Restatement UK GAAP to IFRS

Cairn Energy PLC 28 February 2006 28 February 2006 CAIRN ENERGY PLC 2005 PRELIMINARY RESULTS REPORTING AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) Cairn Energy PLC intends to publish its preliminary results for the year ended 31 December 2005 under IFRS on Tuesday, 14 March 2006. Cairn has adopted International Financial Reporting Standards (IFRS) as the basis for preparation of its financial statements from 1 January 2005, with a date of transition to IFRS of 1 January 2004. Interim results to 30 June 2005 and associated audited restated financial information were prepared and issued on this revised basis during 2005. Those financial documents highlighted that the Group was continuing to apply its existing full cost accounting policy for oil and gas assets to both the exploration and appraisal activity phase and to those in the development and production phase, pending receipt of any guidance or clarification from either the International Financial Reporting Interpretations Committee (IFRIC) Agenda Committee or IFRIC. Following the subsequent publication of IFRIC guidance in November 2005, which noted the limited scope of IFRS 6 'Exploration for and Evaluation of Mineral Resources', Cairn announced on 17 January 2006 it had updated its oil and gas accounting policy and as a consequence had decided to adopt a successful efforts based accounting policy for its financial statements. As a consequence, Cairn has updated the restatement document issued previously on 8 September 2005 to reflect changes arising from the implementation of this revised methodology. Cairn is today providing audited revised year ended 31 December 2004 restated results prepared on the basis of revised accounting policies under IFRS. This restated financial information and revised accounting policies are presented in this press release along with reconciliations from UK Generally Accepted Accounting Practise ('UK GAAP') to IFRS. These accounting changes do not impact the fundamentals of the business. There is: • No impact on the underlying business • No effect on the Group's trading cash flows or cash available for investment • No effect on the Group's strategy or management of its business The key implications for Cairn's financial statements on adopting this policy are as follows: •Costs of unsuccessful wells initially capitalised within exploration assets are expensed in the income statement in the period in which they are determined unsuccessful; •Depletion of development/producing assets is now performed on a field by field basis although fields within development areas can be combined where appropriate; •Impairment testing for development/producing assets is now performed on each individual cash generating unit - this is usually, but not always, the development area; and •Cairn has elected to measure certain development/producing assets at the transition date to IFRS (1 January 2004) at fair value and use this fair value as their deemed cost, as allowable under IFRS 1- 'First time adoption of International Financial Reporting Standards'. Other principle differences between UK GAAP and IFRS disclosed in the restatement document issued in September 2005 are unaffected by this update and are detailed in the revised document. The impact on the Balance Sheet at 2004 on transition to IFRS from UK GAAP is as follows: UK GAAP IFRS £'m £'m Shareholders' funds / Total equity 431 371 Cairn intends to adopt the US dollar as the reporting currency for the Group's results for the year ended 31 December 2005. Restated US Dollar balances prepared from updated accounting policies reflecting a US Dollar reporting currency have been included in the restatement document for comparative purposes. Enquiries to: Cairn Energy PLC Tel: 0131 475 3000 Kevin Hart, Finance Director Kerry Crawford, Senior Group Finance Manager NOTES TO EDITORS: • Cairn focuses its activities on the geographic region of South Asia. The Group holds material exploration and production positions in west India, east India and Bangladesh along with new exploration rights in northern India and Nepal. • This focus on South Asia has already resulted in a significant number of oil and gas discoveries. In particular, the company made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. • 'Cairn' where referred to in this release means Cairn Energy PLC and/or its subsidiaries, as appropriate. • Cairn has now made 17 oil and gas discoveries on Rajasthan block RJ-ON-90/1. • Working interests of Rajasthan block RJ-ON-90/1 development area: Cairn 70% ONGC 30%. Cairn Energy Live Audio Webcast The webcast of the 2005 Results presentation will be available at 09:00hrs (UK time) on Tuesday 14 March, 2005 This will be available on the Cairn Energy PLC website: www.cairn-energy.plc.uk An archived version of the webcast will be available in the afternoon For further information on Cairn see www.cairn-energy.plc.uk Disclaimer: Note: There are matters discussed in this Statement that are forward looking. All such forward-looking statements are based on our management's assumptions and beliefs in light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties and actual results, performance or achievements may be materially different from those expressed in such statements. Cairn Energy PLC Restatement of 2004 Results from UK GAAP to IFRS Updated 28 February 2006 Contents Introduction.................................................................. 2 Independent Auditors' Report.................................................. 4 Group IFRS Income Statement for the year ended 31 December 2004............... 6 Group IFRS Statement of Changes in Equity for the year ended 31 December 2004. 7 Group IFRS Balance Sheet as at 31 December 2004............................... 8 Group IFRS Balance Sheet as at 31 December 2003............................... 9 Note 1 - Accounting Policies................................................. 10 Reconciliation of Group Equity as at 31 December 2004........................ 16 Reconciliation of Group Equity as at 31 December 2003........................ 17 Reconciliation of Group Income Statement for the year ended 31 December 2004. 18 Note 2 - Reconciling items between UK GAAP and IFRS.......................... 19 Glossary of Terms............................................................ 22 Introduction Cairn has a mandatory requirement to implement IFRS for accounting periods commencing 1 January 2005. This requires Cairn to report its financial results under applicable International Accounting Standards and International Financial Reporting Standards (hereafter referred to as 'IFRS'), including comparative information from the Group's interim 2005 results. Cairn originally released restated IFRS results for prior periods on 8 September 2005 and its interim 2005 results under IFRS on 20 September 2005. Both sets of results were prepared on the basis of the Group's continued application of its full cost accounting policy for oil and gas assets to both the exploration and appraisal activity phase and to those in the development and production phase. When these results were authorised for issue, the Board were aware that, owing to a lack of clarity in the authoritative literature, no consensus had been reached amongst the UK oil industry and the accounting profession on the status of full cost accounting policies under IFRS beyond the exploration and appraisal phase. As noted in the restatement document, this point was referred to the Agenda Committee of the International Financial Reporting Interpretations Committee ('IFRIC') to request clarification. The Agenda Committee subsequently issued guidance that the scope of IFRS 6 'Exploration for and Evaluation of Mineral Resources' is limited to exploration and appraisal activities and that accounting policies for development and production activities are to be based on the provisions of other existing IFRS. Following this clarification from the IFRIC Agenda Committee, Cairn has reviewed its oil and gas accounting policy for both exploration and appraisal and development/producing assets. Cairn has decided to adopt a successful efforts based accounting policy for the Group's 2005 Annual Report and Accounts and has updated its restatement of prior periods to reflect this change in policy. The revised accounting policy is detailed in Note 1. The key implications for Cairn's financial statements on adopting this policy are as follows: •Costs of unsuccessful wells initially capitalised within exploration assets are expensed in the Income Statement in the period in which they are determined unsuccessful; •depletion of development/producing assets is now performed on a field by field basis although fields within development areas can be combined where appropriate; and •impairment testing for development/producing assets is now performed on each cash generating unit - this is usually, but not always, the development area. The Group's Balance Sheets as at 31 December 2003 and 31 December 2004 and the Group Income Statement and the Statement of Changes in Equity for the year ended 31 December 2004 have therefore been restated to comply with IFRS and are presented with reconciliations from UK GAAP to IFRS and revised accounting policies. Cairn also intends to adopt the US dollar as the reporting currency for the Group's results for the year ended 31 December 2005. On adoption, the Group's existing foreign currencies accounting policy defined in Note 1 will be updated to reflect the revised translation policy to US dollars. Restated US dollar balances prepared under this revised policy have been included in this document for comparative purposes. On the first time adoption of IFRS, the general principle for applying IFRS is one of full retrospective application. IFRS 1 'First time adoption of International Financial Reporting Standards' does, however, allow the first time adopter certain exemptions from this principle. IFRS 1 contains both mandatory and optional exemptions. From the optional exemptions, Cairn has elected: •Not to restate financial information for business combinations which occurred prior to 31 December 2003; •To deem cumulative translation differences arising on consolidation of subsidiary undertakings to be zero at 31 December 2003; and •To measure certain development/producing assets at the transition date to IFRS at fair value and use this fair value as their deemed cost. In preparing these statements, Cairn has also chosen to adopt IFRS 6 early. Other principal differences between UK GAAP and IFRS disclosed in the restatement document issued in September are unaffected by this update and are set out below for reference: •Expensing pre-exploration expenditure previously held within exploration assets and development/producing assets; •Retranslation of certain assets held by subsidiaries with non-Sterling functional currencies on consolidation; •Recognising an expense for the fair value of employee share options granted post 7 November 2002 and changes in the fair values for LTIP awards granted post 7 November 2002 including reversing expenses recognised for awards granted prior to this date; •Recognising deferred tax liabilities on prior year business acquisitions; and •Disclosure and presentational adjustments for certain assets held by the Group. The UK GAAP financial information contained in this document does not constitute statutory accounts as defined by section 240 of the Companies Act 1985. The Company's auditors have issued unqualified audit opinions on the Group's UK GAAP financial statements for the years ended 31 December 2003 and 31 December 2004. Copies of the UK GAAP financial statements for these years have also been delivered to the Registrar of Companies. Independent Auditors' Report INDEPENDENT AUDITORS' REPORT TO CAIRN ENERGY PLC ON THE PRELIMINARY IFRS FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 We have audited the accompanying preliminary International Financial Reporting Standards ('IFRS') financial statements of the Group for the year ended 31 December 2004 which comprise the opening IFRS Balance Sheet as at 31 December 2003, the Income Statement and the Statement of Changes in Equity for the year ended 31 December 2004 and the Balance Sheet as at 31 December 2004, together with the related accounting policies note set out on pages 10 to 15. This report is made solely to the Company in accordance with our engagement letter dated 7 July 2005. Our audit work has been undertaken so that we might state to the Company those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility or liability to anyone other than the Company for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors These preliminary IFRS financial statements are the responsibility of the Company's directors and have been prepared as part of the Company's conversion to IFRS. They have been prepared in accordance with Note 1 which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 December 2005. Our responsibility is to express an independent opinion on the preliminary IFRS financial statements based on our audit. We read the other information accompanying the preliminary IFRS financial statements and consider whether it is consistent with the preliminary IFRS financial statements. This other information comprises the introduction on pages 2 to 3, and the reconciliations from UK GAAP to IFRS and accompanying explanations on pages 16 to 21. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the preliminary opening Balance Sheet. Our responsibilities do not extend to any other information. 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 IFRS financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the preliminary IFRS financial statements. 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 IFRS financial statements. We believe that our audit provides a reasonable basis for our opinion. Emphasis of matter Without qualifying our opinion, we draw attention to the fact that Note 1 explains why there is a possibility that the preliminary IFRS financial statements may require adjustment before constituting the final IFRS financial statements. Moreover, we draw attention to the fact that, under IFRS only a complete set of financial statements with comparative financial information and explanatory notes can provide a fair presentation of the Company's financial position, results of operations and cash flows in accordance with IFRS. Opinion In our opinion, the preliminary IFRS financial statements for the year ended 31 December 2004 have been prepared, in all material respects, in accordance with the basis set out in Note 1, which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 December 2005. Ernst & Young LLP London 28 February 2006 Group IFRS Income Statement for the year ended 31 December 2004 ------------------------------------ -------- -------- -------- -------- UK GAAP IFRS IFRS IFRS adjustments 2004 £'000 2004 2004 £'000 £'000 US$'000 ----------------------------------- -------- -------- -------- -------- Revenue 95,449 - 95,449 172,909 Cost of sales Production costs (27,689) (37) (27,726) (50,757) Unsuccessful exploration costs - (19,392) (19,392) (36,325) DD&A (32,791) (6,569) (39,360) (72,095) ------------------------ -------- -------- -------- -------- Gross profit 34,969 (25,998) 8,971 13,732 ------------------------ -------- -------- -------- -------- Administrative expenses (18,200) 3,661 (14,539) (26,516) ------------------------ -------- -------- -------- -------- Operating profit/(loss) 16,769 (22,337) (5,568) (12,784) Exceptional gain on sale of oil and gas assets 2,206 (2,206) - - ------------------------ -------- -------- -------- -------- Profit/(loss) on ordinary activities before interest 18,975 (24,543) (5,568) (12,784) Interest income 1,811 - 1,811 3,306 Finance costs (4,889) (1,345) (6,234) (10,236) ------------------------ -------- -------- -------- -------- Profit/(loss) on ordinary activities before taxation 15,897 (25,888) (9,991) (19,714) Taxation on profit/(loss) on ordinary activities (5,055) 12,295 7,240 14,736 ------------------------ -------- -------- -------- -------- Profit/(loss) for the year attributable to equity holders 10,842 (13,593) (2,751) (4,978) ------------------------ -------- -------- -------- -------- Earnings per ordinary share - basic 7.11p (1.80p) Earnings per ordinary share - diluted 7.05p (1.79p) ------------------------ -------- -------- -------- -------- Further details of the IFRS adjustments can be found on pages 16 to 21. Group IFRS Statement of Changes in Equity for the year ended 31 December 2004 Group Group 2004 2004 £'000 US$'000 Opening equity 298,365 532,223 Currency translation differences (22,575) 5,270 ------------------------------------ -------- -------- Total (expense)/income recognised direct in equity (22,575) 5,270 Loss for the year (2,751) (4,978) ------------------------------------ -------- -------- Total expense recognised for the year (2,751) (4,978) ------------------------------------ -------- -------- Total (expense)/income recognised for the year (25,326) 292 ------------------------------------ ------- -------- New shares issued for cash 101,889 184,786 New shares issued in respect of employee share options 4,559 8,267 Cost of shares purchased by ESOP trust (9,329) (16,540) Share based payments charges 1,291 2,169 ------------------------------------ -------- -------- Closing equity attributable to the Company's equity holders 371,449 711,197 ------------------------------------ -------- -------- Group IFRS Balance Sheet as at 31 December 2004 UK GAAP IFRS adjustments IFRS 2004 IFRS 2004 2004 £'000 £'000 US$'000 £'000 Non-current assets Intangible exploration assets 235,503 (45,708) 189,795 364,189 PP&E - development/pr oducing assets 232,415 (17,096) 215,319 411,737 PP&E - other 1,628 (172) 1,456 2,757 Intangible assets - other - 724 724 1,347 Investments 50 - 50 96 Deferred tax assets - 4,554 4,554 8,744 ------------------------ -------- -------- -------- -------- 469,596 (57,698) 411,898 788,870 ------------------------- -------- -------- -------- -------- Current assets Inventory - 1,125 1,125 2,160 Trade and other receivables 69,934 (1,652) 68,282 131,101 Bank deposits - 8,000 8,000 15,361 Cash and cash equivalents 72,042 (8,000) 64,042 122,961 ----------------------- -------- -------- -------- -------- 141,976 (527) 141,449 271,583 ------------------------- -------- -------- -------- -------- Total assets 611,572 (58,225) 553,347 1,060,453 ----------------------- -------- -------- -------- -------- Current liabilities Trade and other payables 81,656 (2,826) 78,830 151,362 Income tax liabilities - 2,930 2,930 5,626 ----------------------- -------- -------- -------- -------- 81,656 104 81,760 156,988 ------------------------- -------- -------- -------- -------- Non-current liabilities Deferred tax liabilities 68,148 1,362 69,510 133,463 Provisions 30,628 - 30,628 58,805 ----------------------- -------- -------- -------- -------- 98,776 1,362 100,138 192,268 ------------------------- -------- -------- -------- -------- Total liabilities 180,432 1,466 181,898 349,256 ----------------------- -------- -------- -------- -------- Net assets 431,140 (59,691) 371,449 711,197 ----------------------- -------- -------- -------- -------- Equity Called-up share capital 15,901 - 15,901 25,635 Share premium 107,278 - 107,278 194,253 Shares held by the ESOP trust (14,031) - (14,031) (23,624) Foreign currency translation - (22,575) (22,575) 5,270 Other reserves 24,256 - 24,256 37,284 Capital reserves - non distributable 26,281 - 26,281 45,331 Capital reserves - distributable 109,635 - 109,635 178,429 Retained earnings 161,820 (37,116) 124,704 248,619 ----------------------- -------- -------- -------- -------- Total equity attributable to the Company's equity holders 431,140 (59,691) 371,449 711,197 ----------------------- -------- -------- -------- -------- Further details of the IFRS adjustments can be found on pages 16 to 21. Group IFRS Balance Sheet as at 31 December 2003 UK GAAP IFRS IFRS IFRS adjustments 2003 2003 2003** £'000 £'000 US$'000 £'000 Non-current assets Intangible exploration assets 155,046 (24,171) 130,875 234,079 PP&E - development/pr oducing assets 236,749 (8,364) 228,385 407,132 PP&E - other 1,546 (122) 1,424 2,580 Intangible assets - other - 391 391 678 Investments 54 - 54 96 ---------------------------- -------- -------- -------- -------- 393,395 (32,266) 361,129 644,565 ---------------------------- -------- -------- -------- -------- Current assets Inventory - 2,271 2,271 4,065 Trade and other receivables 56,866 (2,553) 54,313 97,224 Cash and cash equivalents 17,766 - 17,766 31,801 ---------------------------- -------- -------- -------- -------- 74,632 (282) 74,350 133,090 ---------------------------- -------- -------- -------- -------- Total assets 468,027 (32,548) 435,479 777,655 ---------------------------- -------- -------- -------- -------- Current liabilities Trade and other payables 42,396 (5,634) 36,762 65,829 Income tax liabilities - 5,689 5,689 10,157 ---------------------------- -------- -------- -------- -------- 42,396 55 42,451 75,986 ---------------------------- -------- -------- -------- -------- Non-current liabilities Deferred tax liabilities 71,771 6,810 78,581 140,657 Provisions 16,082 - 16,082 28,789 ---------------------------- -------- -------- -------- -------- 87,853 6,810 94,663 169,446 ---------------------------- -------- -------- -------- -------- Total liabilities 130,249 6,865 137,114 245,432 ----------------------------- -------- -------- -------- -------- Net assets 337,778 (39,413) 298,365 532,223 ----------------------------- -------- -------- -------- -------- Equity Called-up share capital 15,010 - 15,010 24,021 Share premium 1,721 - 1,721 2,814 Shares held by the ESOP trust (4,702) - (4,702) (7,084) Foreign currency - - - - translation Other reserves 24,256 - 24,256 37,284 Capital reserves - non distributable 26,281 - 26,281 45,331 Capital reserves - distributable 109,635 - 109,635 178,429 Retained earnings 165,577 (39,413) 126,164 251,428 ---------------------------- -------- -------- -------- -------- Total equity attributable to the Company's 337,778 (39,413) 298,365 532,223 equity holders ---------------------------- -------- -------- -------- -------- Further details of the IFRS adjustments can be found on pages 16 to 21. ** - restated UK GAAP as disclosed in 2004 annual accounts comparative figures following change in accounting policy arising from the amendment to UITF 17 following implementation of UITF 38 effective for accounting periods ending on or after 22 June 2004. Note 1 - Accounting Policies a) Accounting convention Cairn prepares its accounts on a historical cost basis. b) Accounting standards Cairn prepares its accounts in accordance with applicable IFRS. This restatement of financial information for the years ended 31 December 2003 and 2004 has been prepared on the basis of all IFRS and interpretations issued by the International Accounting Standards Board ('IASB') effective for the Group's reporting year ended 31 December 2005, on the assumption that they will be fully endorsed by the European Commission ('EC'). Should the EC fail to endorse, there may be further changes required to the information presented. The general principle in adopting IFRS is that all applicable accounting standards should be applied retrospectively. IFRS 1 'First time adoption of International Financial Reporting Standards' allows certain exemptions which companies are allowed to apply. Cairn has elected: • Not to restate financial information for business combinations which occurred prior to 31 December 2003; • To measure certain development/producing assets at the transition date to IFRS at fair value and used this fair value as their deemed cost; and • To deem cumulative translation differences arising on consolidation of subsidiary undertakings to be zero at 31 December 2003. This Statement has also been prepared in accordance with IFRS 6 'Exploration for and Evaluation of Mineral Resources' following early adoption of this standard by Cairn. c) Basis of consolidation The consolidated accounts include the results of Cairn Energy PLC and its subsidiary undertakings to the Balance Sheet date. The consolidated Income Statement and Cash Flow Statement include the results and cash flows of subsidiary undertakings up to the date of disposal. Cairn allocates the purchase consideration of any acquisition to assets and liabilities on the basis of fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the assets and liabilities is recognised as goodwill. Any goodwill arising is recognised as an asset and subject to annual review for impairment. Business combinations arising prior to the Group's transition date to IFRS (1 January 2004) have not been revisited under the exemption provided by IFRS 1. Deferred tax liabilities have been recognised on fair value adjustments which arose from past business combinations in accordance with IAS 12. d) Joint Ventures Cairn participates in several joint ventures which involve the joint control of assets used in the Group's oil and gas exploration and production activities. Cairn recognises its share of the assets and liabilities of joint ventures in which the Group holds a participating interest, classified in the appropriate Balance Sheet heading. e) Revenue Revenue represents Cairn's share of oil, gas and condensate production, recognised on a direct entitlement basis and tariff income received for third party use of operating facilities and pipelines in accordance with agreements. Income received as operator from joint ventures is recognised on an accruals basis in accordance with joint venture agreements and is included as a deduction from administrative expenses. Interest income is recognised on an accruals basis and is disclosed separately on the face of the Income Statement. f) Oil and gas exploration assets and development/producing assets Cairn follows a successful efforts based accounting policy for oil and gas assets. Costs incurred prior to obtaining the legal rights to explore an area are expensed immediately to the Income Statement. Expenditure incurred on the acquisition of a licence interest is initially capitalised on a licence by licence basis. Costs are held, undepleted, within exploration assets until such a time as the exploration phase on the licence area is complete or commercial reserves have been discovered. Exploration expenditure incurred in the process of determining exploration targets is capitalised initially within exploration assets and subsequently allocated to drilling activities. Exploration drilling costs are initially capitalised on a well by well basis until the success or otherwise of the well has been established. The success or failure of each exploration effort is judged on a well by well basis. Drilling costs are written off on completion of a well unless the results indicate that hydrocarbon reserves exist and there is a reasonable prospect that these reserves are commercial. Following appraisal of successful exploration wells, if commercial reserves are established and technical feasibility for extraction demonstrated, then the related capitalised exploration and appraisal costs are transferred into a single field cost centre within development/producing assets after testing for impairment (see below). Where results of exploration drilling indicate the presence of hydrocarbons which are ultimately considered not commercially viable, all related costs are written off to the Income Statement. All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons have been demonstrated are capitalised within development/ producing assets on a field by field basis. Subsequent expenditure is capitalised only where it either enhances the economic benefits of the development/producing asset or replaces part of the existing development/ producing asset. Any costs remaining associated with the replaced asset part are expensed. Net proceeds from any disposal of an exploration asset are initially credited against the previously capitalised costs. Any surplus proceeds are credited to the Income Statement. Net proceeds from any disposal of development/producing assets are credited against the previously capitalised cost. A gain or loss on disposal of a development/producing asset is recognised in the Income Statement to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset. Depletion and amortisation Cairn depletes separately, where applicable, any significant part within development/producing assets, such as fields, processing facilities and pipelines which are significant in relation to the total cost of a development/ producing asset. Cairn depletes expenditure on oil and gas production and development on a unit of production basis, based on proved and probable reserves on a field by field basis. In certain circumstances, fields within a single development area may be combined for depletion purposes. Impairment Exploration assets are reviewed regularly for indicators of impairment and costs are written off where circumstances indicate that the carrying value might not be recoverable. In such circumstances the exploration asset is allocated to development/producing assets within the same geographic segment, as disclosed in the segmental analysis notes to the financial statements, and tested for impairment. Any such impairment arising is recognised in the Income Statement for the period. Where there are no development/producing assets within a geographic segment, the exploration costs are charged immediately to the Income Statement. Impairment reviews on development/producing oil and gas assets are carried out on each cash-generating unit identified in accordance with IAS 36. Cairn's cash generating units are those assets which generate largely independent cash flows and are normally, but not always, single development areas. At each reporting date, where there are indicators of impairment, the net book value of the cash generating unit is compared with the associated expected discounted future cash flows. If the net book value is higher, then the difference is written off to the Income Statement as impairment. Where there has been a charge for impairment in an earlier year that charge will be reversed in a later period where there has been a change in circumstances to the extent that the discounted cash flows are higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be increased to the lower of its original carrying value or the carrying value that would have been determined (net of depletion) had no impairment loss been recognised in prior periods. g) Property, plant and equipment Tangible assets, other than development/producing assets, are measured at cost and depreciated over their expected useful economic lives as follows: Annual Rate (%) Depreciation Method ------------------------------ ------------ ------------------- Tenants' improvements 10 - 33 straight line Vehicles, fixtures and equipment 25 - 50 straight line h) Intangible assets Intangible assets, other than exploration assets, have finite useful lives and are measured at cost and amortised over their expected useful economic lives as follows: Annual Rate (%) Amortisation Method ------------------------- ------------ ------------------- Computer software 25 - 50 straight line i) Investments Cairn recognises and measures unlisted investments where there is no quoted market price available at cost. j) Inventories Inventories of oil and condensate held at the Balance Sheet date are valued at net realisable value based on the estimated selling price at that date. k) Financial instruments Trade and other receivables Trade receivables are recognised and carried at the original invoiced amount less any allowances for doubtful debts. Other debtors are recognised and measured at nominal value. Bank deposits Bank deposits with a maturity of over three months are held as a separate category of current asset and presented on the face of the Balance Sheet. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and short-term deposits with a maturity of three months or less. Trade payables and other creditors Trade payables and other creditors are non-interest bearing and are measured at cost. Interest bearing bank loans Interest bearing bank loans represent amounts drawn under the Group's revolving credit facilities, classified according to the length of time remaining under the respective facility. Interest payable is accrued in the Income Statement for the period using the effective interest rate method. Borrowing costs Interest payable and exchange differences incurred on borrowings directly attributable to development projects are capitalised within the development/ producing assets. All other borrowing costs are recognised in the Income Statement in the period in which they are incurred. l) Equity Equity instruments issued by Cairn are recorded at the proceeds received, net of direct issue costs, allocated between share capital and share premium. m) Taxation The tax expense represents the sum of current tax and deferred tax expense. The current tax 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 never 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 amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Balance Sheet liability method. Deferred income tax liabilities are recognised for all taxable temporary differences except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference 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, carry forward of unused tax assets and unused tax losses, can be utilised. In respect of taxable 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 difference 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 tax assets and liabilities are measured at the tax rates that are expected to apply in the periods in which the asset is realised or the liability is settled, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date. n) Decommissioning At the end of the producing life of a field, costs are incurred in removing and decommissioning production facilities. Cairn recognises the full discounted cost of decommissioning as an asset and liability when the obligation to rectify environmental damage arises. The decommissioning asset is included within fixed assets with the cost of the related installation. The liability is included within provisions. Revisions to the estimated costs of decommissioning which alter the level of the provisions required are also reflected in adjustments to the decommissioning asset. The amortisation of the asset, calculated on a unit of production basis based on proved and probable reserves, is shown as the 'decommissioning charge' in the Income Statement, and the unwinding of the discount on the provision is included within 'finance costs'. o) Foreign currencies In the accounts of individual Group companies, Cairn translates foreign currency transactions into the functional currency at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the rate of exchange prevailing at the Balance Sheet date. Exchange differences arising are taken to the Income Statement except for those incurred on borrowings specifically allocable to development projects, which are capitalised as part of the cost of the asset. Cairn maintains the accounts of all subsidiary undertakings in their functional currency, which for all material subsidiaries is US$. Cairn translates subsidiary accounts into Sterling using the closing rate method, whereby assets and liabilities are translated into Sterling at the rate of exchange prevailing at the Balance Sheet date and Income Statement accounts are translated into Sterling at average rates which approximate the exchange rates at the date of the underlying transactions. Cairn takes exchange differences arising on the translation of net assets and associated long term borrowings of subsidiary undertakings and branches whose functional currency is non-Sterling directly to reserves. On transition to IFRS Cairn has taken advantage of the exemption offered under IFRS 1 and assumed zero brought forward translation differences on subsidiary undertakings as at 1 January 2004. For the year ending 31 December 2005, Cairn will be presenting its financial statements in US$. This accounting policy will therefore be amended to reflect the revised presentational currency in these financial statements. Rates of exchange to £1 were as follows: 31 December Average 31 December 2004 2004 2003 ---------- ----------- ----------- ----------- US$ 1.920 1.832 1.790 EUR 1.413 1.473 1.419 p) Pension schemes Cairn operates defined contribution pension schemes in the UK and India. The assets of the schemes are held separately from those of Cairn and its subsidiaries. Cairn also operates an insured benefit scheme for certain Indian employees as required under Indian legislation. In accordance with IAS 19 this is treated as a defined contribution scheme. The pension cost charge represents contributions payable in the year in accordance with the rules of the schemes. q) Leasing commitments Cairn charges rental payable under operating leases to the profit and loss account on a straight line basis over the lease term. r) Share schemes The cost of awards to employees under Cairn's LTIP and share option plans are recognised over the three year period to which the performance relates. The amount recognised is based on the fair value of the shares as measured at the date of the award. The shares are valued using a binomial model. The costs of awards to employees in the form of cash but based on share performance (phantom options) are recognised over the period to which the performance relates. The amount recognised is based on the fair value of the liability arising from the transaction. Reconciliation of Group Equity as at 31 December 2004 UK IFRS 6 Fair Unsuccessful DD&A Foreign Taxation Other Total IFRS GAAP adjustments Value exploration adjustments currency IFRS adjustments costs translation adjustments £'000 £'000 £'000 £'000 £'00 £'000 £'000 £'000 £'000 £'000 Notes on a b c e f h reconciling items Intangible exploration assets 235,503 4,027 - (44,988) - (4,747) - - (45,708) 189,795 PP&E - dev. /prod. assets 232,415 (22,735) 40,523 (18,362) (12,622) (3,900) - - (17,096) 215,319 PP&E - 1,628 - - - - - (172) (172) 1,456 other Intangible assets - - - - - - (14) - 738 724 724 other Investments 50 - - - - - - - - 50 Deferred tax assets - - - - - - 4,554 - 4,554 4,554 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total non-current assets 469,596 (18,708) 40,523 (63,350) (12,622) (8,661) 4,554 566 (57,698) 411,898 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Inventory - - - - - - - 1,125 1,125 1,125 Trade and other receivables 69,934 - - - - - - (1,652) (1,652) 68,282 Bank - - - - - - - 8,000 8,000 8,000 deposits Cash and cash equivalents 72,042 - - - - - - (8,000) (8,000) 64,042 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total current assets 141,976 - - - - - - (527) (527) 141,449 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total 611,572 (18,708) 40,523 (63,350) (12,622) (8,661) 4,554 39 (58,225) 553,347 assets ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ ------------- Trade and other 81,656 - - - - - - (2,826) (2,826) 78,830 payables Current tax liabilities - - - - - - - 2,930 2,930 2,930 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total current liabilities 81,656 - - - - - - 104 104 81,760 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Deferred tax liabilities 68,148 - - - - 2,293 (931) - 1,362 69,510 Provisions 30,628 - - - - - - - - 30,628 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total non current liabilities 98,776 - - - - 2,293 (931) - 1,362 100,138 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total liabilities 180,432 - - - - 2,293 (931) 104 1,466 181,898 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Net assets 431,140 (18,708) 40,523 (63,350) (12,622) (10,954) 5,485 (65) (59,691) 71,449 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Share capital and premium 123,179 - - - - - - - - 123,179 Shares held by (14,031) - - - - - - - - (14,031) the ESOP trust Foreign currency translation - - - - - (22,575) - - (22,575) (22,575) Reserves 160,172 - - - - - - - - 160,172 Retained earnings 161,820 (18,708) 40,523 (63,350) (12,622) 11,621 5,485 (65) (37,116) 124,704 ------------- ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ Total 431,140 (18,708) 40,523 (63,350) (12,622) (10,954) 5,485 (65) (59,691) 371,449 equity ------ ------- ------- ------- ------- ------- ------ ------ ------- ------ ------------- Reconciliation of Group Equity as at 31 December 2003 UK IFRS 6 Fair Unsuccessful DD&A Foreign Taxation Other Total IFRS GAAP adjustments Value exploration adjustments currency IFRS adjustments costs translation adjustments £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Notes on a b c e f h reconciling items Intangible exploration assets 155,046 4,027 - (25,163) - (3,035) - - (24,171) 130,875 PP&E - dev. /prod. assets 236,749 (22,698) 40,523 (18,795) (6,053) (1,341) - - (8,364) 228,385 PP&E - 1,546 - - - - (13) - (109) (122) 1,424 other Intangible assets - - - - - - - - 391 391 391 other Investments 54 - - - - - - - - 54 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total non-current assets 393,395 (18,671) 40,523 (43,958) (6,053) (4,389) - 282 (32,266) 361,129 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Inventory - - - - - - - 2,271 2,271 2,271 Trade and other receivables 56,866 - - - - - - (2,553) (2,553) 54,313 Cash and cash equivalents 17,766 - - - - - - - - 17,766 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total current assets 74,632 - - - - - - (282) (282) 74,350 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total 468,027 (18,671) 40,523 (43,958) (6,053) (4,389) - - (32,548) 435,479 assets ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ ------------- Trade and other 42,396 - - - - - - (5,634) (5,634) 36,762 payables Current tax liabilities - - - - - - - 5,689 5,689 5,689 ------------- ------ ------- ------ ------- ------- - ----- ------ ------ ------- ------ Total current liabilities 42,396 - - - - - - 55 55 42,451 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Deferred tax liabilities 71,771 - - - - - 6,810 - 6,810 78,581 Provisions 16,082 - - - - - - - - 16,082 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total non current liabilities 87,853 - - - - - 6,810 - 6,810 94,663 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total liabilities 130,249 - - - - - 6,810 55 6,865 137,114 ------------- ------ ------- ------ ------- ------- - ----- ------ ------ ------- ------ Net assets 337,778 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 298,365 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Share capital and premium 16,731 - - - - - - - - 16,731 Shares held by (4,702) - - - - - - - - (4,702) the ESOP trust Foreign - - - - - - - - - - currency translation Reserves 160,172 - - - - - - - - 160,172 Retained earnings 165,577 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 126,164 ------------- ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ Total 337,778 (18,671) 40,523 (43,958) (6,053) (4,389) (6,810) (55) (39,413) 298,365 equity ------ ------- ------ ------- ------- ------ ------ ------ ------- ------ ------------- Reconciliation of Group Income Statement for the year ended 31 December 2004 UK Fair Value Unsuccessful DD&A Foreign Taxation Share Other Total IFRS IFRS GAAP adjustment exploration adjustments currency based adjustments costs translation payments £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Notes on b c d e f g h reconciling items Revenue 95,449 - - - - - - - - 95,449 Cost of sales Production costs (27,689) - - - - - - (37) (37) (27,726) Unsuccessful exploration costs - - (19,392) - - - - - (19,392) (19,392) DD&A (32,791) - - (6,569) - - - - (6,569) (39,360) ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ Gross profit 34,969 - (19,392) (6,569) - - - (37) (25,998) 8,971 Administration expenses (18,200) - - - - - 3,710 (49) 3,661 (14,539) ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ Operating profit/(loss) 16,769 - (19,392) (6,569) - - 3,710 (86) (22,337) (5,568) Exceptional gain on sale 2,206 (2,206) - - - - - - (2,206) - ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ Profit/(loss) on ordinary activities before interest 18,975 (2,206) (19,392) (6,569) - - 3,710 (86) (24,543) (5,568) Interest income 1,811 - - - - - - - - 1,811 Finance (4,889) - - - (1,345) - - - (1,345) (6,234) costs ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ ------------ Profit/(loss) on ordinary activities before tax 15,897 (2,206) (19,392) (6,569) (1,345) - 3,710 (86) (25,888) (9,991) Taxation (5,055) - - - - 12,295 - - 12,295 7,240 ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ Profit/(loss) for the year 10,842 (2,206) (19,392) (6,569) (1,345) 12,295 3,710 (86) (13,593) (2,751) ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ Note 2 - Reconciling items between UK GAAP and IFRS a) IFRS 6 adjustments Pre exploration write-offs Under IFRS 6, costs incurred prior to the legal rights to explore an area being obtained may no longer be capitalised within exploration assets. Such costs incurred by Cairn in prior years totalling £18.7 million, including general exploration costs not related to a specific licence, have therefore been written off through retained earnings as at 31 December 2003. During 2004 Cairn incurred pre-exploration costs of £37,000 which have been expensed through the Income Statement (see h) below). Impairment of exploration assets Previously under UK GAAP and the Statement of Recommended Practice ('SORP') issued by the Oil Industry Accounting Committee ('OIAC'), where indicators of impairment existed on an asset held within the exploration cost pool, an impairment test was performed. Any resulting impairment of an exploration asset led to a transfer of the impaired amount into the depletable development/ producing cost pool, the latter being subject to a separate impairment test. Under IFRS 6, where indicators of impairment exist on an exploration asset, an impairment test is performed by assigning the asset to the associated development/producing assets within the same geographic segment and testing this combined cost against future discounted cash flows (including any associated with the exploration asset). Any impairment arising would be recognised directly in the Income Statement for the period. Where no development/producing assets exists, impairment losses arising on the exploration would be written off immediately to the Income Statement. As a consequence of this change, previous transfers between Cairn's exploration and development/producing cost pools of £4.2 million, which arose from the impairment of exploration assets, have been reversed. Impairment tests have then been reperformed using the IFRS approach with no impairment losses arising. b) Fair value adjustments Cairn has elected to measure certain development/producing assets at the transition date to IFRS at fair value and use this fair value as their deemed cost, as allowable under IFRS 1. As a result of measuring at fair value at transition date, the exceptional gain on sale under UK GAAP of the sale of the Group's North Sea producing asset in 2004 now results in neither a gain nor a loss being recognised. c) Unsuccessful exploration costs Cairn previously followed the full cost method of accounting for oil and gas assets. Under this method, all expenditure incurred in connection with and directly attributable to the acquisition, exploration, appraisal and development of oil and gas assets were capitalised in two geographical cost pools: South Asia and North Sea. Following guidance from IFRIC in November 2005 it is no longer permissible to continue this treatment for development/producing assets. Cairn has therefore decided to change accounting policies for both exploration and development/producing assets to a successful efforts based policy. Under the Group's new policy unsuccessful exploration costs previously capitalised (subject to impairment reviews) are now written off in the period in which they are determined to be unsuccessful. The adjustments for unsuccessful costs written off in the period have been made against the Balance Sheet classifications as used under the UK GAAP full cost accounting methodology. d) DD&A The adjustments to DD&A reflect the revised carrying value of the development/ producing assets as a result of the pre-exploration write offs, fair value adjustments and the write off of exploration costs (as per notes a) to c) above. Depletion is now charged on a field by field basis, with certain fields within development areas being combined where appropriate. It is also now calculated in the Group's functional currency of US$ rather than in Sterling as was previously the case under UK GAAP. e) Foreign currency translation IAS 21 requires that the functional currency for each subsidiary within the Group be determined. Where the functional currency is different from the Group's Sterling presentational currency, all assets and liabilities of those subsidiaries should be converted to Sterling at closing rates on consolidation. Given that the Group's income and expenses are mainly received and incurred in US$, the majority of the Group's subsidiary undertakings have a US$ functional currency. This includes UK based subsidiaries holding oil and gas exploration and development/producing assets. These subsidiaries are now fully translated from US$ to Sterling at the closing rate at the Balance Sheet date on consolidation (rather than historic Sterling conversions). In accordance with IAS 21, cumulative exchange differences are now recognised as a separate component within equity. Cairn has taken advantage of the exemptions offered under IFRS 1 and deemed cumulative translation differences to be zero at 31 December 2003. For the year ending 31 December 2005, Cairn is intending to present its financial results in US$ with the associated accounting policies being updated accordingly. f) Taxation Deferred tax liabilities arising from fair value adjustments made in prior business combinations have been recognised on transition to IFRS. Such liabilities were specifically excluded from recognition under UK GAAP. These deferred tax liabilities are only likely to crystallise on disposal of the assets concerned and will reduce as the carrying values of the underlying assets are depleted on a unit of production basis. A deferred tax asset has been created as at 31 December 2004 due to the lower net book values arising under the successful efforts based accounting policy and the associated recognition requirements under IFRS. g) Share based payments In accordance with IFRS 2, Cairn has recognised a charge for share awards made to employees under its LTIP and share option plans since 7 November 2002. This charge is based on the fair value of these awards. The fair value has been calculated using a binomial valuation model and is charged to the Income Statement over the relevant vesting period, adjusted to reflect actual and expected levels of vesting. In accordance with IFRS, only awards made after 7 November 2002 should be charged through the Income Statement, therefore LTIP charges relating to awards made prior to this date have been reversed. Share options awarded prior to this date were not previously charged to the Income Statement. The reconciling credit of £3.7 million between the UK GAAP and the IFRS Income Statement for the year ended 31 December 2004 is a consequence of the differing fair value methodologies of the binomial valuation model used to fair value LTIP awards under IFRS 2 from that previously used to fair value such awards under UK GAAP, the charge relating to share options awarded post 7 November 2002 and the credit for LTIP charges relating to awards prior to this date. h) Other adjustments 1) Cairn have introduced an accrual of £55,000 at 31 December 2003, increasing to £104,000 at 31 December 2004 relating to employees entitlements to annual leave, as required by IAS 19. 2) Pre-exploration costs of £37,000 have been expensed during 2004 (see note a) above). 3) The following reclassifications have been made in accordance with IAS 1, which requires separate disclosure of certain assets and liabilities on the face of the Balance Sheet: • Oil and condensate inventory of £2.3 million at 31 December 2003 and £1.1 million at 31 December 2004 has been reclassified from 'trade and other receivables'; • Current taxation liabilities of £5.7 million at 31 December 2003 and £2.9 million at 31 December 2004 have been reclassified from 'trade and other payables'; and • Computer software costs previously held as 'tangible fixed assets' and within prepayments to 'intangible assets' in accordance with IAS 38. 4) In accordance with the Group's revised accounting policy, cash and cash equivalents include only short-term deposits with a maturity of less than three months. As a consequence, £8.0 million of long term deposits at 31 December 2004 have been reclassified to 'bank deposits'. i) Cash flow statements The IFRS Cash Flow Statement, prepared under IAS 7, presents cash flows in three categories; cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. This is fewer than the previous seven categories under UK GAAP. Other than the reclassification of cash flow items into the new disclosure categories, there are no significant differences between the Group's Cash Flow Statement under UK GAAP and IFRS. Consequently, the revised Cash Flow Statement has not been presented in this document. Glossary of Terms The following are the main terms and abbreviations used in this document:- Corporate Board - the Board of Directors of Cairn Energy PLC Cairn - the Company and/or its subsidiaries as appropriate Company - Cairn Energy PLC (as the context requires) Group - the Company and/or its subsidiaries as appropriate Accounting DD&A - Depletion, Depreciation and Amortisation ESOP Trust - Employee Share Ownership Plan Trust IAS 1 - International Accounting Standard 1 'Presentation of Financial Statements' IAS 7 - International Accounting Standard 7 'Cash Flow Statements' IAS 12 - International Accounting Standard 12 'Income Taxes' IAS 19 - International Accounting Standard 19 'Employee Benefits' IAS 21 - International Accounting Standard 21 'The Effects of Changes in Foreign Exchange Rates' IAS 36 - International Accounting Standard 36 'Impairment of Assets' IAS 38 - International Accounting Standard 38 'Intangible Assets' IASB the - International Accounting Standards Board IFRIC the - International Financial Reporting Interpretations Committee IFRS - International Financial Reporting Standards IFRS 1 - International Financial Reporting Standard 1 'First-time Adoption of International Financial Reporting Standards' IFRS 2 - International Financial Reporting Standard 2 'Share Based Payments' IFRS 6 - International Financial Reporting Standard 6 'Exploration for and Evaluation of Mineral Resources' PP&E - Property, Plant and Equipment LTIP - Long Term Incentive Plan UITF 17 - Urgent Issues Task Force Abstract number 17 'Employee Share Schemes' UITF 38 - Urgent Issues Task Force Abstract number 38 'Accounting for ESOP Trusts' UK GAAP - Generally Accepted Accounting Practise in the United Kingdom This information is provided by RNS The company news service from the London Stock Exchange

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