IFRS Transitional Statement
Thomson Intermedia PLC
13 October 2006
13 October 2006
Thomson Intermedia plc
Transition to International Financial Reporting Standards
Thomson Intermedia plc ('the Group', AIM: THN) will be reporting its financial
results in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union from 1 February 2006. The Group will be publishing
under IFRS its results for the six months to 31 July 2006 on 18 October 2006.
This statement presents and explains the conversion of the results of the Group
as previously reported under UK Generally Accepted Accounting Principles (UK
GAAP) onto an IFRS basis for the year ended 31 January 2006.
The key changes for the Group are:
• non-amortisation of goodwill
• recognition and amortisation of purchased intangible assets
• inclusion of a fair value charge in relation to employee share schemes
• balance sheet reclassification of internally developed computer
software to intangible assets.
The net impact of these changes for the year ended 31 January 2006 was that
Group Operating profit increased by £176,000 to £1.93m and basic earnings per
share increased from 6.99p to 7.59p.
Full details are set out in this announcement.
Enquiries:
Thomson Intermedia plc 0208 466 5555
David Trendle, Finance Director
College Hill
Adrian Duffield/Ben Way 0207 457 2020
Restatement of financial information for International Financial Reporting
Standards
1 Introduction
Following a recent change to AIM rules, requiring AIM listed companies to comply
with International Financial Reporting Standards for periods commencing on or
after 1 January 2007, in accordance with best practice Thomson Intermedia plc
(the 'Group') has decided to prepare its financial statements under
International Financial Reporting Standards ('IFRS') with effect from the year
ended 31 January 2006.
The financial statements for the year ended 31 January 2006 have been restated
under IFRS, adopting a 1 February 2005 transition date. This announcement
presents and explains the Group's results for the year ended 31 January 2006 as
converted from UK GAAP to IFRS.
The first results to be published under IFRS will be for the 6 months to 31 July
2006, which will be reported in an announcement to be issued on 18 October 2006.
2 Basis of preparation
AIM rules require that financial statements be prepared in accordance with
International Financial Reporting Standards (IFRS's) adopted for use in the EU
('adopted IFRS's') for periods commencing on or after 1 January 2007. Thomson
Intermedia Plc has decided, in accordance with best practice, to adopt IFRS
early.
This financial information will be prepared on the basis of the recognition and
measurement requirements of IFRS's in issue that either are endorsed by the EU
and effective (or available for early adoption) at 30 April 2007 (the Group's
new period end) or are expected to be endorsed and effective (or available for
early adoption) at 30 April 2007, the Group's first reporting date at which it
has elected to use adopted IFRS's. Based on these adopted IFRS's, the directors
have made assumptions about the accounting policies expected to be applied,
which are as set out in note 6, when the first full IFRS financial statements
are prepared for the period ending 30 April 2007.
In addition, the adopted IFRS's that will be effective (or available for early
adoption) in the financial statements for the period ending 30 April 2007 are
still subject to change and to additional interpretations and therefore cannot
be determined with certainty. Accordingly, the accounting policies for that
annual period will be determined finally only when the financial statements are
prepared for the period ending 30 April 2007.
3 Transition to IFRS - first time adoption
IFRS 1 'First Time Adoption of International Financial Reporting Standards' sets
out the procedures that the Group must follow when it adopts IFRS for the first
time as the basis for preparing its consolidated financial statements. The Group
is required to establish its accounting policies as at its date of transition, 1
February 2005 and, apply these prospectively to determine the IFRS balance sheet
for the year ended 31 January 2006. This standard permits companies adopting
IFRS for the first time to take certain exemptions from the full requirements of
IFRS during the transition period. As permitted under the transitional
provisions of IFRS1, the exemptions adopted by the Group are set out below.
• Share based payments
The Group has adopted the exemption to apply IFRS 2 Share based payments only to
awards made after 7 November 2002 that had not vested by 1 January 2005.
• Business combinations
The Group has chosen not to restate business combinations completed prior to the
transition date on an IFRS basis.
• Financial Instruments
The Group has adopted the exemption not to restate comparatives for IAS 32 and
IAS 39 and therefore the comparative information in the 2007 financial
statements will be presented on the existing UK GAAP basis and will not be
restated in line with IAS32 and IAS 39.
• Cumulative translation differences
Cumulative translation differences in respect of foreign operations have been
deemed to be nil at the date of transition.
4 Significant accounting policy changes and adjustments
The following sets out significant accounting policy changes and adjustments
arising from the transition to IFRS.
I. Goodwill and impairments (IFRS 3)
UK GAAP requires that amortisation of goodwill is charged to the profit and loss
account on a straight line basis over the useful economic life of the intangible
asset. Under UK GAAP, the goodwill arising on the acquisitions of BCMG Limited
was being amortised over 20 years. The charge in the year ended 31 January 2006
under UK GAAP was £234,000.
IFRS 3 requires that goodwill arising from business combinations should not be
amortised but tested annually for impairment.
As permitted by IFRS 1 the Group has decided to apply IFRS 3 prospectively from
the date of transition (1 February 2005) and has elected not to restate previous
business combinations.
Amortisation charged in the year ended 31 January 2006, under UK GAAP, relating
to goodwill on the balance sheet at the date of transition has been reversed,
resulting in a credit to income of £234,000.
II. Acquired Intangible Assets (IAS 38)
IAS38 'Intangible Assets', establishes general principles for the recognition
and measurement of intangible assets. In addition, IFRS 3 'Business
Combinations' stipulates that, if an intangible asset is acquired in a business
combination, the cost of that intangible asset is its fair value at the
acquisition date. The fair value of the assets will reflect market expectations
as to the economic benefits that will flow from it.
IFRS requires that where the fair value of an intangible asset can be measured
reliably, the acquirer should recognise an intangible asset acquired in a
business combination separately from goodwill, irrespective of whether the asset
was previously recognised by the acquiree. This will include, for example,
customer relationships, trade names and non-compete agreements where these meet
the definition of an intangible asset, and can be measured reliably.
On 23 August 2005 the Company acquired the entire share capital of BCMG Limited
(billetts) for a maximum total consideration of £13.1m. In line with IAS 38
intangible assets owned by billetts have been independently valued by an
external consultant and shown within 'other intangible assets' on the balance
sheet.
Amortisation is charged so as to write off the cost of the purchased intangible
assets over their estimated useful lives, the assets and periods used are as
follows:
Asset Asset value Useful
£'000s economic life
Years
billetts media consulting customer relationships 2,859 10
billetts marketing sciences customer relationships 271 5
MPMA customer relationships 43 2
Trade name 215 10
Non-compete 7 1.5
3,395
An amortisation charge of £162,000 has been debited through the income statement
representing the write down of these intangible assets from the acquisition date
to 31 January 2006.
III. Share based payments (IFRS 2)
With respect to share-based payments, under UK GAAP only the intrinsic value is
expensed over the performance period e.g. where the options are granted over
shares with an exercise price below market price at the date of the grant.
IFRS 2 requires that an expense for all equity-settled share based payments is
recognised. For share based payments under IFRS, the expense is calculated with
reference to the fair value of the award on the date of grant and is spread over
the vesting period of the scheme, adjusted to reflect actual and expected levels
of vesting. The Black-Scholes model has been used to calculate the fair values
of options on their grant date for all options issued after 7 November 2002
which had not vested by 1 January 2005.
A charge of £229,000 was incurred under UK GAAP for the year ended 31 January
2006 due to share options issued below market value. The charge to the income
statement under IFRS is the same as UK GAAP, based on the fair value of the
share options. However, a cumulative amount of £414,000 was previously credited
to accruals under UITF17, this has been transferred to the profit & loss
reserve, as required by IFRS2.
The charge in the 2006 income statement for all other options is £20,000.
IV. Reclassification of research and development costs (IAS 38)
Under IFRS an intangible asset arising from development (or from the development
phase of an internal project) shall be recognised if, and only if, an entity can
demonstrate all of the following:
a) the technical feasibility of completing the intangible asset so that it will
be available for use or sale.
(b) its intention to complete the intangible asset and use or sell it.
(c) its ability to use or sell the intangible asset.
(d) how the intangible asset will generate probable future economic benefits.
Among other things, the entity can demonstrate the existence of a market for the
output of the intangible asset or the intangible asset itself or, if it is to be
used internally, the usefulness of the intangible asset.
(e) the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset.
(f) its ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The Group has applied IAS 38 fully retrospectively and under IFRS £3.3m of
development expenditure over the last 5 years has been capitalised. This is
prudently based on the expenditure incurred in the development of the
methodologies and systems to create the innovative products and services
provided by Thomson. The estimated useful life of these developments has been
set at 5 years. This is a prudent estimate of the developments which form part
of our Intellectual Property and where we continue to gain economic benefit from
the development carried out over the last five years. This policy results in an
adjustment of £2.66m of development expenditure capitalised as at the transition
date with a cumulative amortisation charge of £909,000. The capitalisation and
amortisation prior to the transition date is taken through reserves. In 2005/06
development expenditure of £644,000 has been capitalised and £532,000
amortisation has been charged relating to development expenditure capitalised
previously, creating a net credit to income of £112,000.
V. Classification of cash and cash equivalents
Under UKGAAP liquid resources were excluded from the cashflow statement. Under
IFRS the cashflow statement includes cash equivalents, defined as short-term,
highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Accordingly, short term deposits of £850,000 have been included within the
balance of cash and cash equivalents held at the date of transition and the
transfer of £515,000 from cash to liquid resources under UKGAAP has been
reversed in the IFRS cashflow statement for the year ended 31 January 2006.
5 Restatement of financial information under IFRS
The financial information set out below has been prepared on the basis of the
accounting policies set out in note 6. An explanation of the effects of
transition to IFRS is provided above in note 4.
Consolidated Income Statement - Effect of transition to IFRS
31 January 2006
UKGAAP Preliminary IFRS Preliminary IFRS
Adjustments
£'000s
£'000s £'000s
Revenue 11,136 11,136
Cost of Sales (4,129) (4,129)
Gross Profit 7,007 7,007
Administrative expenses (4,775) 644 (4,131)
Shared based expenses (229) (20) (249)
Amortisation of intangible assets (246) (448) (694)
Total administrative expenses (5,250) 176 (5,074)
Operating Profit 1,757 176 1,933
Financial Income 49 49
Financial expenses (55) (55)
Net financing income (6) (6)
Profit before taxation 1,751 176 1,927
Tax (126) (126)
Deferred tax 430 430
Profit for the year 2,055 176 2,231
Attributable to:
Equity holders of the parent 2,065 2,241
Minority interests (10) (10)
2,055 2,231
Earnings per share (pence)
Basic 6.99p 7.59p
Diluted 6.67p 7.24p
Consolidated Balance Sheet - As at 31 January 2006
Effect of transition to IFRS
UK GAAP Preliminary IFRS Preliminary IFRS
Adjustments
£'000s
£'000s
£'000s
Non Current assets
Goodwill 11,054 (3,149) 7,905
Other intangible assets 5,096 5,096
Property plant and equipment 706 706
Investments 122 122
Deferred tax asset 910 910
12,792 1,947 14,739
Current assets
Trade & other receivables: Due within one 5,926 5,926
year
Trade & other receivables: Due after more 1,235 1,235
than one year
Cash & Cash Equivalents 2,774 2,774
9,935 9,935
Current liabilities
Trade & other payables (2,041) (2,041)
Current tax liabilities (126) (126)
Bank overdrafts & loans (312) (312)
Provisions (3,850) (3,850)
Accruals & deferred income (4,393) 414 (3,979)
(10,722) (10,308)
Net current liabilities (787) (373)
Non current liabilities
Bank Loans (2,687) (2,687)
Provisions (269) (269)
Accruals & deferred income (1,374) (1,374)
(4,330) (4,330)
Total liabilities (15,052) 414 (14,638)
Net assets 7,675 2,361 10,036
Capital & reserves
Share capital 7,823 7,823
Share premium 8,869 8,869
Merger reserve (4,504) (4,504)
Retained earnings (4,405) 2,361 (2,044)
Minority interest (108) (108)
Total Equity 7,675 2,361 10,036
Consolidated Balance Sheet - As at 31 January 2005
Effect of transition to IFRS
UK GAAP Preliminary IFRS Preliminary IFRS
Adjustments
£'000s
£'000s
£'000s
Non current assets
Goodwill 31 31
Other intangible assets - 1,751 1,751
Property plant and equipment 518 518
Deferred tax assets 480 480
1,029 1,751 2,780
Current assets
Trade & other receivables: Due within one
year
2,290 2,290
Trade & other receivables: Due after more
than one year 2 2
Cash & Cash Equivalents 1,598 1,598
3,890 3,890
Current liabilities
Trade & other payables (848) (848)
Accruals & deferred income (3,007) (3,007)
(3,855) (3,855)
Net current assets 35 35
Non current liabilities
Accruals & deferred income (528) (528)
(528) (528)
Total liabilities (4,383) (4,383)
Net assets 536 1,751 2,287
Capital & reserves
Share capital 7,186 7,186
Share premium 5,064 5,064
Merger reserve (5,250) (5,250)
Retained earnings (6,464) 1,751 (4,713)
Total Equity 536 1,751 2,287
Consolidated Cash Flow Statement - As at 31 January 2006
Effect of transition to IFRS
UK GAAP Preliminary IFRS Preliminary IFRS
Adjustments
£'000s
£'000s £'000s
Cashflows from operating activities 1,751 176 1,927
Profit before taxation
Adjustments for:
Depreciation 276 276
Amortisation 246 448 694
Share based expenses 229 20 249
Investment income - (49) (49)
Interest expense - 55 55
2,502 650 3,152
Increase in trade & other
receivables (2,648) (6) (2,654)
Increase in trade payables 1,385 1,385
Cash generated from operations
1,239 644 1,883
Interest expense (71) (71)
Income taxes paid (6) (6)
Net cash from operating activities 1,162 1,806
Cash from investing activities
Purchase of subsidiary, net of cash
acquired (7,012) (7,012)
Purchase of property, plant &
equipment (264) (264)
Purchase of intangible assets - (644) (644)
Investment in short term deposits (515) 515 -
Purchase of investments (87) (87)
Investment income 43 43
Net cash used in investing
activities
(7,835) (7,964)
Cashflows from financing activities
Proceeds from issue of share
capital 4,343 4,343
Proceeds from long term borrowings 3,000 3,000
Repayment of bank loans (63) (63)
Net cashflow used in financing
activities 7,280 7,280
Net decrease in cash and cash
equivalents 607 515 1,122
Effect of foreign exchange rate (8) - (8)
changes
Cash & cash equivalents at
beginning of period 748 850 1,598
Cash & Cash equivalents at end of
period 1,347 1,365 2,712
6 Significant Accounting Policies
Basis of accounting
The financial statements have been prepared in accordance with all adopted
International Financial Reporting Standards (IFRS's) for the first time. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS's
are given above. The financial statements have also been prepared in accordance
with IFRS's adopted for use in the European Union and therefore comply with
Article 4 of the EU IAS Regulation.
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 January 2006. Control is achieved where the Company has the power to govern
the financial and operating policies of an investee entity so as to obtain
benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
• Acquisition method of accounting
The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the acquiree,
plus any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 are recognised at their fair value
at the acquisition date.
• Merger method of accounting
Although IFRS 3 outlawed merger accounting, under IFRS 1, the Group is not
required to re-state acquisitions or business combinations prior to the date of
transition. Therefore the Group is permitted to retain their historical merger
accounting position in the consolidated accounts.
The interest of minority shareholders in the acquiree is initially measured at
the minority's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less any accumulated
impairment losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised immediately in
profit and loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
In respect of the billetts transaction in August 2005, goodwill previously
carried on the balance sheet at cost and amortised in accordance with UK GAAP
has been restated at cost and reviewed for impairment.
Goodwill arising on other acquisitions before the date of transition to IFRS has
been retained at the previous UK GAAP amounts subject to being tested for
impairment at that date.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for services provided in the normal
course of business, net of discounts, VAT and other sales related taxes. Income
is recognised evenly over the period of the contract for subscription to systems
and in accordance with the stage of completion of the contract activity for
consultancy income.
If the outcome of a contract could not be estimated reliably, the contract
revenue would be recognised to the extent of contract costs incurred that it is
probable would be recoverable. Costs are recognised as an expense in the period
in which they are incurred.
Foreign currencies
For the purposes of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds sterling, which
is the functional currency of the Company, and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of transactions.
At each balance sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the balance
sheet date.
The exchange differences arising from the retranslation of the opening balance
sheet amounts of subsidiaries and the difference on translation of the results
of subsidiaries are dealt with through equity. All other exchange differences
are dealt with through the income statement.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated
at the average exchange rates for the period, approximating to rates applicable
at the dates of the transactions.
Operating profit
Operating profit is stated after charging restructuring costs, but before
financial income and financial expenses.
Taxation
The tax expense included in the Consolidated Income Statement comprises current
and deferred tax. Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted by the balance
sheet date.
Tax is recognised in the Consolidated Income Statement except to the extent that
it relates to items recognised directly in equity, in which case it is
recognised in equity.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Consolidated Income Statement, except when it relates
to items charged or credited directly to equity, in which case deferred tax is
also dealt with in equity.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are offset against each other when they
relate to income taxes levied by the same tax jurisdiction and when the group
intends to settle its current tax assets and liabilities on a net basis.
Internally-generated intangible assets - research and development expenditure
An internally-generated intangible asset arising from the Group's development
expenditure is recognised only if all of the following conditions are met:
• An asset is created that can be identified (such as software);
• It is probable that the asset created will generate future economic
benefits; and
• The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis
over their useful lives. Where internally-generated intangible asset can not be
recognised, development expenditure is recognised as an expense in the period in
which it is incurred.
Purchased intangible assets
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised on a
straight-line basis over their useful economic lives. The amortisation expense
is included within the
administrative expenses line in the income statement. Intangible assets are
recognised on business combinations if they are separable from the acquired
entity or give rise to other contractual/legal rights. The amounts ascribed to
such intangibles are arrived at by using appropriate valuation techniques.
In-process research and development programmes acquired in such combinations are
recognised as an asset even if subsequent expenditure is written off because the
criteria specified in the policy for research and development costs above are
not met. The significant intangibles recognised by the group, their useful
economic lives and the methods used to determine the cost of intangibles
acquired in a business combination are as follows:
billetts media consulting - customer Straight line over 10 years Estimated discounted cash flow
relationships
billetts marketing sciences - Straight line over 5 years Estimated discounted cash flow
customer relationships
MPMA customer relationships Straight line over 2 years Estimated discounted cash flow
Trade name Straight line over 10 years Estimated royalty stream if
rights were to be licensed
Non-compete agreement Straight line over 1.5 years Estimated discounted cash flow
of potentially lost revenue
Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives, the rates generally applicable are:
Motor vehicles 25% per annum reducing balance
Furniture & fittings 25% per annum reducing balance
Computer equipment & software 25% per annum on costs
Plant & equipment Straight line over 3-10 years
Operating leases Over remaining useful life
Impairment
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation or
depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If any
such condition exists, the recoverable amount of the asset is estimated in order
to determine the extent, if any, of the impairment loss. Where the asset does
not generate cash flows that are independent from other assets, estimates are
made of the cashflows of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to sell, and value in
use. In assessing value in use, estimated future cashflows are discounted to
their present value using a discount rate appropriate to the specific asset or
cash generating unit.
If the recoverable amount of an asset or cash generating unit is estimated to be
less than its carrying amount, the carrying value of the asset or cash
generating unit is reduced to its recoverable amount. Impairment losses are
recognised immediately in the income statement.
In respect of assets other than goodwill, an impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation; if no impairment loss had been
recognised. Impairment losses in respect of goodwill are not reversed.
Financial instruments
Financial assets
The group classifies its financial assets into one of the following categories,
depending on the purpose for which the asset was acquired. The group's
accounting policy for each category is as follows:
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to customers
(trade debtors), but also incorporate other types of contractual monetary asset.
They are carried at cost less any provision for impairment.
Held-to-maturity investments: These assets are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the group's
management has the positive intention and ability to hold to maturity. These
assets are measured at amortised cost, with changes through the income
statement.
Financial liabilities
The group classifies its financial liabilities as 'Other financial liabilities',
which includes the following items:
• Trade payables and other short-term monetary liabilities, which are recognised
at amortised cost.
• Bank borrowings, and loan notes issued by the group are initially recognised
at the amount advanced net of any transaction costs directly attributable to the
issue of the instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate method, which
ensures that any interest expense over the period to repayment is at a constant
rate on the balance of the liability carried in the balance sheet. 'Interest
expense' in this context includes initial transaction costs as well as any
interest or coupon payable while the liability is outstanding.
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event, and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are
discounted to present value where the effect is material.
Share-based payments
The Group has applied the requirements of IFRS 2 'Share-based Payment'. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of options after 7 November 2002 that were unvested at 1 January 2005.
The Group issues equity-settled share-based payments only. These are measured
at fair value (excluding the effect of non market-based vesting conditions) at
the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, with a corresponding credit to equity, based on the Group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured by use the Black-Scholes method. The expected life used
in the model has been adjusted, based on management's best estimated, for the
effects of non-transferability, exercise restrictions, and behavioural
considerations.
Income Statement Year ended 31 January 2006 - Effect of transition to IFRS
UK GAAP Amortisation of goodwill R&D expenditure
reversal
billetts Radio Capitalisation Amortisation
monitoring
£'000s
£'000s £'000s £'000s £'000s
Revenue 11,136
Cost of sales (4,129)
Gross Profit 7,007
Administration expenses (4,775) 644
Share based expenses (229)
Amortisation of intangible (246) 234 12 - (532)
assets
Total administrative expenses (5,250) 234 12 644 (532)
Operating profit 1,757 234 12 644 (532)
Finance income 49
Finance expense (55)
Net financing income (6)
Profit before taxation 1,751 234 12 644 (532)
Tax (126)
Deferred tax 430
Profit for the year 2,055 234 12 644 (532)
Income Statement Year ended 31 January 2006 - Effect of transition to IFRS -
Cont'd
Share based Amortisation of Preliminary IFRS Preliminary IFRS
expenses acquired intangible adjustments
assets
£'000s
£'000s £'000s
£'000s
Revenue 11,136
Cost of sales (4,129)
Gross Profit 7,007
Administration expenses 644 (4,131)
Share based expenses (20) (20) (249)
Amortisation of intangible (162) (448) (694)
assets
Total administrative expenses (20) (162) 176 (5,074)
Operating profit (20) (162) 176 1,933
Finance income 49
Finance expense (55)
Net financing income (6)
Profit before taxation (20) (162) 176 1,927
Tax (126)
Deferred tax 430
Profit for the year (20) (162) 176 2,231
Balance Sheet As at 31 January 2006 - Effect of transition to IFRS
UK GAAP Amortisation of goodwill R&D expenditure Share based expenses
reversal
Billetts Radio Capitalisation Amortisation
monitoring
£'000s £'000s
£'000s
£'000s £'000s
£'000s £'000s
Non current assets
Goodwill 11,054 234 12
Other Intangible assets - 3,304 (1,441)
Property plant & equipment 706
Investments 122
Deferred tax asset 910
12,792 234 12 3,304 (1,441)
Current assets
Trade & other receivables: 5,926
Due within one year
Trade & other receivables: 1,235
Due after more than one
year
Cash & cash equivalents 2,774
9,935
Current liabilities
Trade & other payables (2,041)
Current tax liabilities (126)
Bank overdrafts & loans (312)
Provisions (3,850)
Accruals & deferred income (4,393)
(10,722)
Net current liabilities (787)
Non current liabilities
Bank loans (2,687)
Provisions for liabilities (269)
& charges
Accruals & deferred income (1,374)
(4,330)
Total liabilities (15,052)
Net Assets 7,675 234 12 3,304 (1,441)
Capital Reserves
Share Capital 7,823
Share premium 8,869
Merger reserve (4,504)
Retained earnings (4,405) 234 12 3,304 (1,441) (205) 205
Minority Interest (108)
Toyal equity 7,675 234 12 3,304 (1,441) (205) 205
Balance Sheet As at 31 January 2005 - Effect of transition to IFRS - Cont'd
NI for UITF17 Reclassification of Amortisation of Prelim IFRS Prelim IFRS
phantom reclass goodwill to other acquired adjust's
shares intangible assets intangible
assets
£'000s
£'000s £'000s £'000s
£'000s £'000s
Non current assets
Goodwill (3,395) (3,149) 7,905
Other Intangible assets 3,395 (162) 5,096 5,096
Property plant & 706
equipment
Investments 122
Deferred tax asset 910
-
(162) 1,947 14,739
Current assets
Trade & other
receivables: 5,926
Due within one year
Trade & other
receivables: 1,235
Due after more than one
year
Cash & cash equivalents 2,774
9,935
Current liabilities
Trade & other payables (2,041)
Current tax liabilities (126)
Bank overdrafts & loans (312)
Provisions (3,850)
Accruals & deferred (44) 458 414 (3,979)
income
- -
(44) 458 414 (10,308)
Net current liabilities (373)
Non current liabilities
Bank loans (2,687)
Provisions (269)
Accruals & deferred (1,374)
income
(4,330)
Total liabilities (44) 458 414 (14,638)
Net Assets (44) 458 (162) 2,361 10,036
Capital Reserves
Share Capital 7,823
Share premium 8,869
Merger reserve (4,504)
Retained earnings (44) 458 (162) 2,361 (2,044)
Minority Interest (108)
(44) 458 (162) 2,361 10,036
Balance sheet as at 31 January 2005 - Effect of transition to IFRS
UK GAAP R&D expenditure
Capitalisation Amortisation
£000's £'000s £000's
Non current assets
Goodwill 31
Other Intangible assets - 2,660 (909)
Property plant & equipment 518
Deferred tax asset 480
1,029 2,660 (909)
Current assets
Trade & other receivables:
Due within one year 2,290
Trade & other receivables:
Due after more than one year 2
Cash & cash equivalents 1,598
3,890
Current liabilities
Trade & other payables (848)
Accruals & deferred income (3,007)
(3,855)
Net current assets 35
Non current liabilities
Provisions for liabilities & -
charges
Accruals & deferred income (528)
(528)
Total liabilities (4,383)
Net Assets 536 2,660 (909)
Capital & reserves
Share Capital 7,186
Share premium 5,064
Merger reserve (5,250)
Retained earnings (6,464) 2,660 (909)
Total equity 536 2,660 (909)
Balance sheet as at 31 January 2005 - Effect of transition to IFRS - Cont'd
Share based expenses Preliminary IFRS Preliminary IFRS
adjustments
£'000s
£'000s £'000s £'000s
Non current assets
Goodwill 31
Other Intangible assets 1,751 1,751
Property plant & 518
equipment
Deferred tax asset 480
1,751 2,780
Current assets
Trade & other
receivables:
2,290
Due within one year
Trade & other
receivables:
2
Due after more than one
year
Cash & cash equivalents 1,598
3,890
Current liabilities
Trade & other payables (848)
Accruals & deferred (3,007)
income
(3,855)
Net current assets 35
Non current liabilities
Provisions for
liabilities & charges
-
Accruals & deferred (528)
income
(528)
Total liabilities (4,383)
Net Assets 1,751 2,287
Capital & reserves
Share Capital 7,186
Share premium 5,064
Merger reserve (5,250)
Retained earnings 13 (13) 1,751 (4,713)
13 (13) 1,751 2,287
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