted Accounting
Principles (UK GAAP).

The purpose of this release is to explain the impact of IFRS on the previously
reported consolidated UK GAAP results and position for the 53 weeks ended 3
September 2005 (2004/05) and for the 26 weeks ended 26 February 2005.

For full details of the impact of IFRS on Carr's financial statements, reference
can be made to a further detailed document, which can be viewed on the Company's
website, www.carrs-milling.com.


Summary of the IFRS impact on 2004/05

The following summarises the impact of the IFRS adjustments on the previously
reported UK GAAP position for 2004/05:

 
                         Profit   Intangible  Profit      Net  Adjusted   Basic
                         before        asset  before assets**    EPS*     EPS  
                         tax*   amortisation   tax                             
                                         and                                   
                                 exceptional                                   
                                     items                                     
                           £m           £m      £m       £m     pence   pence  
As previously                                                                  
reported under                                                                 
UK GAAP                   6.1          2.9     9.0     31.3      47.7    87.5  

Associate                                                                      
adjustment                0.1          0.2     0.3     (1.9)      0.8     0.8  

Pensions                  0.7            -     0.7    (11.3)      5.7     5.7  

Derivitive                                                                     
contracts                (0.1)           -    (0.1)    (0.1)     (1.0)   (1.0) 

Intangible                                                                     
amortisation                -         (1.0)   (1.0)    (1.0)        -    (9.3) 

Business                                                                       
combinations                -          1.5     1.5      3.1         -    18.8  

Proposed                                                                       
dividends                   -            -       -      0.9         -       -  

Other                     0.2            -     0.2      0.1       1.3     1.3  

Deferred tax                -            -       -      1.2         -    (8.8) 

----------------         ------    ---------  ------   ------   -------  ------
As restated                                                                    
under IFRS                7.0          3.6    10.6     22.3      54.5    95.0  
----------------         ------    ---------  ------   ------   -------  ------


* stated before intangible asset amortisation and exceptional items

** IFRS adjustments are stated post-tax.

 
1. IFRS 1 - 'First time adoption of International Financial Reporting Standards'

IFRS 1 details the requirements and guidance to be used by first time adopters
of IFRS in preparing their first IFRS accounts. IFRS 1 requires Carr's to select
accounting policies that comply with the IFRS in force at 4 March 2006 and to
apply these policies retrospectively.

The date of transition to IFRS for Carr's was 28 August 2004. The first annual
statements fully compliant with IFRS, with IFRS restated comparatives, will be
those for 2005/06.

IFRS 1 provides optional exemptions to first time adopters. The exemptions
adopted by Carr's are as follows:

1.1 Business combinations

Business combinations that took place prior to the date of transition to IFRS
have not been restated.

1.2 Fair value as deemed cost

Carr's has opted to use previous revaluations of property made under UK GAAP as
deemed cost.

1.3 Employee benefits

Carr's has opted to recognise in equity all cumulative actuarial gains and
losses at the date of transition. Carr's has also opted to account for pension
benefits under the amendment to IAS 19 issued in December 2004 in which all
actuarial gains and losses are recognised in the Statement of Recognised Income
and Expense (SORIE). This is consistent with the UK GAAP requirement under FRS
17 'Retirement benefits', the effect of which has been disclosed previously in
the Annual Report.

1.4 Cumulative exchange differences

IFRS 1 permits an exemption where Carr's cumulative foreign exchange translation
differences are set to zero at the date of transition. Carr's has adopted this
exemption. On subsequent disposal of an overseas subsidiary, exchange
differences arising after the date of transition will be recycled through the
income statement.

1.5 Share-based payments

IFRS 1 permits a company to apply IFRS 2 only to equity-settled share-based
awards granted on or after 7 November 2002, which have not vested by the later
of the date of transition to IFRS (28 August 2004) and 1 January 2005. Carr's
has taken advantage of this exemption.


2. IFRS Adjustments

The selection of IFRS accounting policies as required by IFRS 1 creates a number
of adjustments which are required to transition from UK GAAP to IFRS as endorsed
by the EU. Each of these is discussed in turn below in the context of the
appropriate standard and the guidance it gives:

2.1 Employee benefits (IAS 19)

IAS 19 is more encompassing than the UK equivalent FRS 17. Specifically, IAS 19
covers all employee benefits which include post-retirement benefits such as
pensions and medical care and short term employee benefits payable in employment 
such as holiday pay.

2.1.1 Defined benefit pension scheme

Carr's sponsors the Carr's Milling Industries Pension Scheme 1993 (the 'Scheme')
which includes a defined benefit category providing members with benefits based
on pay and service.

Under UK GAAP, the pension costs associated with the Scheme were accounted for
under SSAP 24 'Accounting for pensions costs' and detailed disclosures were
provided in accordance with the transitional provisions of FRS 17.

In terms of the initial recognition of the pension deficit, IAS 19 and FRS 17
are similar. As such, in the 2004/05 opening balance sheet, the pre-tax
reduction in net assets is £10.4m, being £10.9m relating to the FRS 17 deficit
and £0.5m relating to the reversal of the SSAP 24 prepayment. An associated
deferred tax adjustment of £3.1m has also been recognised, being an asset of
£3.3m on the deficit and £0.2m reversal of the deferred tax creditor associated
with the SSAP 24 prepayment. The total reduction in opening net assets is thus
£7.3m.

The increase in pre-tax profit for 2004/05 is £0.7m, being the net IAS 19 cost
of £0.9m and the UK GAAP cost of £1.6m. The related deferred tax gives a charge
to the income statement of £0.2m. Thus the total increase in profit after tax is
£0.5m.

2.2 Financial Instruments (IAS 32 and IAS 39)

2.2.1 Derivative financial instruments

IFRS requires derivative financial instruments to be recorded in the balance
sheet at fair value with any change in fair value charged or credited to the
income statement. Previously under UK GAAP, these were not required to be
recorded in the balance sheet.

Carr's uses interest rate collars and swaps to manage its exposure to interest
rate fluctuations. The value of these derivatives is calculated as the
difference between the actual cost of each contract and the cost had the
contracts been taken out on the balance sheet date. There were no interest rate
derivatives at the 2004/05 opening balance sheet. At 2004/05 closing balance
sheet, the change in value of the net assets is a decrease of £0.1m, resulting
in a charge to the income statement of the same amount.

A subsidiary of Carr's entered into forward contracts to buy US dollars. The
value of these derivatives is calculated as the difference between the actual
cost of each forward contract and the cost had the contracts been taken out on
the balance sheet date. In the 2004/05 opening balance sheet, the value is
deemed immaterial. There were no outstanding contracts at the end of 2004/05.

2.3 Deferred and income tax (IAS 12)

IAS 12 is more encompassing than FRS 19 'Deferred tax', in that it requires
deferred tax to be provided on all temporary differences rather than just
taxable timing differences.

An example of this distinction is the revaluation of fixed assets with no
obligation to sell. Under UK GAAP, deferred tax would not be provided because
there is no obligation to transfer economic benefit in a subsequent period.
However, under IFRS, deferred tax would be provided because the expectation is
that the re-valued assets will be realised for at least their carrying amount in
the form of the future economic benefits derived from the performance of the
business in subsequent periods. In the 2004/05 opening balance sheet, the
reduction in net assets is £0.3m, being the deferred tax liability relating to
the £1.7m revaluation reserve. There is no material impact on the 2004/05 income
statement.

IAS 12 also requires that deferred tax assets should be presented within
non-current assets and deferred tax liabilities within non-current liabilities.
They are only offset on the balance sheet if the entity has a legally
enforceable right to set off current tax assets against current tax liabilities
and they are levied by the same tax authority on either the same taxable entity
or different taxable entities which intend to settle current tax liabilities and
assets on a net basis.

2.4 Intangible assets (IAS 38)

2.4.1 Goodwill

Carr's intangible assets under UK GAAP relate to goodwill and acquired know-how.
IAS 38 prohibits goodwill amortisation.

Carr's has opted to apply IFRS 3 prospectively from the date of transition.
Goodwill has been frozen in the 2004/05 opening balance sheet at the 2003/04
closing net book value of £0.04m.

The non-amortisation of goodwill results in a £0.1m increase in pre-tax profit
for 2004/05. There are no associated tax implications.

2.4.2 Capitalised computer software

Under UK GAAP, capitalised computer software is classified within tangible fixed
assets. Under IFRS, computer software that is not integral to an item of
property, plant or equipment must be classified as an intangible asset. The
value of capitalised computer software is deemed immaterial and has not been
classified as an intangible asset.

2.5 Impairment of assets (IAS 36)

IAS 36 requires that at each balance sheet date all tangible and intangible
assets should be reviewed for indication of impairment.

IFRS 1 requires that an impairment review of goodwill should be conducted in
accordance with IAS 16 at the date of transition and at the balance sheet date.
Carr's has performed this review and no adjustment is required for 2004/05.
There is no impact on the 2004/05 opening balance sheet or on the income
statement for 2004/05.

2.6 Leases (IAS 17)

IFRS requires property leases to be split into their separate land and building
elements with leasehold land normally treated as an operating lease.

A detailed review of the Company's lease portfolio has resulted in two leases
being reclassified as an operating lease, and being classified on the balance
sheet as prepaid leases and amortised over the life of the lease.

The impact on the income statement for 2004/05 is deemed immaterial.

2.7 Share based payments (IFRS 2)

IFRS 2 requires that share-based payment transactions be expensed to the income
statement. The expense is calculated with reference to the fair value of the
award on the date of the grant and is recognised over the vesting period of the
scheme. Adjustments are made to reflect actual and expected levels of vesting
Carr's granted sharebased awards on 17 February 2006 and 24 February 2006 and
the fair value of the award since these dates. At 4 March 2006, the adjustment
is deemed immaterial.

IFRS 1 permits a company to apply IFRS 2 only to equity settled share-based
awards granted on or after 7 November 2002, which have not vested by the later
of the date of transition of IFRS (28 August 2004) and 1 January 2005. Carr's
has taken advantage of this exemption.

There is no impact on the 2004/05 opening balance sheet.

2.8 Property, plant and equipment (IAS 16)

Carr's has opted to use previous revaluations of property made under UK GAAP as
deemed cost. The impact on 2004/05 opening balance sheet is a reclassification
of £1.7m from the revaluation reserve to other reserves. There is no impact on
the income statement for 2004/05.

No adjustment has been made to the carrying value on plant and equipment in the
2004/05 opening balance sheet.

2.9 Post balance sheet events (IAS 10)

2.9.1 Proposed dividends

IAS 10 requires that dividends declared after the balance sheet date should not
be recognised as a liability at that date as the dividend does not represent a
present obligation. Under UK GAAP, the year end balance sheet includes an
accrual for the proposed final dividend.

The final dividend liability for £0.7m approved at the Company's Annual General
Meeting in January 2005 in relation to the 12 months ended 28 August 2004 has
been reversed in the transitional IFRS balance sheet and is recognised in the
accounts for the 6 months to 26 February 2005. Similarly, the final dividend of
£0.9m approved in January 2006 in relation to the 12 months ended 3 September
2005 has been reversed, and will be recognised in the accounts for the 6 months
to 4 March 2006.

The interim dividend liability for £0.4m declared in April 2005 in relation to
the 6 months ended 26

February 2005 has been reversed in the balance sheet as at that date and is
recognised in the accounts for the 53 weeks ended 3 September 2005.

2.10 Business combinations (IFRS 3)

IFRS requires the acquirer of a business to identify and value acquired
intangible assets. The impact on the balance sheet as at 3 September 2005 is to
add £1.5m to intangible fixed assets, the value attributable to acquired
customer relationships and brands less deferred tax. The intangible asset is
amortised over the life of the asset and £1.0m is recognised in the accounts for
the 12 months to 3 September 2005.

IFRS 3 requires negative goodwill (excess of acquirer's interest in the fair
value of acquiree's identifiable assets, liabilities and contingent liabilities
over costs) arising on the acquisition of a business to be recognised
immediately in the income statement; an amount of £1.5m has been recognised in
the accounts for the 12 months to 3 September 2005.

2.11 Cumulative translation differences (IAS 21)

IAS 21 requires cumulative translation differences arising from translation of
foreign operations to be recorded separately within equity and included in the
gain or loss on disposal when the operation is sold.

Carr's has adopted the exemption from reflecting this aspect of IAS 21
retrospectively as permitted by IFRS 1.

There is no impact on either the 2004/05 opening balance sheet or the income
statement for 2004/05. The impact on the closing 2004/2005 balance sheet is a
reclassification of £0.1m from the profit and loss reserve to a new foreign
exchange reserve.

 



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