Restatement under IFRS
Computacenter PLC
28 June 2005
Restatement of 2004 financial information under IFRS
Computacenter plc, the European IT infrastructure services provider has today
published excerpts of its financial statements for 2004, restated in line with
International Financial Reporting Standards ('IFRS').
This report explains the impact of the adoption of IFRS on the Group's results,
and quantifies the expected impact on 2004 financial information, including the
1 January 2004 balance sheet, previously prepared under UK GAAP.
The Group's first financial result under IFRS will be its 2005 interims, which
are due to be released on 8th September 2005.
The full report, which contains detailed explanations of the IFRS and UK GAAP
numbers, is also available on the Computacenter website
http://www.computacenter.com.
-----------------------------
For further information, please contact:
Tony Conophy, Group Finance Director 01707 631515
Keith Mortimer, Group Financial Controller 01707 639888
Restated financial information under International Financial Reporting Standards
28 June 2005
Contents
Summary information
-------------------
Introduction and summary of IFRS impact
Basis of preparation
Restated consolidated income statements
Restated balance sheets
Explanatory notes on the impact of IFRS
Detailed information
--------------------
Detailed restated consolidated income statements
Detailed restated balance sheets
Principal accounting policies
Introduction
Computacenter is required to report its consolidated financial statements under
International Financial Reporting Standards (IFRS), as adopted by the European
Union for all accounting periods beginning on or after 1 January 2005.
Previously the Group has applied UK Generally Accepted Accounting Principles (UK
GAAP).
The first financial result under IFRS will be the 2005 interim report, to be
released on 8th September. This document explains the impact of the adoption of
IFRS on the Group's results, and quantifies the expected impact on 2004
financial information, including the 1 January 2004 balance sheet, previously
prepared under UK GAAP.
Summary of IFRS impact
The impact on the profit for the year ended 31 December 2004, together with the
impact split between the half-year and second half results is detailed in the
table below:
________________________________________ _____________
Year ended 31 December 2004 H1 H2
2004 2004
________________________________________ _____________
Profit
before Income Discon- Profit Profit Profit
tax, tax tinued for for for
continuing expense operations the the the
operations year year year
________________________________________ _____________
£'000 £'000 £'000 £'000 £'000 £'000
________________________________________________________________________ _____________
UK GAAP 67,287 (19,860) (2,642) 44,785 23,368 21,417
________________________________________________________________________ _____________
Reclassification
Discontinued operation 1,568 (1) (1,567) - - -
Adjustments
1a Positive goodwill 282 - - 282 141 141
1b Negative goodwill (531) - - (531) (531) -
2 Share based payment (898) 222 - (676) (502) (174)
3 Employee benefits 35 - - 35 (2,519) 2,554
4 Accounting for joint venture 185 - 286 471 - 471
________________________________________________________________________ ______________
Total IFRS adjustments (927) 222 286 (419) (3,411) 2,992
________________________________________________________________________ ______________
IFRS 67,928 (19,639) (3,923) 44,366 19,957 24,409
________________________________________________________________________ ______________
The impact on total equity (and net assets) at 31 December 2004, 30 June 2004
and 31 December 2003 is shown in the table below:
31 December 2004 30 June 2004 31 December 2003
_________________________________________________
Total equity Total equity Total equity
£'000 £'000 £'000
_________________________________________________________________________
UK GAAP (315,138) (300,287) (282,883)
_________________________________________________________________________
Reclassification
Discontinued operation - - -
Adjustments
1a Positive goodwill (282) (141) -
1b Negative goodwill - - (531)
2 Share based payment (461) (325) (330)
3 Employee benefits 883 3,437 918
4 Accounting for joint venture (471) - -
5 Proposed dividend (9,785) (4,316) (9,236)
_________________________________________________________________________
Total IFRS adjustments (10,116) (1,345) (9,179)
_________________________________________________________________________
IFRS (325,254) (301,632) (292,062)
_________________________________________________________________________
Detailed reconciliation information for the relevant 2004 primary statements is
provided later in this document.
Summary of IFRS impact (continued)
The introduction of IFRS has no impact on the underlying cash flows of the
business.
From 1 January 2005, the application of IAS 32 'Financial instruments:
disclosure and presentation' and IAS 39 'Financial instruments: recognition and
measurement' will affect the financial statements of the Group, the most
material changes on adoption, which are explained further on page 11, will be
due to non-recourse financing and hedge accounting on foreign currency forward
contracts.
Basis of preparation
Statement of compliance
These extracts of the unaudited financial statements of Computacenter plc have
been prepared, for the first time, in accordance with IFRS and are covered by
IFRS 1 'First-time adoption of IFRS'. They have been prepared in accordance with
those IFRS standards issued and effective as at the time of preparing these
statements, and have been applied retrospectively except where certain
exceptions apply.
As listed companies are adopting IFRS for the first time, there is limited
established practice upon which to draw in matters of interpretation and
application. Furthermore, it is possible that new standards, revisions to
existing standards and new interpretations may be issued which affect the Group.
Consequently it is not possible at this stage to definitively quantify the
impact of the adoption of IFRS, and therefore the comparative information in the
2005 interim and annual reports may differ from that presented in this document.
IFRS 1 'First-time adoption of international financial reporting standards'
The Group has adopted IFRS 1 'First-time adoption of international financial
reporting standards' and has applied the following optional IFRS 1 exemptions:
IFRS 3 'Business combinations'
Business combinations prior to 1 January 2004 have not been restated to
comply with IFRS 3.
IAS 21 - 'The effects of changes in foreign exchange rates'
Under IAS 21, exchange differences arising on the retranslation are taken
directly to a separate component of equity. The Group has elected, under the
provisions of IFRS 1, to set the historic translation differences on foreign
subsidiaries to zero.
IFRS 2 'Share based payments'
IFRS 2 is mandatory for accounting periods beginning on or after
1 January 2005. The Group has taken advantage of the transitional
provisions of IFRS 2 in respect of equity-settled awards and has applied
IFRS 2 only to equity-settled awards granted after 7 November 2002 that had
not vested on or before 1 January 2005.
IAS 32 'Financial instruments : disclosure and presentation' and IAS 39
'Financial instruments recognition and measurement'
The Group has taken advantage of the transitional provisions of IAS 32 and
IAS 39 and has not adopted these two standards early. They will be adopted
from 1 January 2005. The comparative information for 2004 has not been
restated from UK GAAP to IFRS.
More details are provided in the 'Explanatory notes on the impact of IFRS'
and 'Principal accounting policies' sections.
Consolidated income statement, prepared under IFRS (unaudited)
(i) Year ended 31 December 2004
UK GAAP
profit and Reclass Other
loss discontinued IFRS IFRS income
account operation adjs statement
£'000 £'000 £'000 £'000
Continuing operations
Revenue 2,455,752 (45,162) - 2,410,590
Cost of sales (2,120,351) 39,959 - (2,080,392)
___________ ___________ ________ ____________
Gross profit 335,401 (5,203) - 330,198
Distribution costs (20,759) 133 - (20,626)
Administrative expenses (248,899) 6,617 (1,112) (243,394)
___________ ___________ ________ ____________
Profit from continuing operations
before tax and finance costs 65,743 1,547 (1,112) 66,178
Finance costs (3,573) 36 - (3,537)
Finance income 5,262 (15) - 5,247
Share of loss of joint venture (411) - 185 (226)
Share of profit of associate 266 - - 266
___________ ___________ ________ ____________
Profit before tax 67,287 1,568 (927) 67,928
Income tax expense (19,860) (1) 222 (19,639)
___________ ___________ ________ ____________
Profit for the year from continuing
operations 47,427 1,567 (705) 48,289
Discontinued operation
Loss for the year from discontinued
operation (2,356) (1,567) - (3,923)
Net loss on investment in joint venture (286) - 286 -
___________ ___________ ________ ____________
Profit for the year 44,785 - (419) 44,366
=========== =========== ======== ============
Attributable to:
Equity holders of the parent 44,854 - (419) 44,435
Minority interests (69) - - (69)
___________ ___________ ________ ____________
44,785 - (419) 44,366
=========== =========== ======== ============
Earnings per share
- basic for profit for the year 24.1p -0.3p 23.8p
- basic for profit from continuing operations 25.5p 0.4p 25.9p
- diluted for profit for the year 23.7p -0.2p 23.5p
- diluted for profit from continuing
operations 25.1p 0.5p 25.6p
Consolidated income statement, prepared under IFRS (unaudited)
(ii) Period ended 30 June 2004
UK GAAP
profit and Reclass Other IFRS
loss discontinued IFRS income
account operation adjs statement
£'000 £'000 £'000 £'000
Continuing operations
Revenue 1,254,918 (25,977) - 1,228,941
Cost of sales (1,083,683) 22,862 - (1,060,821)
___________ ___________ ________ ____________
Gross profit 171,235 (3,115) - 168,120
Distribution costs (9,953) 85 - (9,868)
Administrative expenses (128,247) 3,313 (3,459) (128,393)
___________ ___________ ________ ____________
Profit from continuing operations before tax
and finance costs 33,035 283 (3,459) 29,859
Finance costs (1,743) 21 - (1,722)
Finance income 1,996 (1) - 1,995
Share of loss of joint venture (205) - - (205)
Share of profit of associate 135 - - 135
___________ ___________ ________ ____________
Profit before tax 33,218 303 (3,459) 30,062
Income tax expense (9,850) 1 48 (9,801)
___________ ___________ ________ ____________
Profit for the year from continuing operations 23,368 304 (3,411) 20,261
Discontinued operation
Loss for the year from discontinued operation - (304) - (304)
Net loss on investment in joint venture - - - -
___________ ___________ ________ ____________
Profit for the year 23,368 - (3,411) 19,957
=========== =========== ======== ============
Attributable to:
Equity holders of the parent 23,338 - (3,411) 19,927
Minority interests 30 - - 30
___________ ___________ ________ ____________
23,368 - (3,411) 19,957
=========== =========== ======== ============
Earnings per share
- basic for profit for the year 12.6p -1.9p 10.7p
- basic for profit from continuing operations 12.7p -1.8p 10.9p
- diluted for profit for the year 12.3p -1.8p 10.5p
- diluted for profit from continuing operations 12.5p -1.8p 10.7p
Consolidated balance sheet, prepared under IFRS (unaudited)
(i) As at 31 December 2004
UK GAAP Reclass Other IFRS
balance discontinued IFRS balance
sheet operation adjs sheet
£'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and 93,430 (349) (3,167) 89,914
equipment
Intangible assets 4,474 - 3,449 7,923
Investment in a joint 5,648 - (5,648) -
venture
Investment in an associate 373 - - 373
Deferred income tax assets 1,433 - 53 1,486
_______________________________________________
105,358 (349) (5,313) 99,696
_______________________________________________
Current assets
Inventories 120,087 (1,173) - 118,914
Trade and other
receivables :gross 444,512 (6,060) - 438,452
Less : non-returnable
proceeds (39,043) - - (39,043)
_______________________________________________
Trade and other
receivables 405,469 (6,060) - 399,409
Prepayments 55,797 (662) - 55,135
Cash and short-term
deposits 139,182 (964) - 138,218
_______________________________________________
720,535 (8,859) - 711,676
Non-current assets
classified as held for
sale - 9,208 - 9,208
_______________________________________________
TOTAL ASSETS 825,893 - (5,313) 820,580
===============================================
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Issued capital (9,489) - - (9,489)
Share premium (73,920) - - (73,920)
Capital redemption reserve (100) - - (100)
Investment in own shares 2,503 - - 2,503
Other reserves - - 904 904
Amounts recognised
directly in equity
relating to non-current
assets held for sale - - 7 7
Retained earnings (234,086) - (11,027) (245,113)
_______________________________________________
(315,092) - (10,116) (325,208)
Minority interest (46) - - (46)
_______________________________________________
TOTAL EQUITY (315,138) - (10,116) (325,254)
_______________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings (429) - - (429)
Provisions (15,233) - - (15,233)
Other non-current
liabilities (2,691) - - (2,691)
Deferred income tax
liabilities (1,455) - - (1,455)
______________________________________________
(19,808) - - (19,808)
______________________________________________
Current liabilities
Trade and other payables (311,344) 5,306 (926) (306,964)
Deferred income (90,665) 1,582 - (89,083)
Interest-bearing loans and
borrowings (58,706) - - (58,706)
Income tax payable (11,927) - 408 (11,519)
Dividend payable (9,828) - 9,828 -
Provision for joint
venture deficit (6,119) - 6,119 -
Provisions (2,358) - - (2,358)
______________________________________________
(490,947) 6,888 15,429 (468,630)
Liabilities directly
associated with
non-current assets
classified as held for
sale - (6,888) - (6,888)
______________________________________________
TOTAL LIABILITIES (510,755) - 15,429 (495,325)
______________________________________________
TOTAL EQUITY AND
LIABILITIES (825,893) - 5,313 (820,580)
==============================================
Consolidated balance sheet, prepared under IFRS (unaudited)
(ii) As at 30 June 2004
UK GAAP Reclass Other IFRS
balance discontinued IFRS balance
sheet operation adjs sheet
£'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment 94,925 (393) (2,077) 92,455
Intangible assets 4,646 - 2,218 6,864
Investment in a joint
venture 7,450 - (7,430) 20
Investment in an associate 649 - - 649
Listed investment 3,047 - - 3,047
Deferred income tax assets 3,086 - 21 3,107
________________________________________________
113,803 (393) (7,268) 106,142
________________________________________________
Current assets
Inventories 121,005 (1,095) - 119,910
Trade and other receivables
:gross 422,144 (5,540) - 416,604
Less : non-returnable
proceeds (55,643) - - (55,643)
________________________________________________
Trade and other receivables 366,501 (5,540) - 360,961
Prepayments 60,499 (451) - 60,048
Cash and short-term deposits 101,032 (1,705) - 99,327
________________________________________________
649,037 (8,791) - 640,246
Non-current assets
classified as held for sale - 9,184 - 9,184
________________________________________________
TOTAL ASSETS 762,840 - (7,268) 755,572
================================================
EQUITY AND LIABILITIES
Equity attributable to
equity holders of the parent
Issued capital (9,447) - - (9,447)
Share premium (71,778) - - (71,778)
Capital redemption reserve (100) - - (100)
Investment in own shares 2,503 - - 2,503
Amounts recognised directly
in equity relating to
non-current assets held for
sale - - 85 85
Other reserves - - 1,860 1,860
Retained earnings (221,382) - (3,290) (224,672)
________________________________________________
(300,204) - (1,345) (301,549)
Minority interest (83) - - (83)
________________________________________________
TOTAL EQUITY (300,287) - (1,345) (301,632)
________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings (326) - - (326)
Provisions (14,628) - - (14,628)
Other non-current
liabilities (3,221) - - (3,221)
Deferred income tax
liabilities (1,667) - - (1,667)
________________________________________________
(19,842) - - (19,842)
________________________________________________
Current liabilities
Trade and other payables (302,108) 7,342 (3,422) (298,188)
Deferred income (79,834) - - (79,834)
Interest-bearing loans and
borrowings (38,279) - - (38,279)
Income tax payable (9,092) - 304 (8,788)
Dividend payable (4,301) - 4,301 -
Provision for joint venture
deficit (7,430) - 7,430 -
Provisions (1,667) - - (1,667)
________________________________________________
(442,711) 7,342 8,613 (426,756)
Liabilities directly
associated with non-current
assets classified as held
for sale - (7,342) - (7,342)
________________________________________________
TOTAL LIABILITIES (462,553) - 8,613 (453,940)
________________________________________________
TOTAL EQUITY AND LIABILITIES (762,840) - 7,268 (755,572)
================================================
Consolidated balance sheet, prepared under IFRS (unaudited)
(iii) As at 31 December 2003
UK GAAP Reclass Other IFRS
balance discontinued IFRS balance
sheet operation adjs sheet
£'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 100,549 (456) (2,251) 97,842
Intangible assets 4,223 - 2,782 7,005
Investment in a joint venture 7,450 - (7,224) 226
Investment in an associate 539 - - 539
Listed investment 3,047 - - 3,047
Deferred income tax assets 3,315 - 191 3,506
________________________________________________
119,123 (456) (6,502) 112,165
________________________________________________
Current assets
Inventories 134,133 (1,343) - 132,790
Trade and other receivables :
gross 469,200 (5,635) - 463,565
Less : non-returnable
proceeds (78,390) - - (78,390)
________________________________________________
Trade and other receivables 390,810 (5,635) - 385,175
Prepayments 48,186 (440) - 47,746
Cash and short-term deposits 96,997 (1,511) - 95,486
________________________________________________
670,126 (8,929) - 661,197
Non-current assets classified
as held for sale - 9,385 - 9,385
________________________________________________
TOTAL ASSETS 789,249 - (6,502) 782,747
================================================
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Issued capital (9,441) - - (9,441)
Share premium (71,486) - - (71,486)
Capital redemption reserve (100) - - (100)
Investment in own shares 2,503 - - 2,503
Other reserves - - - -
Amounts recognised directly
in equity relating to
non-current assets held for
sale - - - -
Retained earnings (204,244) - (9,179) (213,423)
________________________________________________
(282,768) - (9,179) (291,947)
Minority interest (115) - - (115)
________________________________________________
TOTAL EQUITY (282,883) - (9,179) (292,062)
________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings (326) - - (326)
Provisions (15,100) - - (15,100)
Other non-current liabilities (13,597) - - (13,597)
Deferred income tax
liabilities (1,668) - - (1,668)
________________________________________________
(30,691) - - (30,691)
________________________________________________
Current liabilities
Trade and other payables (326,800) 7,136 (972) (320,636)
Deferred income (78,179) - - (78,179)
Interest-bearing loans and
borrowings (46,746) - - (46,746)
Income tax payable (5,801) - 139 (5,662)
Dividend payable (9,290) - 9,290 -
Provision for joint venture
deficit (7,224) - 7,224 -
Provisions (1,635) - - (1,635)
________________________________________________
(475,675) 7,136 15,681 (452,858)
Liabilities directly
associated with non-current
assets classified as held for
sale - (7,136) - (7,136)
________________________________________________
TOTAL LIABILITIES (506,366) - 15,681 (490,685)
________________________________________________
TOTAL EQUITY AND LIABILITIES (789,249) - 6,502 (782,747)
=================================================
Explanatory notes on the impact of IFRS
The notes below explain the impact that the adoption of IFRS has had on the
Group's consolidated results, which is summarised on pages 5 to 9. These notes
also support the detailed UK GAAP to IFRS reconciliations on pages 12 to 16. In
addition to the adjustments below, details of the Group's IFRS 1 elections have
been summarised on page 4.
Discontinued operation
The discontinued operation relates to the results of Computacenter Austria,
which, under IFRS, is classified as held for sale as at 31 December 2004. For
comparative purposes all figures within the 2004 results, in respect of this
operation, have been removed from continuing operations. Under UK GAAP, the
relevant amounts were disclosed under discontinued operations in the 2004
year-end accounts only.
Other adjustments
1) IFRS 3 - Business combinations; IAS 36 - Impairment of assets; IAS 38 -
Intangible assets IFRS 3 applies to accounting for business combinations for
which the agreement date is on or after 31 March 2004.
The Group has elected not to apply IFRS 3 retrospectively to business
combinations that took place prior to 1 January 2004. As a result in the opening
balance sheet, positive goodwill arising from previous business combinations
remains (£4.8m) as stated under UK GAAP at 31 December 2003.
The transitional provisions of IFRS 3 have required the Group to carry forward
the UK GAAP net book value of positive goodwill as deemed cost under IFRS, and
to eliminate the net negative goodwill brought forward under UK GAAP of £531,000
with a corresponding entry in reserves at 1 January 2004.
The adoption of IFRS 3 and IAS 36 has resulted in the Group ceasing annual
goodwill amortisation from 1 January 2004. As a result, the UK GAAP amortisation
charge of £282,000 and credit of £531,000, for positive and negative goodwill
respectively have been removed from the Group's 2004 IFRS profit for the year.
2) IFRS 2 - Share-based payment
IFRS 2 'Share-based payment' requires an expense to be recognised where the
Group buys goods or services in exchange for shares or rights over shares
('equity-settled transactions'), or in exchange for other assets equivalent in
value to a given number of shares or rights over shares ('cash-settled
transactions'). The main impact of IFRS 2 on the Group is the expensing of
employees' and directors' share options and other share-based incentives by
using an option-pricing model.
The effect of the revised policy has decreased consolidated 2004 profit before
tax by £898,000, and half year profits by £550,000 due to an increase in the
employee benefits expense with a corresponding increase in equity which is taken
to retained earnings. A corresponding deferred tax movement has also been
accounted for.
3) IAS 19 - Employee benefits
IAS 19 requires the Group to recognise in full liabilities in relation to
employee benefits. As at 1 January 2004, the Group has recognised an additional
£918,000 of liabilities for holiday pay and other long-term employee benefits.
The corresponding provision as at 31 December 2004 is £883,000, and as a result,
there is an increase in the profit for the year of £35,000 for the year ended 31
December 2004.
This introduces seasonality into the Group's result, because the holiday
entitlement of employees is typically higher at 30 June that at 31 December. The
additional provision required at 30 June 2004 results in a charge to the
half-year income statement of £2,519,000.
4) IAS 31 - Interest in joint venture
Under UK GAAP the Group's interest in its joint venture was accounted under the
gross equity method, which is not a recognised approach under IFRS. The Group
has therefore changed its method of accounting for the joint venture to equity
accounting.
During the second half of 2004 the Group's holding in its joint venture was
diluted, and its share of the losses exceeded the Group's net investment. Under
UK GAAP the Group was required to continue recognising its share of the losses
even though this resulted in a net negative amount in the balance sheet. Under
IFRS the Group only recognises its share of the losses up until the point that
its net investment is reduced to zero. This has resulted in £185,000 of losses
and an exceptional charge of £286,000 in respect of the dilution in the Group's
holding, both of which were recognised under UK GAAP, not being recognised under
IFRS.
5) IAS 10 - Events after the balance sheet date
In accordance with IAS 10, dividends declared after the balance sheet date are
not recognised as a liability in the financial statements as there is no present
obligation at the balance sheet date, as defined by IAS 37 - Provisions,
contingent liabilities and contingent assets. Accordingly, the final dividends
for 2003 of £9,236,000 and 2004 of £9,785,000 (as recognised under previous
GAAP) are de-recognised in the balance sheets for 31 December 2003 and 31
December 2004. The interim dividend has also been accounted for in this manner.
6) IAS 38 - Intangible assets
Computer software that is not an integral part of the related hardware is
classified as an intangible asset under IFRS, whereas such assets were
classified under tangible assets under UK GAAP. Reclassifications of £2,251,000
have been made between tangible and intangible assets at 1 January 2004,
£2,077,000 at 30 June 2004 and £3,167,000 at 31 December 2004 accordingly.
7) IAS 21 - The effects of changes in foreign exchange rates
From 1 January 2004, foreign currency translation differences are pulled into a
separate reserve. As stated on page 4, the Group has elected, under the
provisions of IFRS 1, to set the historic translation differences on foreign
subsidiaries to zero.
Additional changes from 1 January 2005
IAS 32 and 39 - Financial instruments: recognition, measurement and disclosure
The Group has taken advantage of the transitional provisions of IAS 32 and IAS
39 and has not adopted these two standards early. They will be adopted from 1
January 2005. The comparative information for 2004 has not been restated from UK
GAAP to IFRS.
The most material changes on adoption of these standards will be due to
non-recourse financing and accounting for foreign currency forward contracts.
Non-recourse financing
----------------------
For the 2004 comparative numbers, under UK GAAP, the Group has adopted a linked
presentation of its non-recourse financing, in line with FRS 5 'Reporting the
substance of transactions'. Linked presentation is not permitted under IFRS.
Application of IFRS to the non-recourse financing scheme in operation throughout
2004 would have resulted in the financing element being accounted for as
borrowings. There would have been no impact on the 2004 income statement.
Forward currency contracts
--------------------------
The Group uses forward currency contracts to hedge material risks associated
with movements in foreign currency exchange rates. In 2004 the material risk
related to a £32,448,000 receivable (in Euros) relating to the purchase of GE
CompuNet and GECITS Austria in 2003.
Under UK GAAP the fair value of the foreign currency forward contracts has not
been recognised, and the receivable has been recorded at the contract rate.
Under IFRS, foreign currency forward contracts are recognised at their fair
value. The receivable would also be recognised at its fair value, and be
recorded at the spot rate prevailing at the balance sheet date.
If IAS 32 and 39 had been applied from 1 January 2004, there would have been an
asset of £75,000 on the opening balance sheet, and a net movement in the income
statement, from measuring both instruments at fair value, of a loss of £286,000
before tax.
Reconciliation of consolidated income statement
(i) For the year ended 31 December 2004
1a 1b 2
UK GAAP Reclass Share
profit and discontinued Positive Negative based
loss account operation goodwill goodwill payment
£'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 2,455,752 (45,162) - - -
Cost of sales (2,120,351) 39,959 - - -
_________________________________________________________
Gross profit 335,401 (5,203) - - -
Distribution costs (20,759) 133 - - -
Administrative expenses (248,899) 6,617 282 (531) (898)
_________________________________________________________
Profit from continuing
operations before tax and
finance costs 65,743 1,547 282 (531) (898)
Finance costs (3,573) 36 - - -
Finance income 5,262 (15) - - -
Share of loss of joint
venture (411) - - - -
Share of profit of associate 266 - - - -
_________________________________________________________
Profit before tax 67,287 1,568 282 (531) (898)
Income tax expense (19,860) (1) - - 222
_________________________________________________________
Profit for the year from
continuing operations 47,427 1,567 282 (531) (676)
Discontinued operation
Loss for the year from
discontinued operation (2,356) (1,567) - - -
Net loss on investment in
joint venture (286) - - - -
_________________________________________________________
Profit for the year 44,785 - 282 (531) (676)
=========================================================
Attributable to:
Equity holders of the parent 44,854 - 282 (531) (676)
Minority interests (69) - - - -
_________________________________________________________
44,785 - 282 (531) (676)
=========================================================
Earnings per share
- basic for profit for the year 24.1p
- basic for profit from
continuing operations 25.5p
- diluted for profit for the year 23.7p
- diluted for profit from
continuing operations 25.1p
Reconciliation of consolidated income statement
(i) For the year ended 31 December 2004 continued
3 4
Employee Accounting Other
benefits for joint IFRS IFRS income
venture adjs statement
£'000 £'000 £'000 £'000
Continuing operations
Revenue - - - 2,410,590
Cost of sales - - - (2,080,392)
____________________________________________
Gross profit - - - 330,198
Distribution costs - - - (20,626)
Administrative expenses 35 - (1,112) (243,394)
____________________________________________
Profit from continuing
operations before tax and
finance costs 35 - (1,112) 66,178
Finance costs - - - (3,537)
Finance income - - - 5,247
Share of loss of joint
venture - 185 185 (226)
Share of profit of associate - - - 266
____________________________________________
Profit before tax 35 185 (927) 67,928
Income tax expense - - 222 (19,639)
____________________________________________
Profit for the year from
continuing operations 35 185 (705) 48,289
Discontinued operation
Loss for the year from
discontinued operation - - - (3,923)
Net loss on investment in
joint venture - 286 286 -
____________________________________________
Profit for the year 35 471 (419) 44,366
============================================
Attributable to:
Equity holders of the parent 35 471 (419) 44,435
Minority interests - - - (69)
____________________________________________
35 471 (419) 44,366
============================================
Earnings per share
- basic for profit for the year -0.3p 23.8p
- basic for profit from
continuing operations 0.4p 25.9p
- diluted for profit for the year -0.2p 23.5p
- diluted for profit from
continuing operations 0.5p 25.6p
Reconciliation of consolidated income statement
(ii) For the six months ended 30 June 2004
1a 1b 2
UK GAAP
profit and Reclass Share
loss discontinued Positive Negative based
account operation goodwill goodwill payment
£'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 1,254,918 (25,977) - - -
Cost of sales (1,083,683) 22,862 - - -
________________________________________________________
Gross profit 171,235 (3,115) - - -
Distribution costs (9,953) 85 - - -
Administrative expenses (128,247) 3,313 141 (531) (550)
________________________________________________________
Profit from continuing
operations before tax and
finance costs 33,035 283 141 (531) (550)
Finance costs (1,743) 21 - - -
Finance income 1,996 (1) - - -
Share of loss of joint
venture (205) - - - -
Share of profit of
associate 135 - - - -
________________________________________________________
Profit before tax 33,218 303 141 (531) (550)
Income tax expense (9,850) 1 - - 48
________________________________________________________
Profit for the year from
continuing operations 23,368 304 141 (531) (502)
Discontinued operation
Loss for the year from
discontinued operation - (304) - - -
Net loss on investment in
joint venture - - - - -
________________________________________________________
Profit for the year 23,368 - 141 (531) (502)
========================================================
Attributable to:
Equity holders of the
parent 23,338 - 141 (531) (502)
Minority interests 30 - - - -
________________________________________________________
23,368 - 141 (531) (502)
========================================================
Earnings per share
- basic for profit for the year 12.6p
- basic for profit from
continuing operations 12.7p
- diluted for profit for the year 12.3p
- diluted for profit from
continuing operations 12.5p
Reconciliation of consolidated income statement
(ii) For the six months ended 30 June 2004 continued
3 4
Employee Accounting Other
benefits for joint IFRS IFRS income
venture adjs statement
£'000 £'000 £'000 £'000
Continuing operations
Revenue - - - 1,228,941
Cost of sales - - - (1,060,821)
____________________________________________
Gross profit - - - 168,120
Distribution costs - - - (9,868)
Administrative expenses (2,519) - (3,459) (128,393)
____________________________________________
Profit from continuing operations before tax
and finance costs (2,519) - (3,459) 29,859
Finance costs - - - (1,722)
Finance income - - - 1,995
Share of loss of joint venture - - - (205)
Share of profit of associate - - - 135
____________________________________________
Profit before tax (2,519) - (3,459) 30,062
Income tax expense - - 48 (9,801)
____________________________________________
Profit for the year from continuing operations (2,519) - (3,411) 20,261
Discontinued operation
Loss for the year from discontinued operation - - - (304)
Net loss on investment in joint venture - - - -
____________________________________________
Profit for the year (2,519) - (3,411) 19,957
============================================
Attributable to:
Equity holders of the parent (2,519) - (3,411) 19,927
Minority interests - - - 30
____________________________________________
(2,519) - (3,411) 19,957
============================================
Earnings per share
- basic for profit for the year -1.9p 10.7p
- basic for profit from continuing operations -1.8p 10.9p
- diluted for profit for the year -1.8p 10.5p
- diluted for profit from continuing operations -1.8p 10.7p
Reconciliation of consolidated balance sheet
(i) As at 31 December 2004
1a 1b 2 3 4
UK GAAP Reclass Positive Negative Share Employee Accounting
balance discontinued goodwill goodwill based benefits for joint
sheet operation payment venture
£'000 £'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment 93,430 (349) - - - - -
Intangible assets 4,474 - 282 - - - -
Investment in a joint
venture 5,648 - - - - - (5,648)
Investment in an
associate 373 - - - - - -
Deferred income tax
assets 1,433 - - - 53 - -
________________________________________________________________________
105,358 (349) 282 - 53 - (5,648)
________________________________________________________________________
Current assets
Inventories 120,087 (1,173) - - - - -
Trade and other
receivables: gross 444,512 (6,060) - - - - -
Less: non-returnable
proceeds (39,043) - - - - - -
________________________________________________________________________
Trade and other
receivables 405,469 (6,060) - - - - -
Prepayments 55,797 (662) - - - - -
Cash and short-term
deposits 139,182 (964) - - - - -
________________________________________________________________________
720,535 (8,859) - - - - -
Non-current assets
classified as held for
sale - 9,208 - - - - -
________________________________________________________________________
TOTAL ASSETS 825,893 - 282 - 53 - (5,648)
========================================================================
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Issued capital (9,489) - - - - - -
Share premium (73,920) - - - - - -
Capital redemption
reserve (100) - - - - - -
Investment in own
shares 2,503 - - - - - -
Other reserves - - - - - - -
Amounts recognised
directly in equity
relating to non-current
assets held for sale - - - - - - -
Retained earnings (234,086) - (282) - (461) 883 (471)
________________________________________________________________________
(315,092) - (282) - (461) 883 (471)
Minority interest (46) - - - - - -
________________________________________________________________________
TOTAL EQUITY (315,138) - (282) - (461) 883 (471)
________________________________________________________________________
Non-current liabilities
Interest-bearing loans
and borrowings (429) - - - - - -
Provisions (15,233) - - - - - -
Other non-current
liabilities (2,691) - - - - - -
Deferred income tax
liabilities (1,455) - - - - - -
________________________________________________________________________
(19,808) - - - - - -
________________________________________________________________________
Current liabilities
Trade and other
payables (311,344) 5,306 - - - (883) -
Deferred income (90,665) 1,582 - - - - -
Interest-bearing loans
and borrowings (58,706) - - - - - -
Income tax payable (11,927) - - - 408 - -
Dividend payable (9,828) - - - - - -
Provision for joint
venture deficit (6,119) - - - - - 6,119
Provisions (2,358) - - - - - -
________________________________________________________________________
(490,947) 6,888 - - 408 (883) 6,119
Liabilities directly
associated with
non-current assets
classified as held for
sale - (6,888) - - - - -
________________________________________________________________________
TOTAL LIABILITIES (510,755) - - - 408 (883) 6,119
________________________________________________________________________
TOTAL EQUITY AND
LIABILITIES (825,893) - (282) - (53) - 5,648
========================================================================
Reconciliation of consolidated balance sheet
(i) As at 31 December 2004 continued
5 6 7
Reclass of Other IFRS
Proposed software to IFRS balance
dividend intangibles Other adjs sheet
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment - (3,167) - (3,167) 89,914
Intangible assets - 3,167 - 3,449 7,923
Investment in a joint venture - - - (5,648) -
Investment in an associate - - - - 373
Deferred income tax assets - - - 53 1,486
____________________________________________________
- - - (5,313) 99,696
____________________________________________________
Current assets
Inventories - - - - 118,914
Trade and other receivables :
gross - - - - 438,452
Less : non-returnable proceeds - - - (39,043)
____________________________________________________
Trade and other receivables - - - - 399,409
Prepayments - - - - 55,135
Cash and short-term deposits - - - - 138,218
____________________________________________________
- - - - 711,676
Non-current assets classified
as held for sale - - - - 9,208
____________________________________________________
TOTAL ASSETS - - - (5,313) 820,580
====================================================
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Issued capital - - - - (9,489)
Share premium - - - - (73,920)
Capital redemption reserve - - - - (100)
Investment in own shares - - - - 2,503
Other reserves - - 904 904 904
Amounts recognised directly in
equity relating to non-current
assets held for sale - - 7 7 7
Retained earnings (9,785) - (911) (11,027) (245,113)
____________________________________________________
(9,785) - - (10,116) (325,208)
Minority interest - - - - (46)
____________________________________________________
TOTAL EQUITY (9,785) - - (10,116) (325,254)
____________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings - - - - (429)
Provisions - - - - (15,233)
Other non-current liabilities - - - - (2,691)
Deferred income tax liabilities - - - - (1,455)
____________________________________________________
- - - - (19,808)
____________________________________________________
Current liabilities
Trade and other payables (43) - - (926) (306,964)
Deferred income - - - - (89,083)
Interest-bearing loans and
borrowings - - - - (58,706)
Income tax payable - - - 408 (11,519)
Dividend payable 9,828 - - 9,828 -
Provision for joint venture
deficit - - - 6,119 -
Provisions - - - - (2,358)
____________________________________________________
9,785 - - 15,429 (468,630)
Liabilities directly
associated with non-current
assets classified as held for
sale - - - - (6,888)
____________________________________________________
TOTAL LIABILITIES 9,785 - - 15,429 (495,326)
____________________________________________________
TOTAL EQUITY AND LIABILITIES - - - 5,313 (820,580)
====================================================
Reconciliation of consolidated balance sheet
(ii) As at 30 June 2004
1a 1b 2 3 4
UK GAAP Reclass Positive Negative Share Employee Accounting
balance discontinued goodwill goodwill based benefits for joint
sheet operation payment venture
£'000 £'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment 94,925 (393) - - - - -
Intangible assets 4,646 - 141 - - - -
Investment in a joint
venture 7,450 - - - - - (7,430)
Investment in an
associate 649 - - - - - -
Listed investment 3,047 - - - - - -
Deferred income tax
assets 3,086 - - - 21 - -
______________________________________________________________________
113,803 (393) 141 - 21 - (7,430)
______________________________________________________________________
Current assets
Inventories 121,005 (1,095) - - - - -
Trade and other
receivables :gross 422,144 (5,540) - - - - -
Less : non-returnable
proceeds (55,643) - - - - - -
______________________________________________________________________
Trade and other
receivables 366,501 (5,540) - - - - -
Prepayments 60,499 (451) - - - - -
Cash and short-term
deposits 101,032 (1,705) - - - - -
______________________________________________________________________
649,037 (8,791) - - - - -
Non-current assets
classified as held for
sale - 9,184 - - - - -
______________________________________________________________________
TOTAL ASSETS 762,840 - 141 - 21 - (7,430)
======================================================================
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Issued capital (9,447) - - - - - -
Share premium (71,778) - - - - - -
Capital redemption
reserve (100) - - - - - -
Investment in own shares 2,503 - - - - - -
Amounts recognised
directly in equity
relating to non-current
assets held for sale - - - - - - -
Other reserves - - - - - - -
Retained earnings (221,382) - (141) - (325) 3,437 -
______________________________________________________________________
(300,204) - (141) - (325) 3,437 -
Minority interest (83) - - - - - -
______________________________________________________________________
TOTAL EQUITY (300,287) - (141) - (325) 3,437 -
______________________________________________________________________
Non-current liabilities
Interest-bearing loans
and borrowings (326) - - - - - -
Provisions (14,628) - - - - - -
Other non-current
liabilities (3,221) - - - - - -
Deferred income tax
liabilities (1,667) - - - - - -
______________________________________________________________________
(19,842) - - - - - -
______________________________________________________________________
Current liabilities
Trade and other payables (302,108) 7,342 - - - (3,437) -
Deferred income (79,834) - - - - - -
Interest-bearing loans
and borrowings (38,279) - - - - - -
Income tax payable (9,092) - - - 304 - -
Dividend payable (4,301) - - - - - -
Provision for joint
venture deficit (7,430) - - - - - 7,430
Provisions (1,667) - - - - - -
______________________________________________________________________
(442,711) 7,342 - - 304 (3,437) 7,430
Liabilities directly
associated with
non-current assets
classified as held for
sale - (7,342) - - - - -
______________________________________________________________________
TOTAL LIABILITIES (462,553) - - - 304 (3,437) 7,430
______________________________________________________________________
TOTAL EQUITY AND
LIABILITIES (762,840) - (141) - (21) - 7,430
=======================================================================
Reconciliation of consolidated balance sheet
(ii) As at 30 June 2004 continued
5 6 7
Reclass of Other IFRS
Proposed software to IFRS balance
dividend intangibles Other adjs sheet
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment - (2,077) - (2,077) 92,455
Intangible assets - 2,077 - 2,218 6,864
Investment in a joint
venture - - - (7,430) 20
Investment in an associate - - - - 649
Listed investment - - - - 3,047
Deferred income tax assets - - - 21 3,107
___________________________________________________
- - - (7,268) 106,142
___________________________________________________
Current assets
Inventories - - - - 119,910
Trade and other receivables
:gross - - - - 416,604
Less : non-returnable
proceeds - - - - (55,643)
___________________________________________________
Trade and other receivables - - - - 360,961
Prepayments - - - - 60,048
Cash and short-term deposits - - - - 99,327
___________________________________________________
- - - - 640,246
Non-current assets
classified as held for sale - - - - 9,184
___________________________________________________
TOTAL ASSETS - - - (7,268) 755,572
===================================================
EQUITY AND LIABILITIES
Equity attributable to
equity holders of the parent
Issued capital - - - - (9,447)
Share premium - - - - (71,778)
Capital redemption reserve - - - - (100)
Investment in own shares - - - - 2,503
Amounts recognised directly
in equity relating to
non-current assets held for
sale - - 85 85 85
Other reserves - - 1,860 1,860 1,860
Retained earnings (4,316) - (1,945) (3,290) (224,672)
___________________________________________________
(4,316) - - (1,345) (301,549)
Minority interest - - - - (83)
___________________________________________________
TOTAL EQUITY (4,316) - - (1,345) (301,632)
___________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings - - - - (326)
Provisions - - - - (14,628)
Other non-current
liabilities - - - - (3,221)
Deferred income tax
liabilities - - - - (1,667)
___________________________________________________
- - - - (19,842)
___________________________________________________
Current liabilities
Trade and other payables 15 - - (3,422) (298,188)
Deferred income - - - - (79,834)
Interest-bearing loans and
borrowings - - - - (38,279)
Income tax payable - - - 304 (8,788)
Dividend payable 4,301 - - 4,301 -
Provision for joint venture
deficit - - - 7,430 -
Provisions - - - - (1,667)
___________________________________________________
4,316 - - 8,613 (426,756)
Liabilities directly
associated with non-current
assets classified as held
for sale - - - - (7,342)
___________________________________________________
TOTAL LIABILITIES 4,316 - - 8,613 (453,940)
___________________________________________________
- -
___________________________________________________
TOTAL EQUITY AND LIABILITIES - - - 7,268 (755,572)
===================================================
Reconciliation of consolidated balance sheet
(iii) As at 31 December 2003
1a 1b 2 3
UK GAAP Reclass Positive Negative Share Employee
Balance discontinued goodwill goodwill based benefits
Sheet operation payment
£'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment 100,549 (456) - - - -
Intangible assets 4,223 - - 531 - -
Investment in a joint
venture 7,450 - - - - -
Investment in an associate 539 - - - - -
Listed investment 3,047 - - - - -
Deferred income tax assets 3,315 - - - 191 -
____________________________________________________________
119,123 (456) - 531 191 -
____________________________________________________________
Current assets
Inventories 134,133 (1,343) - - - -
Trade and other receivables
:gross 469,200 (5,635) - - - -
Less : non-returnable
proceeds (78,390) - - - - -
____________________________________________________________
Trade and other receivables 390,810 (5,635) - - - -
Prepayments 48,186 (440) - - - -
Cash and short-term deposits 96,997 (1,511) - - - -
____________________________________________________________
670,126 (8,929) - - - -
Non-current assets - 9,385 - - - -
classified as held for sale
____________________________________________________________
TOTAL ASSETS 789,249 - - 531 191 -
=============================================================
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Issued capital (9,441) - - - - -
Share premium (71,486) - - - - -
Capital redemption reserve (100) - - - - -
Investment in own shares 2,503 - - - - -
Other reserves - - - - - -
Amounts recognised directly
in equity relating to
non-current assets held for
sale - - - - - -
Retained earnings (204,244) - - (531) (330) 918
____________________________________________________________
(282,768) - - (531) (330) 918
Minority interest (115) - - - - -
____________________________________________________________
TOTAL EQUITY (282,883) - - (531) (330) 918
____________________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings (326) - - - - -
Provisions (15,100) - - - - -
Other non-current
liabilities (13,597) - - - - -
Deferred income tax
liabilities (1,668) - - - - -
____________________________________________________________
(30,691) - - - - -
____________________________________________________________
Current liabilities
Trade and other payables (326,800) 7,136 - - - (918)
Deferred income (78,179) - - - - -
Interest-bearing loans and
borrowings (46,746) - - - - -
Income tax payable (5,801) - - - 139 -
Dividend payable (9,290) - - - - -
Provision for joint venture
deficit (7,224) - - - - -
Provisions (1,635) - - - - -
____________________________________________________________
(475,675) 7,136 - - 139 (918)
Liabilities directly
associated with non-current
assets classified as held
for sale - (7,136) - - - -
____________________________________________________________
TOTAL LIABILITIES (506,366) - - - 139 (918)
____________________________________________________________
TOTAL EQUITY AND LIABILITIES (789,249) - - (531) (191) -
============================================================
Reconciliation of consolidated balance sheet
(iii) As at 31 December 2003 continued
4 5 6 7
Accounting Proposed Reclass of Other IFRS
for joint dividend software to IFRS balance
venture intangibles Other adjs sheet
£'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and
equipment - - (2,251) - (2,251) 97,842
Intangible assets - - 2,251 - 2,782 7,005
Investment in a joint
venture (7,224) - - - (7,224) 226
Investment in an associate - - - - - 539
Listed investment - - - - - 3,047
Deferred income tax assets - - - - 191 3,506
___________________________________________________________
(7,224) - - - (6,502) 112,165
___________________________________________________________
Current assets
Inventories - - - - - 132,790
Trade and other
receivables: gross - - - - - 463,565
Less: non-returnable
proceeds - - - - - (78,390)
___________________________________________________________
Trade and other
receivables - - - - - 385,175
Prepayments - - - - - 47,746
Cash and short-term
deposits - - - - - 95,486
___________________________________________________________
- - - - - 661,197
Non-current assets
classified as held for
sale - - - - - 9,385
___________________________________________________________
TOTAL ASSETS (7,224) - - - (6,502) 782,747
===========================================================
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Issued capital - - - - - (9,441)
Share premium - - - - - (71,486)
Capital redemption reserve - - - - - (100)
Investment in own shares - - - - - 2,503
Other reserves - - - - - -
Amounts recognised
directly in equity
relating to non-current
assets held for sale - - - - - -
Retained earnings - (9,236) - - (9,179) (213,423)
___________________________________________________________
- (9,236) - - (9,179) (291,947)
Minority interest - - - - - (115)
___________________________________________________________
TOTAL EQUITY - (9,236) - - (9,179) (292,062)
___________________________________________________________
Non-current liabilities
Interest-bearing loans and
borrowings - - - - - (326)
Provisions - - - - - (15,100)
Other non-current
liabilities - - - - - (13,597)
Deferred income tax
liabilities - - - - - (1,668)
___________________________________________________________
- - - - - (30,691)
___________________________________________________________
Current liabilities
Trade and other payables - (54) - - (972) (320,636)
Deferred income - - - - - (78,179)
Interest-bearing loans and
borrowings - - - - - (46,746)
Income tax payable - - - - 139 (5,662)
Dividend payable - 9,290 - - 9,290 -
Provision for joint
venture deficit 7,224 - - - 7,224 -
Provisions - - - - - (1,635)
___________________________________________________________
7,224 9,236 - - 15,681 (452,858)
Liabilities directly
associated with
non-current assets
classified as held for
sale - - - - - (7,136)
___________________________________________________________
TOTAL LIABILITIES 7,224 9,236 - - 15,681 (490,685)
___________________________________________________________
TOTAL EQUITY AND
LIABILITIES 7,224 - - - 6,502 (782,747)
===========================================================
Principal accounting policies
The principal accounting policies that the Group has applied in preparing the
restated financial information under IFRS are set out below. These policies are
expected to be used in preparation of the 2005 interim and annual reports,
except for the changes to reflect the adoption of IAS 32 and IAS 39 from 1
January 2005, explained in more detail below.
Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis, except for derivative financial instruments and investments that have
been measured at fair value. The carrying values of recognised assets and
liabilities that are hedged are adjusted to record changes in the fair values
attributable to the risks that are being hedged. The consolidated financial
statements are presented in sterling and all values are rounded to the nearest
thousand (£'000) except when otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
Computacenter plc and its subsidiaries as at 31 December each year. The
financial statements of subsidiaries are prepared for the same reporting year as
the parent company, using existing GAAP in each country of operation.
Adjustments are made to translate any differences that may exist between the
respective local GAAP's and IFRS.
All inter-company balances and transactions have been eliminated in full.
Subsidiaries are consolidated from the date on which control is obtained by the
Group and cease to be consolidated from the date on which the Group no longer
retains control.
Minority interests represent the interests in Computacenter France SA not held
by the Group.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment in value.
Depreciation, down to residual value, is calculated on a straight-line basis
over the estimated useful life of the asset as follows:
Freehold land and buildings 50 years
Leasehold improvements costs period to expiry of lease
Structural improvements shorter of 7 years & period to expiry of lease
Fixtures and fittings
- Head office 5 - 15 years
- Other shorter of 7 years & period to expiry of lease
Office machinery, computer
hardware 2 - 15 years
Motor vehicles 3 years
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate the carrying value may not be
recoverable. If any such indication exists and where the carrying values exceed
the estimated recoverable amount, the assets or cash-generating units are
written down to their recoverable amount.
The recoverable amount of property, plant and equipment is the greater of net
selling price 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 an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the
item) is included in the income statement in the year the item is derecognised.
Leases
Finance leases, which transfer to the Group substantially all the risks and
benefits incidental to ownership of the leased item, are capitalised at the
inception of the lease at the fair value of the leased asset or, if lower, at
the present value of the minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated
useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease
payments are recognised as an expense in the income statement on a straight-line
basis over the lease term.
Intangible assets
Software and software licences
Software and software licences includes computer software that is not integral
to a related item of hardware. These assets are stated at cost less accumulated
amortisation and any impairment in value. Amortisation is calculated on
straight-line basis over the estimated useful life of the asset.
The carrying values of software and software licences are reviewed for
impairment when events or changes in circumstances indicate the carrying value
may not be recoverable. If any such indication exists and where the carrying
values exceed the estimated recoverable amount, the assets are written down to
their recoverable amount.
Goodwill
Goodwill on acquisition is initially measured at cost being the excess of the
cost of the business combination over the Group's interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities. Following
initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill already carried in the balance sheet is not
amortised after 1 January 2004.
Goodwill is reviewed for impairment, annually or more frequently if events or
changes in circumstances indicate that the carrying value may be impaired. As at
the acquisition date, any goodwill acquired is allocated to each of the
cash-generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the
cash-generating unit, to which the goodwill relates. Where recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is
recognised.
Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
Interest in joint venture
The Group's interest in its joint venture is accounted for under the equity
method of accounting. The net investment in the joint venture is carried in the
Group's balance sheet at cost plus post-acquisition changes in the Group's share
of net assets of the joint venture, less any impairment in value.
Where the Group's holding in its joint venture is diluted its share of the
changes in net assets of the joint venture are changed to reflect its new
holding as at the date of the dilution.
Investment in an associate
The Group's investment in its associate is accounted for under the equity method
of accounting. The associate is an entity over which the Group has significant
influence and which is neither a subsidiary nor a joint venture. The financial
statements of the associate are used by the Group to apply the equity method.
The reporting dates of the associate and the Group are identical. As is the case
with the Group's subsidiaries, the associate prepares its financial statements
under local GAAP. These are then converted into IFRS during the consolidation
process of the Group.
The investment in the associate is carried in the Group's balance sheet at cost
plus its share of the post-acquisition changes in the net assets of the
associate, less any impairment in value. The Group's income statement reflects
its share of the results of operations of the associate. Where there has been a
change recognised directly in the associate's equity, the Group recognises its
share of any changes and discloses this in its Statement of Changes in Equity.
Investments
All investments are initially recognised at cost, being the fair value of the
consideration given and including acquisition charges associated with the
investment.
After initial recognition, investments in equity shares are measured at their
fair value with any gains or losses recognised in income. Their fair value is
determined by reference to Stock Exchange quoted market bid prices at the close
of business on the balance sheet date.
Inventories
Inventories are valued at the lower of average cost and net realisable value
after making allowance for any obsolete or slow moving items.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs necessary to make the sale.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and
carried at original invoice amount less an allowance for any uncollectible
amounts. An estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written off when identified.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Interest-bearing borrowings
All borrowings are initially recognised at cost, being the fair value of the
consideration received net of issue costs associated with the borrowing.
Borrowing costs are recognised as an expense when incurred.
After initial recognition, interest-bearing borrowings are subsequently measured
at amortised cost using the effective interest method. Amortised cost is
calculated by taking into account any issue costs, and any discount or premium
on settlement.
Derecogition of financial instruments
The derecognition of a financial instrument takes place when the Group no longer
controls the contractual rights that comprise the financial instrument, which is
normally the case when the instrument is sold, or all the cash flows
attributable to the instrument are passed through to an independent third party.
In line with the transitional guidance provided in IAS 32, IAS 39 and IFRS 1,
the policies for derecognition of non-recourse financing that have been applied
to 2004 financial statements are the same policies as applied under UK GAAP.
For the 2004 comparative numbers the Group has adopted the UK GAAP linked
presentation of its non-recourse financing, in line with FRS 5 'Reporting the
substance of transactions'. The gross debt, and non-returnable proceeds are
disclosed on the face of the balance sheet within debtors.
Derivative financial instruments
In line with the transitional guidance provided in IAS 32, IAS 39 and IFRS 1,
the policies for derivative financial instruments that have been applied to 2004
financial statements are the same policies applied under UK GAAP.
Forward currency contracts
The Group uses foreign currency forward contracts to hedge its risks associated
with foreign currency fluctuations. The fair value of these derivative financial
instruments are not recognised.
A financial asset or liability, where its risks have been effectively hedged, is
recorded at the contract rate of the foreign currency forward contract.
Foreign currency translation
The functional and presentation currency of Computacenter plc is pounds sterling
(£). Transactions in foreign currencies are initially recorded in the functional
currency rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date.
All differences are taken to the consolidated income statement with the
exception of gains and losses on forward currency contracts that meet the
criteria for treatment as a fair value hedge as described in the policy on
Derivative Financial Instruments on page (x).
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of initial
transaction.
The functional currency of the overseas subsidiaries is Euro (€). As at the
reporting date, the assets and liabilities of these overseas subsidiaries are
translated into the presentation currency of Computacenter plc at the rate of
exchange ruling at the balance sheet date and, their income statements are
translated at the average exchange rates for the year. The exchange differences
arising on the retranslation are taken directly to a separate component of
equity. On disposal of a foreign entity, the deferred cumulative amount
recognised in equity relating to that particular foreign operation shall be
recognised in the income statement.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognised as a borrowing cost.
Taxation
Deferred income tax is provided, using the liability method, on temporary
differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary
differences except:
• where the deferred income tax liability arises from the initial
recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, except where the
timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry-forward of unused tax assets
and unused tax losses can be utilised, except:
• where the deferred income tax asset relating to the deductible
temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit
or loss; and
• in respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets
are only recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will
be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income tax relating to items recognised directly in equity are recognised in
equity and not in the income statement.
Revenues, expenses and assets are recognised net of the amount of VAT except:
• where the VAT incurred on a purchase of goods and services is not recoverable
from the taxation authority, in which case the VAT is recognised as
part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
• trade receivables and payables are stated with the amount of VAT included.
The net amount of VAT recoverable from, or payable to, the taxation authority is
included as part of receivables or payables in the balance sheet.
Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognised:
Technology sourcing
Revenue is recognised when receivable under a contract following delivery of a
product.
Infrastructure integration
Revenue is recognised when receivable under a contract following delivery of a
service.
Contracted managed services
Contracted managed services revenue is recognised over the contract period on a
straight-line basis, which represents the level of completion of an individual
contract. The unrecognised contracted revenue is included as deferred income in
the balance sheet. Amounts invoiced relating to more than one period are
deferred and recognised over their relevant life.
Pensions and other post-employment benefits
The Group operates a defined contribution scheme available to all UK employees.
Contributions are recognised as an expense in the income statement as they
become payable in accordance with the rules of the scheme. There are no material
pension schemes within the Group's overseas operations.
Employee benefits
In accordance with IAS 19, the Group provides for accumulating absences. The
cost is measured as the additional amount that the Group expects to pay as a
result of the unused entitlement that has accumulated at the balance sheet date.
Share-based payment transactions
Employees (including Executive Directors) of the Group can receive remuneration
in the form of share-based payment transactions, whereby employees render
services in exchange for shares or rights over shares ('equity-settled
transactions').
The cost of equity-settled transactions with employees is measured by reference
to the fair value of the award at the date at which they are granted. The fair
value is determined by an appropriate valuation model further details of which
are given in note (..). In valuing equity-settled transactions, no account is
taken of any performance conditions.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award ('vesting date'). The cumulative expense
recognised for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has expired and the
number of awards that, in the opinion of the directors of the Group at that
date, based on the best available estimate of the number of equity instruments
that will ultimately vest. As the awards do not have performance conditions
attached to them which are market conditions no expense is recognised for awards
that do not ultimately vest.
Where the terms of an equity-settled award are modified, as a minimum an expense
is recognised as if the terms had not been modified. In addition, an expense is
recognised for any increase in the value of the transaction as a result of the
modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the
cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of earnings per share (see note (..)).
The Group has employee share trust for the granting of non-transferable options
to executives and senior employees. Shares in the Group held by the employee
share trust are treated as investment in own shares and are recorded at cost as
a deduction from equity (see note (..)).
The Group has taken advantage of the transitional provisions of IFRS 2 in
respect of equity-settled awards and has applied IFRS 2 only to equity-settled
awards granted after 7 November 2002 that had not vested on or before 1 January
2005.
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