IFRS Statement
ITV PLC
01 June 2005
ITV plc
Preliminary International Financial Reporting Standards Financial Statements for
2004
Introduction
ITV plc will be reporting its financial results in accordance with International
Financial Reporting Standards as adopted by the European Union ('IFRS') from 1
January 2005. The Group's first IFRS results will be the interim results for
the six months to 30 June 2005 with the first Annual Report under IFRS being for
the year ended 31 December 2005. The Group's date of transition to IFRS is 1
January 2004. The purpose of this statement is to present the effect of IFRS on
ITV plc at the date of transition and for the 2004 full year and half year
comparative periods.
Summary
IFRS does not affect the underlying business performance of ITV, has no impact
on cash generated from operations, and does not have a significant impact on
ITV's results before amortisation for the year ended 31 December 2004. EBITA
remains virtually unchanged at £254m and although PBT reduces to £168m this is
principally due to an increased amortisation charge.
Looking forward, IFRS is expected to have minimal further impact on EBITA. The
increased amortisation charge, and other IFRS changes, will have a reduced
effect on PBT in 2005. In 2006, amortisation will reduce significantly and will
also be below the estimated 2006 UK GAAP amortisation charge).
Impact on 2004 profit: £m
Pensions - operating cost 5
Share based payments (5)
Other (1)
Impact on EBITA (1)
Goodwill amortisation 72
Amortisation of other intangibles (105)
Net financing costs (pensions) (6)
Joint ventures and associates 1
Impact on profit before tax (39)
Taxation 36
Impact on profit after tax (3)
Contents
1 Introduction
2 Basis of preparation
3 IFRS 1 exemptions
4 Key impact analysis
4.1 Presentation of financial statements
4.2 Business combinations
4.3 Post employment benefits
4.4 Share based payments
4.5 Deferred taxation
4.6 Recognition of acquired programme rights
4.7 Recognition of dividends
4.8 Financial instruments
4.9 Earnings per share
4.10 Guide to impact on 2005
5 Consolidated Income Statement
6 Consolidated Balance Sheet
7 Consolidated Cash Flow Statement
8 Consolidated Statement of Recognised Income and Expense
9 Consolidated Statement of Changes in Equity
Appendix 1 - Significant accounting policies
Appendix 2 - Reconciliation of income statements from UK GAAP to IFRS
Appendix 3 - Reconciliation of balance sheets from UK GAAP to IFRS
Appendix 4 - Report of KPMG Audit Plc
Appendix 5 - Forward looking statements
1. Introduction
This document explains how ITV's previously reported UK GAAP financial
performance and position are reported under IFRS. It includes, on an IFRS
basis:
• the Group's consolidated income statement for the year ended 31 December
2004 and the six months ended 30 June 2004 along with a consolidated cash
flow statement, a consolidated statement of recognised income and expense
and a consolidated statement of changes in equity for these periods; and
• the Group's consolidated balance sheet at 31 December 2004, 30 June 2004
and 1 January 2004;
Set out below are the key factors affecting the conversion to IFRS including the
IFRS 1 exemptions taken, a key impact analysis and restated primary statements
for 2004. The appendices set out ITV's IFRS accounting policies and
reconciliations of the 2004 statements under IFRS from UK GAAP.
KPMG have audited the IFRS statements for the year ended 31 December 2004.
Their audit report is attached in Appendix 4. The interim financial information
presented is unaudited.
2. Basis of preparation
The restated financial information presented in this document has been prepared
in accordance with International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) adopted by the International Accounting
Standards Board (IASB), and interpretations issued by the International
Financial Reporting Interpretations Committee of the IASB.
ITV is required to prepare its consolidated accounts in accordance with those
standards and interpretations as adopted by the European Union (called 'IFRS' in
this document). This restatement has been prepared on the assumption that all
IFRS and interpretations, that ITV proposes adopting, effective for 2005
reporting will be endorsed by the European Commission. At the date of
publication of this document not all of these standards have been endorsed in
full. In particular, the EU yet to endorse the amendment to IAS 19 (Employee
Benefits). ITV has assumed that the amendment to IAS 19 is endorsed and intends
to adopt it for its 2005 financial reporting.
Were these standards not to be endorsed in time for 2005 financial reporting
then the accounting policies or presentation of certain financial information
contained in this document may need to be changed. It is therefore possible
that further changes will be required to this information before it is presented
in the 2005 interim results and in the 2005 annual report.
Details of ITV plc's significant IFRS accounting policies are given in Appendix
1.
3. IFRS 1 exemptions
IFRS 1 (First-time Adoption of International Financial Reporting Standards) sets
out the procedures that ITV must follow when IFRS is adopted for the first time
as the basis for preparing Group consolidated financial statements. It sets out
a number of exemptions that are available on first-time adoption to assist
companies in the transition to reporting under IFRS. ITV has taken the
following decisions on these exemptions:
a) Business combinations: ITV has taken the exemption from restating
business combinations occurring before the date of transition, 1
January 2004.
b) Employee benefits: ITV has elected to recognise all cumulative
actuarial gains and losses in respect of employee benefit schemes at
the date of transition to IFRS. This is consistent with the Group's
accounting policy adopted under the amendment to IAS 19 issued on 16
December 2004 whereby actuarial gains and losses are recognised
through the statement of recognised income and expense in full in the
period in which they arise.
c) Share-based payments: ITV has applied IFRS 2 only to share options
and awards granted after 7 November 2002 that had not vested at 1
January 2005.
d) Financial instruments: ITV has taken the exemption from applying IAS
32 (Financial Instruments: Disclosure and Presentation) and IAS 39
(Financial Instruments: Recognition and Measurement) to the
comparative information to be presented in the Group's first IFRS
financial statements and will adopt IAS 32 and IAS 39 with effect from
1 January 2005. As such, the 2004 information relating to financial
instruments continues to be presented under the current UK GAAP basis.
This is discussed under key impacts below.
e) Fair value or revaluation as deemed cost: ITV has not taken the
option to restate items of property, plant and equipment to their fair
value at 1 January 2004. ITV has elected for all items to take their
cost or revalued amount as shown previously under UK GAAP as their
deemed cost under IFRS.
f) Cumulative translation differences: ITV has taken the option to set
the cumulative level of translation differences relating to foreign
operations held within reserves to nil at 1 January 2004.
4. Key Impact Analysis
The analysis below sets out the most significant adjustments made to arrive at
the IFRS 2004 income statements and balance sheets. The impact of these can
also be seen in the reconciliations in Appendices 2 and 3. Other less
significant adjustments are included within these reconciliations.
4.1 Presentation of financial statements
The primary statements included in this document have been presented in
accordance with IAS 1 (Presentation of Financial Statements). However, this
presentation may require modification in the event that further guidance is
issued. The key presentational differences are as follows:
Income statement:
• The Group's share of the profit of joint ventures and associates is now
presented including its share of interest and tax. The interest and tax
lines in the income statement now exclude these amounts.
• Net financing costs are analysed between financing income and financing
costs on the face of the income statement.
Balance sheet:
• Assets and liabilities are analysed between current and non-current (see
accounting policies in Appendix 1 for definitions).
• Provisions are analysed between current and non-current liabilities.
• Deferred tax is shown separately on the face of the balance sheet and
disclosed as non-current.
• The defined benefit pensions deficit is shown separately on the face of the
balance sheet.
• Current tax liabilities are shown separately on the face of the balance
sheet.
4.2 Business combinations
As detailed in section 3, ITV has taken the exemption from applying IFRS 3
(Business Combinations) to combinations occurring before 1 January 2004. The
goodwill arising from combinations occurring before that date therefore remains
at the amount shown under UK GAAP at 1 January 2004 and so there is no impact on
the 2004 opening balance sheet.
Business combinations occurring after 1 January 2004 have been accounted for in
accordance with IFRS 3. This impacts on the acquisition accounting for Carlton
Communications Plc and the purchase of additional stakes in GMTV and GSkyB, all
of which occurred during 2004. The principal impact is that intangible assets
(which meet the definition for recognition under IAS 38 (Intangible Assets) and
whose fair value can be measured) are recognised separately from goodwill.
These assets are then amortised over their useful lives. Additionally the fair
values identified under UK GAAP must be revisited under IFRS. The main impact
of this is that the pensions deficits are brought onto the balance sheet using
an IAS 19 (Employee Benefits) valuation rather than the SSAP 24 (Accounting for
Pension Costs) valuation used under UK GAAP. Both the intangible assets and
pensions adjustments lead to associated deferred tax balances being recognised
(see section 4.5). The net of these reduces the goodwill recognised.
IFRS 3 prohibits the amortisation of goodwill instead requiring that it is
subjected to annual impairment testing. This causes a reduction in the Group's
amortisation charge for the year ended 31 December 2004 of £72m. Additionally
goodwill balances held within investments in joint ventures and associates are
also no longer amortised leading to a credit of £5m to the share of profit of
associates and joint ventures. The balance sheet shows corresponding increases
to goodwill and investments in associates and joint ventures.
The net impact on the income statement is to increase the amortisation charge in
2004 by £33m. This reflects the initially high level of amortisation on the
intangible assets included under the acquisition accounting for Carlton.
On the balance sheet at 31 December 2004, goodwill is lower than previously
reported under UK GAAP by £255m while other intangible assets increase by £435m
giving a net increase in intangible assets on the face of the balance sheet of
£180m.
Due to the short useful lives of some of the intangible assets recognised (e.g.
customer contracts generally have a life of 1 to 2 years), the amortisation
charge from these in 2005 will be £13 million lower than 2004, and amortisation
in 2006 will reduce further to be more than £50m less than the 2004 IFRS charge.
4.3 Post employment benefits
The principal impact of IAS 19 (Employee Benefits) on ITV is in relation to
accounting for defined benefit pension schemes.
IAS 19 requires defined benefit pension schemes accounting to be based on fair
values at the balance sheet date. Separate charges for operating and net
financing costs based on actuarial assumptions in place at the start of the year
are required through the income statement while recognition through the balance
sheet is dependent upon the policy adopted for the recognition of actuarial
gains and losses. As discussed in section 3, ITV has elected to recognise all
cumulative actuarial gains and losses in respect of employee benefit schemes at
the date of transition to IFRS. Additionally ITV has chosen to adopt early the
amendment to IAS 19 (issued on 16 December 2004) and recognise actuarial gains
and losses arising from the full year actuarial valuation in full through the
statement of recognised income and expense in the period in which they arise.
The treatment and impact is broadly in line with that previously disclosed in
accordance with FRS 17 under UK GAAP.
The operating charge through the income statement reduces by £5m while the net
financing cost, for which there was no equivalent under UK GAAP (SSAP 24), is
£6m. The reduction reflects a different measurement basis and the recognition
of a short term curtailment gain on ITV's pension schemes which had a
significant drop in active members as a result of the merger between Granada and
Carlton.
The balance sheet shows a total IAS 19 pensions deficit of £672m at 31 December
2004 of which, under UK GAAP, the unfunded element of £27m was previously
recognised within creditors and an amount of £95m was included within provisions
under acquisition accounting for Carlton. A movement through the statement of
recognised income and expense for the year of £123m reflects the actuarial gains
and losses. The deficit is shown before a deferred tax asset of £202m
recognised within non-current assets in the balance sheet. This gives a net
deficit of £470m.
On an ongoing funding basis the latest valuations show a total deficit of £586m
at 31 December 2004 against the IAS 19 deficit of £672m. This is a more
relevant figure as it is these valuations that determine the future funding
requirements for ITV.
Expenditure relating to defined contribution pension schemes continues to be
charged through the income statement as incurred.
The IFRS defined benefit pensions charge for 2005 will remain approximately the
same as 2004 at operating level while a higher interest charge is expected due
to the increased deficit recognised at 31 December 2004.
4.4 Share based payments
Under IFRS 2 (Share Based Payment) the charge through the income statement is
based upon the fair value of share options and awards granted. The fair value
of the equity instrument is measured at grant date and spread over the vesting
period through the income statement with a corresponding increase in equity.
The fair value of the share options and awards is measured using either a
Monte-Carlo or Black-Scholes model as appropriate taking into account the terms
and conditions of the individual scheme. The amount recognised as an expense is
adjusted to reflect changes to the expected vesting except where forfeiture is
due only to changes in the expected achievement of market based criteria.
IFRS 2 requires a charge for all such grants including awards, options and SAYE
schemes unlike 2004 UK GAAP which based the charge on the intrinsic market value
of the underlying shares at the date of grant and so, for ITV, a charge arose on
awards only.
ITV has applied IFRS 2 only to share options and awards granted after 7 November
2002 that had not vested at 1 January 2005 as permitted under IFRS 1. As ITV
has not previously presented the fair value of share options and awards granted,
the IFRS 1 option to apply IFRS 2 to all share options and awards granted,
including those granted before 7 November 2002, cannot be taken by the Group.
The charge under IFRS is £5m higher in 2004 than under UK GAAP. There is no
impact on the net assets of the Group as the charge to the income statement is
matched by an equal credit through reserves.
As ITV is unable to apply IFRS 2 to share options and awards granted pre 7
November 2002, the charge through the income statement in 2005 will increase as
more schemes are captured within the valuation period. This is expected to
increase the IFRS charge by up to £5m in 2005.
4.5 Deferred taxation
IAS 12 (Income Taxes) requires deferred tax to be provided on all temporary
differences rather than timing differences under UK GAAP.
The total impact on the 2004 income statement is a reduction in the tax charge
of £33m. On the balance sheet the net deferred tax asset increases by £24m.
The tax recognised directly through equity in 2004 is £37m. The key impacts on
deferred tax are in the following areas:
• A deferred tax liability has been recognised in relation to intangible
assets brought on to the balance sheet at fair value in accordance with
IFRS 3 (Business Combinations). This liability is released through the
income statement in line with the amortisation of these intangible assets.
At the 31 December 2004 a deferred tax liability of £151m remains on the
balance sheet following a credit of £33m through the income statement in
the period.
• The defined benefit pension schemes deficit recognised in the balance sheet
results in an increase to the deferred tax asset of £174m at 31 December
2004. The movements in this asset are through the income statement with a
£2m increase to the charge in 2004, in respect of the operating charge and
net interest, and £37m through the statement of recognised income and
expense, in respect of the actuarial gains and losses.
• Deferred tax is provided on share based payments as the tax basis differs
from the requirements of IFRS. At 31 December 2004 an additional deferred
tax asset of £5m is recognised with a credit of £2m being recognised
through the income statement in 2004. Movements through equity for the
year are nil.
4.6 Recognition of acquired programme rights
Under UK GAAP, ITV had a policy of recognising, within the cost of programming
rights in stock, contractual commitments in relation to acquired programming
rights which were not yet available for transmission (e.g. film rights). Under
IFRS, acquired programming rights are recognised at the level of payments made
until the asset is available for transmission, whereupon the full cost of the
rights is recognised within programme rights in current assets. This has
resulted in a reduction to programme rights held on the balance sheet, with a
corresponding reduction in trade payables, of £110m.
4.7 Recognition of dividends
Under IAS 10 (Events After the Balance Sheet Date) dividends are recognised in
the period in which they are declared. Additionally ITV no longer shows
dividends on the face of the income statement but instead shows them as a
movement in equity. The impact on the balance sheet is to reduce liabilities by
£53m at 31 December 2004.
4.8 Financial instruments
ITV has taken the IFRS 1 exemption from applying IAS 32 (Financial Instruments:
Disclosure and Presentation) and IAS 39 (Financial Instruments: Recognition and
Measurement) to its 2004 results. As such the 2004 information in this document
for financial instruments continues to be presented under the current UK GAAP
basis. When these standards are adopted from 1 January 2005 the balance sheet
at that date will be restated to show their impact.
Under IFRS all derivative financial instruments are recognised as assets or
liabilities in the balance sheet at fair value. Gains and losses are recognised
in the income statement unless they meet the definition of a cash flow hedge
under IAS 39 in which case the element of the gains and losses which fulfil the
hedge effectiveness criteria are taken directly to equity.
Marketable shares and securities classified as available for sale are recognised
at fair value with fair value movements going directly to equity.
Debt instruments are carried at amortised cost unless they are designated as the
hedged item in a hedge relationship in which case they are held at fair value
with movements being taken to the income statement to match against the movement
in the hedging item.
The impact on the 1 January 2005 balance sheet is limited with the net assets
effect being a decrease of £4m from IAS 39 itself and an increase to deferred
tax assets of £3m resulting from the application of IAS 12 to these adjustments.
4.9 Earnings per share
Basic earnings per share for 2004 are 3.5p (UK GAAP 3.5p). Adjusted earnings
per share for 2004 under IFRS are 6.4p (UK GAAP 6.6p). Adjusted earnings per
share are based on earnings before amortisation of intangible assets,
reorganisation, integration and impairment costs, gains on sale of investments
and the tax associated with these items.
4.10 Guide to impact on 2005
The impact from individual standards is discussed above and the net effect on
PBT in 2005 is expected to be similar to that in 2004. This excludes any
potential volatility caused by the introduction of IAS 39.
5. Consolidated Income Statement under IFRS
12 months ended 31 6 months ended
December 2004 30 June 2004
Total Total
£m £m
Group and share of joint ventures' turnover 2,132 991
Less share of joint ventures' turnover (79) (35)
Revenue 2,053 956
Operating costs before depreciation, amortisation of intangible (1,694) (815)
assets and reorganisation, integration and impairment costs
Operating costs - reorganisation, integration and impairment (70) (23)
costs
EBITDA 289 118
Depreciation of property, plant and equipment (35) (19)
EBITA 254 99
Amortisation of intangible assets (111) (60)
Total operating costs (1,910) (917)
Group operating profit 143 39
Financing income 22 9
Financing costs (41) (17)
Net financing costs (19) (8)
Share of profit of associates and joint ventures 13 5
Investment income 7 4
Gain on sale of property 7 5
Gain on sale of investments 17 -
Profit before tax 168 45
Taxation (25) (8)
Profit for the period 143 37
Profit attributable to minority interest (6) (5)
Profit attributable to equity shareholders of the company 137 32
Basic earnings per share 3.5p 0.8p
Diluted earnings per share 3.4p 0.8p
All results are from continuing operations.
6. Consolidated Balance Sheet under IFRS
31 December 30 June 1 January 2004
2004 2004
£m £m £m
Non-current assets
Property, plant and equipment 258 259 193
Intangible assets 3,797 3,756 1,259
Distribution rights 12 18 6
Investments in joint ventures and associates 83 113 33
Other investments 140 151 157
Deferred tax asset in respect of pension scheme deficits 202 168 127
Other deferred tax balances (136) (129) (3)
Net deferred tax asset 66 39 124
4,356 4,336 1,772
Current assets
Current asset investments - 174 -
Assets held for resale - 59 -
Programme rights and other stock 368 271 229
Trade and other receivables < 1 year 349 336 206
Trade and other receivables > 1 year 8 30 3
Trade and other receivables 357 366 209
Cash and cash equivalents 582 400 185
1,307 1,270 623
Current liabilities
Borrowings (10) (412) (4)
Trade and other payables < 1year (713) (617) (309)
Trade and other payables > 1 year - (20) -
Trade and other payables (713) (637) (309)
Current tax liabilities (225) (222) (141)
Provisions (32) (20) (8)
(980) (1,291) (462)
Net current assets/(liabilities) 327 (21) 161
Non-current liabilities
Borrowings (852) (557) (54)
Defined benefit pension deficit (672) (559) (422)
Other payables (7) (7) (30)
Provisions (43) (62) (39)
(1,574) (1,185) (545)
Net assets 3,109 3,130 1,388
Attributable to equity shareholders
Share capital 422 422 277
Share premium account 91 90 -
Capital reserve 112 112 112
Merger reserve 1,669 1,669 -
Other reserves 885 879 1,079
Income and expense reserve (86) (64) (81)
Total attributable to equity shareholders 3,093 3,108 1,387
Minority interest 16 22 1
Total equity 3,109 3,130 1,388
7. Consolidated Cash Flow Statement under IFRS
12 months ended 6 months ended
31 December 2004 30 June 2004
£m £m £m £m
Cash flows from operating activities
Continuing activities 329 213
Discontinued activities* (8) (6)
Cash generated from operations 321 207
Interest received 19 7
Interest paid on bank and other loans (43) (25)
Interest paid on finance leases (4) (2)
Dividends received 7 4
Dividends received from investments in joint ventures 4 2
and associates
Taxation paid (12) (8)
(29) (22)
Net cash from operating activities 292 185
Cash flows from investing activities
Acquisition of subsidiary undertakings, net of cash 434 461
and cash equivalents acquired
Proceeds from sale of assets held for resale 59 -
Proceeds from sale of property, plant and equipment 35 19
Acquisition of minority interest (154) (140)
Acquisition of property, plant and equipment (36) (7)
Acquisition of investments (2) (2)
Proceeds from sale of investments 208 2
Net cash from investing activities 544 333
Cash flows from financing activities
Proceeds from issue of ordinary share capital 8 7
Bank and other loans repaid (192) (85)
Capital element of finance lease payments (4) (2)
Preference dividends paid to shareholders (5) (5)
Redemption of redeemable shares on merger (200) (200)
Equity dividends paid (48) (28)
Net cash used in financing activities (441) (313)
Net increase in cash and cash equivalents 395 205
Cash and cash equivalents at 1 January 2004 185 185
Effects of exchange rate changes on cash and cash 2 10
equivalents
Cash and cash equivalents at 31 December 2004 582 400
*Cash flows in respect of discontinued activities relates to expenditure against
provisions held in respect of activities which have been previously
discontinued.
8. Consolidated Statement of Recognised Income and Expense
12 months ended 6 months ended 30
31 December 2004 June 2004
£m £m
Exchange differences on translation of foreign operations (2) (1)
Actuarial gains and losses on defined benefit pension schemes (123) -
Taxation on items taken directly to equity 37 -
Net income recognised directly in equity (88) (1)
Profit for the period 143 37
Total recognised income and expense for the period 55 36
Attributable to:
Equity shareholders of the company 49 31
Minority interests 6 5
Total recognised income and expense for the period 55 36
9. Consolidated Statement of Changes in Equity
Attributable to equity shareholders
Share Share Capital Merger Other Income Total Minority Total
capital premium reserve reserve reserve and interest
expense
reserve
£m £m £m £m £m £m £m £m £m
At 1 January 2004 277 - 112 - 1,079 (81) 1,387 1 1,388
Business combinations 143 85 - 1,669 6 - 1,903 174 2,077
Redemption of Granada - - - - (200) - (200) - (200)
redeemable shares
Purchase of minority - - - - - - - (159) (159)
interest
Shares issued in the 2 6 - - - - 8 - 8
period
Total recognised income - - - - - 49 49 6 55
and expense
Movements due to share - - - - - 11 11 - 11
based compensation
Dividends paid to - - - - - - - (6) (6)
non-equity shareholders
Equity dividends - - - - - (65) (65) - (65)
At 31 December 2004 422 91 112 1,669 885 (86) 3,093 16 3,109
At 31 December 2004 the income and expense reserve includes the translation
reserve of £(2)m (1 January 2004: nil).
Attributable to equity shareholders
Share Share Capital Merger Other Income Total Minority Total
capital premium reserve reserve reserve and interest
expense
reserve
£m £m £m £m £m £m £m £m £m
At 1 January 2004 277 - 112 - 1,079 (81) 1,387 1 1,388
Business combinations 143 85 - 1,669 - - 1,897 167 2,064
Redemption of Granada - - - - (200) - (200) - (200)
redeemable shares
Purchase of minority - - - - - - - (146) (146)
interest
Shares issued in the 2 5 - - - - 7 - 7
period
Total recognised income - - - - - 31 31 5 36
and expense
Movements due to share - - - - - 6 6 - 6
based compensation
Dividends paid to - - - - - - - (5) (5)
non-equity shareholders
Equity dividends - - - - - (20) (20) - (20)
At 30 June 2004 422 90 112 1,669 879 (64) 3,108 22 3,130
At 30 June 2004 the income and expense reserve includes the translation reserve
of £(1)m (1 January 2004: nil).
Appendix 1:
Significant accounting policies
a) Basis of preparation
The restated financial information presented in this document has been prepared
in accordance with International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) adopted by the International Accounting
Standards Board (IASB), and interpretations issued by the International
Financial Reporting Interpretations Committee of the IASB.
ITV is required to prepare its consolidated accounts in accordance with those
standards and interpretations as adopted by the European Union (called 'IFRS' in
this document). This restatement has been prepared on the assumption that all
IFRS and interpretations, that ITV proposes adopting, effective for 2005
reporting will be endorsed by the European Commission. At the date of
publication of this document not all of these standards have been endorsed in
full. In particular the EU has yet to endorse the amendment to IAS 19 (Employee
Benefits). ITV has assumed that the amendment to IAS 19 is endorsed and intends
to adopt it for its 2005 financial reporting.
Were these standards not to be endorsed in time for 2005 financial reporting
then the accounting policies or presentation of certain financial information
contained in this document may need to be changed. It is therefore possible
that further changes will be required to this information before it is presented
in the 2005 interim results and in the 2005 annual report.
b) Basis of accounting
The consolidated primary statements presented have been prepared under the
historical cost convention.
The accounting policies set out below have been applied consistently in
presenting this financial information and in preparing an opening IFRS balance
sheet at 1 January 2004 for the purpose of the transition to IFRS.
c) Revenue recognition
Revenue is stated exclusive of VAT and consists of sales of goods and services
to third parties. Revenue from services is recognised when the outcome can be
estimated reliably and by reference to the stage of completion of the
transaction. Revenue from the sale of goods is recognised when the Group has
transferred the significant risks and rewards of ownership and control of the
goods sold and the amount of revenue can be measured reliably. Key classes of
revenue are recognised on the following basis:
Advertising and sponsorship on transmission
Programme production on delivery
Programme rights when contracted and available for
exploitation
Revenue on barter transactions is recognised only when the goods or services
being exchanged are of a dissimilar nature.
d) Subsidiaries, associates and joint ventures
Subsidiaries are entities that are directly or indirectly controlled by the
Group. Control exists where the Group has the power to govern the financial and
operating policies of the entity so as to obtain benefits from its activities.
The proportion of net income and net assets attributable to minority
shareholders is presented separately as a minority interest in the consolidated
income statement and consolidated balance sheet.
A joint venture is an entity in which the Group holds an interest under a
contractual arrangement where the Group and one or more other parties undertake
an economic activity that is subject to joint control. The Group accounts for
its interests in joint ventures using the equity method.
An associate is an entity, other than a subsidiary or joint venture, over which
the Group has significant influence. Significant influence is the power to
participate in the financial and operating decisions of an entity but is not
control or joint control over those policies. These investments are accounted
for using the equity method.
e) Current/non-current distinction
Current assets include assets held primarily for trading purposes, cash and cash
equivalents and assets expected to be realised in, or intended for sale or
consumption in, the course of the Group's operating cycle. All other assets are
classified as non-current assets.
Current liabilities include liabilities held primarily for trading purposes,
liabilities expected to be settled in the course of the Group's operating cycle
and those liabilities due within one year from the reporting date. All other
liabilities are classified as non-current liabilities.
f) Property, plant and equipment
Owned assets
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. Certain items of property, plant and equipment that had
been revalued to fair value prior to 1 January 2004, the date of transition to
IFRS, are measured on the basis of deemed cost, being the revalued amount at the
date of that revaluation.
Leases
Finance leases are those which transfer substantially all the risks and rewards
of ownership to the lessee. Assets held under such leases are capitalised within
property, plant and equipment and depreciation is provided where appropriate.
Outstanding finance lease obligations, which comprise principal plus accrued
interest, are included within borrowings. The finance element of the agreements
is charged to the income statement over the term of the lease on a systematic
basis.
All other leases are operating leases the rentals on which are charged to the
income statement on a straight line basis over the lease term.
Depreciation
Depreciation is provided to write off the cost of property, plant and equipment
less estimated residual value on a straight line basis over their estimated
future lives. The major categories of property, plant and equipment are
depreciated as follows:
Vehicles, equipment and fittings 3 to 10 years
Plant and machinery 10 to 15 years
Properties:
television studios 50 years
leaseholds shorter of residual lease term or 50 years
Freehold land not depreciated
Freehold buildings up to 50 years
g) Intangible assets
Business combinations and goodwill
All business combinations that have occurred since 1 January 2004 are accounted
for by applying the purchase method. Goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable assets
acquired. Subsequent adjustments to the fair values of assets acquired made
within twelve months of the acquisition date are accounted for from the date of
acquisition. Consequently 2004 interim financial information presented has been
restated to reflect changes to the fair value adjustments made in the full year
accounts.
For business combinations prior to this date, but after 30 September 1998,
goodwill is included at its deemed cost, which represents the amount recorded
under relevant GAAP at the time. The classification and accounting treatment of
business combinations occurring prior to 1 January 2004, the date of transition
to IFRS, has not been reconsidered as permitted under IFRS 1.
Goodwill is stated at cost less any accumulated impairment losses and is
allocated to cash generating units. Goodwill is not amortised but tested
annually for impairment.
Goodwill arising on acquisitions prior to 30 September 1998 was recognised as a
deduction from equity.
Other intangible assets
Other intangible assets acquired by the Group are stated at cost less
accumulated amortisation except those acquired as part of a business combination
which are shown at fair value at the date of acquisition (in accordance with
IFRS 3 (Business Combinations)) less accumulated amortisation.
Amortisation
Amortisation is charged to the income statement over the estimated useful lives
of intangible assets unless such lives are indefinite. Goodwill is not
amortised but is tested for impairment at each balance sheet date. The useful
lives and amortisation methods for each major class of intangible asset are as
follows:
Film libraries 20 years Sum of digits
Channel 3 licences 11 years Straight line
Brands 11 years Straight line
Customer contracts up to 2 years Straight line
Customer relationships 7 to 10 years Straight line
h) Distribution rights
Programme rights acquired primarily for the purposes of distribution are
classified within the balance sheet as non-current assets. They are recognised
initially at cost and charged through the income statement over either a 3 or 5
year period depending on genre.
i) Other investments
Other investments comprise equity securities which do not meet the definition of
subsidiaries, joint ventures and associates, and are held at initial cost less
any impairment subsequently recognised.
j) Impairment of assets
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. An
impairment loss is recognised in the income statement for the amount by which
the asset's carrying amount exceeds its recoverable amount. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
The recoverable amount is the higher of an asset's fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset.
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.
k) Foreign currencies
Foreign currency transactions
Transactions in foreign currencies are translated into sterling at the rate of
exchange ruling at the date of the transaction. Foreign currency monetary
assets and liabilities at the balance sheet date are translated into sterling at
the rate of exchange ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement. Non-monetary assets and
liabilities measured at historical cost are translated into sterling at the rate
of exchange on the date of the transaction.
Financial statements of foreign operations
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. The revenues and
expenses of foreign operations are translated into sterling at the average rate
of exchange ruling during the financial period. Exchange differences arising on
translation are recognised directly in a separate component of equity.
Net investment in foreign operations
Exchange differences arising on the translation of the net investment in foreign
operations, and of related hedges, are taken directly to the translation reserve
within equity.
In respect of all foreign operations only those translation differences arising
since 1 January 2004, the date of transition to IFRS, are presented as a
separate component of equity.
l) Programme rights
Where programming, sports rights and film rights are acquired for the primary
purpose of broadcasting these are recognised within current assets. An asset is
recognised when the Group controls, in substance, the respective assets and the
risks and rewards associated with them. For acquired programme rights an asset
is recognised as payments are made and in full when the acquired programming is
available for transmission. Programming produced internally either for the
purpose of broadcasting or to be sold in the normal course of the Group's
operating cycle is recognised within current assets at production cost.
Programme costs and rights are written off to operating costs in full on first
transmission except certain film rights which are written off over a number of
transmissions. Films and programme costs not yet written off at the balance
sheet date are included on the balance sheet at the lower of cost and net
realisable value.
m) Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with
maturity of less than or equal to three months.
n) Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation arising from past events and it is probable
that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows by a
rate which reflects current market assessments of the time value of money and
the risks specific to the liability.
o) Borrowings
Borrowings consist of loans, loans notes and finance leases.
p) IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations)
IFRS 5 has been issued but it is not yet effective and applies prospectively for
periods beginning on or after 1 January 2005. ITV has therefore not adopted
this standard for the purposes of this document and discontinued operations and
assets held for sale continue to be accounted for under current UK GAAP
principles.
q) Taxation
The tax charge for the period comprises both current and deferred tax. Taxation
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method on any
temporary differences between the carrying amounts for financial reporting
purposes and those for taxation purposes. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities.
A deferred tax asset is recognised only to the extent that it is probable
sufficient taxable profit will be available to utilise the temporary difference.
r) Employee benefits
Defined contribution schemes
Obligations under the Group's defined contribution schemes are recognised as an
expense in the income statement as incurred.
Defined benefit plans
The Group's obligation in respect of defined benefit pension plans is calculated
separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value and the fair
value of plan assets is deducted. The discount rate is the yield at the balance
sheet date on high quality corporate bonds. The calculation is performed by a
qualified actuary using the projected unit credit method.
In accordance with IFRS 1 ITV has chosen to recognise the full pensions deficit
on the balance sheet at 1 January 2004. The Group has taken the option of
adopting early the amendment to IAS 19 (Employee Benefits) issued on 16 December
2004. As a result, actuarial gains and losses are recognised in full in the
period in which they arise through the statement of recognised income and
expense.
Share based compensation
The group operates a number of share based compensation schemes including an
SAYE scheme which is open to all employees. The fair value of the equity
instrument is measured at grant date and spread over the vesting period through
the income statement with a corresponding increase in equity. The fair value of
the share options and awards is measured using either a Monte-Carlo or
Black-Scholes model as appropriate taking into account the terms and conditions
of the individual scheme. The amount recognised as an expense is adjusted to
reflect the actual vesting except where forfeiture is due only to market based
criteria not being achieved.
s) Derivatives and other financial instruments
The Group uses a limited number of derivative financial instruments to hedge its
exposure to fluctuations in interest and foreign exchange rates. The Group does
not hold or issue derivative instruments for speculative purposes.
Interest rate swap and option agreements are used to manage the interest basis
of borrowings. Interest receipts and payments under these agreements are
accrued so as to match the net income or cost with the related finance expense.
No amounts are recognised in respect of future periods.
The difference between the fair value and book value of bonds and derivative
instruments arising on the acquisition accounting for Carlton is amortised
through net interest over the remaining life of the instruments.
t) Dividends
Dividends are recognised through equity in the period in which they are
declared.
u) Investment income
Investment income comprises dividends received from the Group's investments.
Dividend income is recognised in the income statement on the date the Group's
right to receive payments is established.
v) Net financing costs
Net financing costs comprise interest payable on borrowings, interest receivable
on funds invested, foreign exchange gains and losses and the net financing costs
in respect of defined benefit pension schemes. Additionally the difference
between the fair value and book value of bonds and derivative instruments
arising on the acquisition accounting for Carlton is amortised through net
interest over the remaining life of the instruments.
Appendix 2:
Consolidated Income Statement for the 12 months ended 31 December 2004
UK GAAP IAS 1 IAS 19 IFRS 2 IFRS 3 Other IFRS IFRS
Presentation Employee Share Business effect
benefits based combinations
payment
£m £m £m £m £m £m £m £m
Group and share of joint ventures' 2,132 - - - - - 2,132 -
revenue
Less share of joint ventures' revenue (79) - - - - - (79) -
Revenue 2,053 - - - - - 2,053 -
Operating costs before depreciation,
amortisation of intangible assets and
reorganisation, integration and
impairment costs (1,694) - 5 (5) - - (1,694) -
Operating costs - reorganisation,
integration and impairment costs (69) - - - (1) - (70) (1)
EBITDA 290 - 5 (5) (1) - 289 (1)
Depreciation of property, plant and
equipment (35) - - - - - (35) -
EBITA 255 - 5 (5) (1) - 254 (1)
Amortisation of intangible assets (78) - - - (33) - (111) (33)
Total operating costs (1,876) - 5 (5) (34) - (1,910) (34)
Group operating profit 177 - 5 (5) (34) - 143 (34)
Financing income 22 - - - - - 22 -
Financing costs (35) 1 (6) - - (1) (41) (6)
Net financing costs (13) 1 (6) - - (1) (19) (6)
Share of profit of associates and joint
ventures 12 (4) - - 5 - 13 1
Investment income 7 - - - - - 7 -
Gain on sale of property 7 - - - - - 7 -
Gain on sale of investments 17 - - - - - 17 -
Profit before tax 207 (3) (1) (5) (29) (1) 168 (39)
Taxation (61) 3 (2) 2 33 - (25) 36
Profit after tax 146 - (3) (3) 4 (1) 143 (3)
Profit attributable to minority (7) - - - 1 - (6) 1
interest
Profit attributable to equity
shareholders 139 - (3) (3) 5 (1) 137 (2)
Consolidated Income Statement for the 6 months ended 30 June 2004
UK GAAP IAS 1 IAS 19 IFRS 2 IFRS 3* IFRS IFRS
Presentation Employee Share Business effect
benefits based combinations
payment
£m £m £m £m £m £m £m
Group and share of joint ventures'
revenue 994 - - - (3) 991 (3)
Less share of joint ventures' revenue (35) - - - - (35) -
Revenue 959 - - - (3) 956 (3)
Operating costs before depreciation,
amortisation of intangible assets and
reorganisation, integration and
impairment costs (818) - 2 (2) 3 (815) 3
Operating costs - reorganisation,
integration and impairment costs (23) - - - - (23) -
EBITDA 118 - 2 (2) - 118 -
Depreciation of property, plant and
equipment (19) - - - - (19) -
EBITA 99 - 2 (2) - 99 -
Amortisation of intangible assets (37) - - - (23) (60) (23)
Total operating costs (897) - 2 (2) (20) (917) (20)
Group operating profit 62 - 2 (2) (23) 39 (23)
Financing income 9 - - - - 9 -
Financing costs (15) 1 (3) - - (17) (2)
Net financing costs (6) 1 (3) - - (8) (2)
Share of profit of associates and joint
ventures 5 (2) - - 2 5 -
Investment income 4 - - - - 4 -
Gain on sale of property 5 - - - - 5 -
Profit before tax 70 (1) (1) (2) (21) 45 (25)
Taxation (28) 1 - 1 18 (8) 20
Profit after tax 42 - (1) (1) (3) 37 (5)
Profit attributable to minority interest (5) - - - - (5) -
Profit attributable to equity
shareholders 37 - (1) (1) (3) 32 (5)
* Includes adjustment in respect of changes to the fair values in acquisition
accounting between publishing the 2004 interim results and the 2004 full year
results (see accounting policies)
Appendix 3: Consolidated Balance Sheet as at 31 December 2004
UK IAS 1 IAS 2 IAS 10 IAS IAS 19 IFRS 3 Other IFRS IFRS
GAAP Presentation Inven- Div- 12 Employee Business 31 Dec effect
31 Dec tories idends Tax benefits combinations 2004
2004
£m £m £m £m £m £m £m £m £m £m
Non-current assets
Property, plant
and equipment 258 - - - - - - - 258 -
Intangible assets 3,617 - - - - - 180 - 3,797 180
Distribution
rights - - 12 - - - - - 12 12
Investments in
joint ventures
and associates 78 - - - - - 5 - 83 5
Other investments 140 - - - - - - - 140 -
Deferred tax asset
in respect of pension
scheme deficits - 28 - - - 174 - - 202 202
Other deferred
tax balances - 14 - - (5) 1 (146) - (136) (136)
Net deferred tax
asset - 42 - - (5) 175 (146) - 66 66
4,093 42 12 - (5) 175 39 - 4,356 263
Current assets
Programme rights
and other stock 490 - (122) - - - - - 368 (122)
Trade and other
receivables < 1 year 349 - - - - - - - 349 -
Trade and other
receivables > 1 year 50 (42) - - - - - - 8 (42)
Trade and other
receivables 399 (42) - - - - - - 357 (42)
Cash and cash
equivalents 582 - - - - - - - 582 -
1,471 (42) (122) - - - - - 1,307 (164)
Current liabilities
Borrowings (10) - - - - - - - (10) -
Trade and other
payables < 1 year (1,054) 225 50 53 - 13 - - (713) 341
Trade and other
payables > 1 year (60) - 60 - - - - - - 60
Trade and other
payables (1,114) 225 110 53 - 13 - - (713) 401
Current tax
liabilities - (225) - - - - - - (225) (225)
Provisions - (32) - - - - - - (32) (32)
(1,124) (32) 110 53 - 13 - - (980) 144
Net current
assets/(liabilities) 347 (74) (12) 53 - 13 - - 327 (20)
Non-current liabilities
Borrowings (852) - - - - - - - (852) -
Defined benefit
pension deficit - - - - - (672) - - (672) (672)
Other payables - - - - - - - (7) (7) (7)
Provisions (170) 32 - - - 95 - - (43) 127
(1,022) 32 - - - (577) - (7) (1,574) (552)
Net assets 3,418 - - 53 (5) (389) 39 (7) 3,109 (309)
Attributable to equity
shareholders
Share capital 422 - - - - - - - 422 -
Share premium account 91 - - - - - - - 91 -
Capital reserve 112 - - - - - - - 112 -
Revaluation reserve 39 - - - - - - (39) - (39)
Merger reserve 1,671 - - - - - (2) - 1,669 (2)
Other reserves 879 - - - - - 6 - 885 6
Income and expense reserve 193 - - 53 (5) (389) 30 32 (86) (279)
Total attributable equity
shareholders 3,407 - - 53 (5) (389) 34 (7) 3,093 (314)
Minority interest 11 - - - - - 5 - 16 5
Total equity 3,418 - - 53 (5) (389) 39 (7) 3,109 (309)
Consolidated Balance Sheet as at 30 June 2004
UK GAAP IAS 1 IAS 2 IAS 10 IAS IAS 19 IFRS 3* Other IFRS IFRS
30 June Presentation Inventories Dividends 12 Employee Business 30 June effect
2004 Tax Benefits combinations 2004
£m £m £m £m £m £m £m £m £m £m
Non-current assets
Property, plant and
equipment 263 - - - - - (4) - 259 (4)
Intangible assets 3,598 - - - - - 158 - 3,756 158
Distribution rights - - 18 - - - - - 18 18
Investments in joint
ventures and associates 112 - - - - - 1 - 113 1
Other investments 151 - - - - - - - 151 -
Deferred tax asset in
respect of pension scheme
deficits - 29 - - - 139 - - 168 168
Other deferred tax
balances - 28 - - (5) 1 (153) - (129) (129)
Net deferred tax asset - 57 - - (5) 140 (153) - 39 39
4,124 57 18 - (5) 140 2 - 4,336 212
Current assets
Current asset investments 168 - - - - - 6 - 174 6
Assets held for resale 40 - - - - - 19 - 59 19
Programme rights and other
stock 342 - (59) - - - (12) - 271 (71)
Trade and other
receivables < 1 year 337 - - - - - (1) - 336 (1)
Trade and other
receivables > 1 year 87 (57) - - - - - - 30 (57)
Trade and other
receivables 424 (57) - - - - (1) - 366 (58)
Cash and cash equivalents 398 - - - - - 2 - 400 2
1,372 (57) (59) - - - 14 - 1,270 (102)
Current liabilities
Borrowings (412) - - - - - - - (412) -
Trade and other
payables < 1 year (935) 237 16 45 - 21 (1) - (617) 318
Trade and other
payables > 1 year (45) - 25 - - - - - (20) 25
Trade and other payables (980) 237 41 45 - 21 (1) - (637) 343
Current tax liabilities - (237) - - - - 15 - (222) (222)
Provisions - (19) - - - - (1) - (20) (20)
(1,392) (19) 41 45 - 21 13 - (1,291) 101
Net current assets/
(liabilities) (20) (76) (18) 45 - 21 27 - (21) (1)
Non-current liabilities
Borrowings (557) - - - - - - - (557) -
Defined benefit pension
deficit - - - - - (559) - - (559) (559)
Other payables - - - - - - - (7) (7) (7)
Provisions (169) 19 - - - 97 (9) - (62) 107
(726) 19 - - - (462) (9) (7) (1,185) (459)
Net assets 3,378 - - 45 (5) (301) 20 (7) 3,130 (248)
Attributable to equity
shareholders
Share capital 422 - - - - - - - 422 -
Share premium account 90 - - - - - - - 90 -
Capital reserve 112 - - - - - - - 112 -
Revaluation reserve 39 - - - - - - (39) - (39)
Merger reserve 1,671 - - - - - (2) - 1,669 (2)
Other reserves 879 - - - - - - - 879 -
Income and expense reserve 143 - - 45 (5) (301) 22 32 (64) (207)
Total attributable to
equity shareholders 3,356 - - 45 (5) (301) 20 (7) 3,108 (248)
Minority interest 22 - - - - - - - 22 -
Total equity 3,378 - - 45 (5) (301) 20 (7) 3,130 (248)
* Includes adjustment in respect of changes to the fair values in acquisition
accounting between publishing the 2004 interim results and the 2004 full year
results (see accounting policies)
Consolidated Balance Sheet as at 1 January 2004
UK GAAP IAS 1 IAS 2 IAS 10 IAS 12 IAS 19 Other IFRS IFRS
1 Jan Presentation Inventories Dividends Tax Employee 1 Jan effect
2004 benefits 2004
£m £m £m £m £m £m £m £m £m
Non-current assets
Property, plant and equipment 193 - - - - - - 193 -
Intangible assets 1,259 - - - - - - 1,259 -
Distribution rights - - 6 - - - - 6 6
Investment in joint ventures and 33 - - - - - - 33 -
associates
Other investments 157 - - - - - - 157 -
Deferred tax asset in respect of - - - - - 127 - 127 127
pension scheme deficits
Other deferred tax balances - 6 - - (9) - - (3) (3)
Net deferred tax asset - 6 - - (9) 127 - 124 124
1,642 6 6 - (9) 127 - 1,772 130
Current assets
Programme rights and other stock 276 - (47) - - - - 229 (47)
Trade and other receivables < 1 year 206 - - - - - - 206 -
Trade and other receivables > 1 year 9 (6) - - - - - 3 (6)
Trade and other receivables 215 (6) - - - - - 209 (6)
Cash and cash equivalents 185 - - - - - - 185 -
676 (6) (47) - - - - 623 (53)
Current liabilities
Borrowings (4) - - - - - - (4) -
Trade and other payables < 1year (512) 141 21 20 - 21 - (309) 203
Trade and other payables > 1year (20) - 20 - - - - - 20
Trade and other payables (532) 141 41 20 - 21 - (309) 223
Current tax liabilities - (141) - - - - - (141) (141)
Provisions - (8) - - - - - (8) (8)
(536) (8) 41 20 - 21 - (462) 74
Net current assets/(liabilities) 140 (14) (6) 20 - 21 - 161 21
Non-current liabilities
Borrowings (54) - - - - - - (54) -
Defined benefit pension deficit - - - - - (422) - (422) (422)
Other payables (25) - - - - - (5) (30) (5)
Provisions (47) 8 - - - - - (39) 8
(126) 8 - - - (422) (5) (545) (419)
Net assets 1,656 - - 20 (9) (274) (5) 1,388 (268)
Attributable to equity shareholders
Share capital 277 - - - - - - 277 -
Capital reserve 112 - - - - - - 112 -
Revaluation reserve 39 - - - - - (39) - (39)
Other reserves 1,079 - - - - - - 1,079 -
Income and expense reserve 148 - - 20 (9) (274) 34 (81) (229)
Total attributable to equity 1,655 - - 20 (9) (274) (5) 1,387 (268)
shareholders
Minority interest 1 - - - - - - 1 -
Total equity 1,656 - - 20 (9) (274) (5) 1,388 (268)
Appendix 4 - Report of KPMG Audit Plc
Special Purpose Audit Report of KPMG Audit Plc to ITV plc on its Preliminary
International Financial Reporting Standards ('IFRS') Financial Statements
We have audited the accompanying consolidated preliminary IFRS balance sheet of
ITV plc ('the Company') as at 31 December 2004, and the related consolidated
statements of income, changes in equity and cash flows for the year then ended
and the related accounting policy notes ('the preliminary IFRS financial
statements') set out in sections 5 to 9 and Appendix 1 but excluding half year
information.
Respective responsibilities of directors and KPMG Audit Plc
The directors of the Company have accepted responsibility for the preparation of
the preliminary IFRS financial statements which have been prepared as part of
the Company's conversion to IFRS. Our responsibilities, as independent auditor,
are established in the United Kingdom by the Auditing Practices Board, our
profession's ethical guidance and the terms of our engagement.
Under the terms of engagement we are required to report to you our opinion as to
whether the preliminary IFRS financial statements have been properly prepared,
in all material respects, in accordance with the accounting policies note to the
preliminary IFRS financial statements. We also report to you if, in our
opinion, we have not received all the information and explanations we require
for our audit.
We read other information accompanying the preliminary IFRS financial statements
and consider whether it is consistent with the preliminary IFRS financial
statements. We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the preliminary IFRS
financial statements.
Our report has been prepared for the Company solely in connection with the
Company's conversion to IFRS. Our report was designed to meet the agreed
requirements of the Company determined by the Company's needs at the time. Our
report should not therefore be regarded as suitable to be used or relied on by
any party wishing to acquire rights against us other than the Company for any
purpose or in any context. Any party other than the Company who chooses to rely
on our report (or any part of it) will do so at its own risk. To the fullest
extent permitted by law, KPMG Audit Plc will accept no responsibility or
liability in respect of our report to any other party.
Basis of audit opinion
We conducted our audit having regard to Auditing Standards issued by the UK
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the preliminary IFRS
financial statements. It also included an assessment of the significant
estimates and judgements made by the directors in the preparation of the
preliminary IFRS financial statements, and of whether the accounting policies
are appropriate to the Group's circumstances, consistently applied and
adequately disclosed. We planned and performed our audit so as to obtain all
the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the
preliminary IFRS financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion
we also evaluated the overall adequacy of the presentation of information in the
preliminary IFRS financial statements.
Emphasis of matters
Without qualifying our opinion, we draw your attention to the following matters:
• The accounting policies note to the preliminary IFRS financial statements
explains why the accompanying preliminary IFRS financial statements may
require adjustment before their inclusion as comparative information in the
IFRS financial statements for the year ending 31 December 2005 when the
Company prepared its first IFRS financial statements.
• As described in the accounting policies note to the preliminary IFRS
financial statements, as part of its conversion to IFRSs, the Company has
prepared the preliminary IFRS financial statements for the year ended 31
December 2004 to establish the financial position, results of operations
and cash flows of the Company necessary to provide the comparative
financial information expected to be included in the Company's first
complete set of IFRS financial statements for the year ending 31 December
2005. The preliminary IFRS financial statements do not themselves include
comparative financial information for the prior period.
• As explained in the accounting policies note, and in accordance with IFRS
1, no adjustments have been made for any changes in estimates made at the
time of approval of the UK GAAP financial statements on which the
preliminary IFRS financial statements are based.
Opinion
In our opinion, the accompanying 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 the accounting policies note, which
describes how IFRS have been applied under IFRS 1, including the assumptions
made by the directors of the Company about the standards and interpretations
expected to be effective, and the policies expected to be adopted, when they
prepare the first complete set of consolidated IFRS financial statements of the
Company for the year ending 31 December 2005.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
1 June 2005
8 Salisbury Square
London EC4Y 8BB
Appendix 5 - Forward looking statements
This announcement contains forward looking statements relating to ITV plc and
its subsidiaries ('ITV'). Such forward looking statements are based on current
expectations and are subject to a number of risks and uncertainties which could
cause actual results and performance to differ materially from any expected
future results or performance, express or implied, by the forward looking
statements. Factors that may cause forward looking statements to differ
materially from actual results include, among other things, the effect of
government regulation on ITV's activities, the level of ITV's future advertising
revenues and programme costs and the numbers of viewers of ITV's channels.
This information is provided by RNS
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