Statement re IFRS conversion
National Grid PLC
29 July 2005
National Grid plc (formerly National Grid Transco plc)
IFRS conversion statement
OVERVIEW
With effect from 1 April 2005, National Grid plc (formerly National Grid Transco plc) is required to report its
consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The first
results required to be published under IFRS will cover the six month period ending 30 September 2005, scheduled to be
reported in November 2005 and the first full set of financial statements to be published under IFRS will cover the year
ending 31 March 2006.
This IFRS conversion statement presents the impact of conversion from UK generally accepted accounting principles
(UK GAAP) to IFRS on the primary statements and selected notes for the comparative information to be included in the
financial statements for the year ending 31 March 2006. As permitted by the US Securities and Exchange Commission, only
one year of IFRS comparatives will be included in the financial statements for the year ending 31 March 2006 and hence
the results for the year ended 31 March 2004 are not presented under IFRS. The IFRS conversion statement does not
constitute a full set of financial statements in compliance with IFRS with all the related disclosures.
In the 2004/05 Annual Report and Accounts, unaudited reconciliations between UK GAAP and IFRS for operating profit,
profit before tax, profit for the year and earnings were presented as well as a reconciliation of the impact of IFRS on
net assets. This IFRS conversion statement provides additional information on the effect of conversion to IFRS on the
income statement, balance sheet, cash flow statement, statement of recognised income and expense, movements in
shareholders' equity, segmental information and information on discontinued operations.
The IFRS information in this statement is presented on the basis that it is expected to appear as comparatives in the
consolidated financial statements for the year ending 31 March 2006. The four regional gas distribution networks sold
on 1 June 2005 have therefore been presented separately as discontinued operations for the purpose of this statement,
even though they did not meet the criteria to qualify as discontinued operations under IFRS as at 31 March 2005.
As permitted by International Financial Reporting Standard No. 1 First-time Adoption of IFRS (IFRS 1), the comparative
balance sheet at 31 March 2005 and income statement for the year ended 31 March 2005 have not been restated to reflect
the adoption of International Accounting Standard No. 39 Financial Instruments: Recognition and Measurement (IAS 39) and
International Accounting Standard No. 32 Financial Instruments: Disclosure and Presentation (IAS 32) on 1 April 2005.
Summary disclosures on the impact of IAS 39 and IAS 32 as at 1 April 2005 are included within this statement.
Cautionary statement
IFRS is subject to interpretation by the International Financial Reporting Interpretations Committee. Further standards
may be issued that need to be adopted for the year ending 31 March 2006 or subsequently. Also, the number of new and
revised standards within IFRS means that there is not yet a significant established practice from which to draw
conclusions on the application and interpretation of IFRS. As a consequence, there is a possibility that the
comparatives included in the financial statements for the year ending 31 March 2006 may differ from the amounts
presented in this IFRS conversion statement.
The financial information set out in this statement relating to the year ended 31 March 2005 does not constitute
statutory accounts for that period. Full audited accounts of National Grid plc in respect of that financial period in
accordance with UK GAAP (which received an unqualified audit opinion and did not contain a statement under either
section 237(2) or (3) of the Companies Act 1985) have been delivered to the Registrar of Companies.
CONTACT DETAILS
Investors
Alexandra Lewis +44 (0)20 7004 3170 +44 (0)7768 554879(m)
David Campbell +44 (0)20 7004 3171 +44 (0)7799 131783(m)
Richard Smith +44 (0)20 7004 3172 +44 (0)7747 006321(m)
Bob Seega (US) +1 508 389 2598
Media
Clive Hawkins +44 (0)20 7004 3147 +44 (0)7836 35173(m)
Citigate Dewe Rogerson +44 (0)20 7638 9571
Anthony Carlisle +44 (0)7973 611888(m)
Contents Page
Special purpose audit report on the IFRS conversion statement 1
Group income statement for the year ended 31 March 2005 3
Group balance sheet at 31 March 2005 4
Group statement of recognised income and expense for the year ended 31
March 2005 5
Group movements in shareholders' equity for the year ended 31 March 2005 5
Group cash flow statement for the year ended 31 March 2005 6
Note 1 - Basis of preparation 7
Note 2 - IFRS adjustments and reconciliations from UK GAAP to IFRS 7
Note 3 - Segmental analysis 10
Note 4 - Other operating income 14
Note 5 - Operating costs 14
Note 6 - Exceptional items 15
Note 7 - Taxation 16
Note 8 - Earnings per share and profit before taxation 16
Note 9 - Adoption of IAS 39 and IAS 32 and presentation of net debt at 1
April 2005 18
Appendix 1 - Provisional accounting policies for the year ending 31 March
2006 20
Appendix 2 - Analysis of IFRS adjustments to the income statement 25
Appendix 3 - Analysis of IFRS adjustments to the balance sheet 26
Special purpose audit report of PricewaterhouseCoopers LLP to National Grid plc (formerly National Grid Transco plc
('the Company')) on its International Financial Reporting Standards conversion statement
We have audited the accompanying Group IFRS balance sheet of National Grid plc and its subsidiaries (the 'Group') at
31 March 2005, the Group IFRS income statement, Group statement of recognised income and expense, Group movements in
shareholders' equity and Group cash flow statement for the year ending 31 March 2005, the related notes 1 to 8, the
transition adjustments relating to the adoption of IAS 39 and IAS 32 set out in note 9 and the Provisional Accounting
Policies set out in Appendix 1 on pages 20 to 24, prepared in accordance with the Basis of preparation (hereinafter
referred to as the 'IFRS financial information').
The IFRS financial information has been prepared by the Group as part of its transition to IFRS and to establish the
financial position and results of operations of the Group to provide the comparative financial information expected to
be included in the first complete set of consolidated IFRS financial statements of the Group for the year ending
31 March 2006.
Respective responsibilities of Directors and PricewaterhouseCoopers LLP
The Directors of the Company are responsible for the preparation of the IFRS financial information which has been
prepared as part of the Group's transition to IFRS. Our responsibilities, as independent auditors, 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 the Company our opinion as to whether the IFRS financial
information has been prepared, in all material respects, in accordance with the basis of preparation set out in note 1
and the Provisional Accounting Policies set out in Appendix 1 on pages 20 to 24.
This report, including the opinion, has been prepared for, and only for, the Company for the purposes of assisting with
the Group's transition to IFRS and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
We read the other information contained in this IFRS conversion statement and consider whether it is consistent with the
above defined IFRS financial information. We consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the above defined IFRS financial information. The other information
comprises the Overview, Cautionary statement, Appendix 2 and Appendix 3.
Basis of audit opinion
We conducted our audit in accordance with 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 IFRS financial
information. It also includes an assessment of the significant estimates and judgements made by the Directors in the
preparation of the IFRS financial information, and of whether the accounting policies are appropriate to the Group's
circumstances 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 IFRS financial information is 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 IFRS financial information.
Emphasis of matter
Without qualifying our opinion, we draw your attention to the fact that the Basis of preparation explains that the IFRS
financial information may require adjustment before its inclusion as comparative information in the Group's first
complete set of IFRS financial statements for the year ending 31 March 2006. This is because Standards currently in
issue and adopted by the EU are subject to interpretation issued from time to time by the International Financial
Reporting Interpretations Committee (IFRIC) and further Standards may be issued by the International Accounting
Standards Board (IASB) that the Group may choose to adopt for the year ending 31 March 2006.
Additionally, without qualifying our opinion, IFRS is currently being applied in the United Kingdom and in a large
number of other countries simultaneously for the first time. Furthermore, due to a number of new and revised Standards
included within the body of Standards that comprise IFRS, there is not yet a significant body of established practice on
which to draw in forming opinions regarding interpretation and application. Accordingly, practice is continuing to
evolve. At this preliminary stage, therefore, the full financial effect of reporting under IFRS as it will be applied
and reported on in the Group's first IFRS financial statements for the year ending 31 March 2006 may be subject to
change.
Moreover, we draw attention to the fact that, under IFRS, only a complete set of financial statements comprising a
balance sheet, income statement, statement of changes in equity, and cash flow statement, together with comparative
financial information and explanatory notes, can provide a fair presentation of the Company's financial position,
results of operations and cash flows in accordance with IFRS.
Opinion
In our opinion, the accompanying IFRS financial information comprising the Group IFRS balance sheet at 31 March 2005,
the Group IFRS income statement, Group statement of recognised income and expense, Group movements in shareholders'
equity and Group cash flow statement for the year ending 31 March 2005, the related notes 1 to 8, the transition
adjustments relating to the adoption of IAS 39 and IAS 32 set out in note 9, and the Provisional Accounting Policies set
out in Appendix 1 on pages 20 to 24 have been prepared, in all material respects, in accordance with the Basis of
preparation and Provisional Accounting Policies, which describe 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 the Directors of the Company prepare the first complete set of IFRS financial
statements of the Group for the year ending 31 March 2006.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28 July 2005
Group income statement for the year
ended 31 March 2005
As previously IFRS IFRS IFRS Remeasured
measured measurement presentation discontinued under
under adjustments adjustments operations
UK GAAP (note 2(b)) (note 2(c)) (note 3(f)) IFRS
Notes £m £m £m £m £m
=========== =========== =========== =========== ===========
Group 3(a) 8,521 (37) - (1,102) 7,382
revenue
Other
operating
income 4 - - 70 - 70
Operating
costs 5 (6,676) 700 - 666 (5,310)
----------- ----------- ----------- ----------- -----------
Operating
profit of
Group
undertakings 1,845 663 70 (436) 2,142
Share of joint
ventures'
operating
profit 7 - (7) - -
----------- ----------- ----------- ----------- -----------
Operating
profit
- Before
exceptional
items and
goodwill
amortisation 3(b) 2,212 599 63 (510) 2,364
- Exceptional
items 6 (251) (45) - 74 (222)
- Goodwill
amortisation (109) 109 - - -
----------- ----------- ----------- ----------- -----------
Total
operating
profit 3(c) 1,852 663 63 (436) 2,142
Non-operating
exceptional
items 6 83 - (83) - -
Net finance
costs (783) 69 8 - (706)
Share of
post-tax
results of
joint ventures - - 3 - 3
----------- ----------- ----------- ----------- -----------
Profit before
taxation 1,152 732 (9) (436) 1,439
Taxation
- Excluding
exceptional
items (324) (235) 1 153 (405)
- Exceptional
items 6 79 19 1 (13) 86
----------- ----------- ----------- ------- -------
Total taxation 7 (245) (216) 2 140 (319)
----------- ----------- ----------- ----------- -----------
Profit from
continuing
operations
after
taxation
- Before
exceptional
items and
goodwill
amortisation 1,105 433 75 (357) 1,256
- Exceptional
items 6 (89) (26) (82) 61 (136)
- Goodwill
amortisation (109) 109 - - -
----------- ----------- ----------- ----------- -----------
Profit for the
year from
continuing
operations 907 516 (7) (296) 1,120
Profit for the
year from
discontinued
operations 3(f) - - 8 296 304
----------- ----------- ----------- ----------- -----------
Profit for the
year 907 516 1 - 1,424
Loss for the
year
attributable
to minority
interests 1 - (1) - -
----------- ----------- ----------- ----------- -----------
Profit for the
year
attributable
to equity
shareholders
- Continuing
operations
before
exceptional
items 1,106 433 74 (357) 1,256
- Discontinued
operations
before
exceptional
items 3(f) - - (5) 357 352
- Exceptional
items -
continuing
operations 6 (89) (26) (82) 61 (136)
- Exceptional
items -
discontinued
operations 6 - - 13 (61) (48)
- Goodwill
amortisation (109) 109 - - -
----------- ----------- ----------- ----------- -----------
Profit for the
year
attributable
to equity
shareholders 908 516 - - 1,424
=========== =========== =========== =========== ===========
Earnings per
share
- Basic 8 29.5p 16.7p - - 46.2p
- Diluted 8 29.3p 16.7p - - 46.0p
Earnings per
share from
continuing
operations
- Basic 8 36.3p
- Diluted 8 36.2p
=========== =========== =========== =========== ===========
An explanation of the nature of the IFRS adjustments is given in note 2 to this statement. An analysis of the IFRS
measurement and presentation adjustments is included in Appendix 2.
An analysis of discontinued operations is shown in note 3(f).
Group balance
sheet at 31
March 2005
As previously IFRS IFRS Remeasured
measured measurement presentation under
under adjustments adjustments
UK GAAP (note 2(b)) (note 2(c)) IFRS
Notes £m £m £m £m
=========== =========== =========== ===========
Non-current
assets
Goodwill 2,003 18 - 2,021
Other
intangible
assets - 183 175 358
Property,
plant and
equipment 17,746 5,082 (175) 22,653
Investments in
joint ventures 17 - - 17
Deferred tax
assets - 336 - 336
Other
receivables 2,498 (2,402) - 96
Available for
sale
investments 131 - - 131
----------- ----------- ----------- -----------
Total
non-current
assets 22,395 3,217 - 25,612
----------- ----------- ----------- -----------
Current assets
Inventories 101 - - 101
Trade and
other
receivables 1,545 (396) - 1,149
Financial
investments 570 - (172) 398
Cash and cash
equivalents 100 - 172 272
----------- ----------- ----------- -----------
Total current
assets 2,316 (396) - 1,920
----------- ----------- ----------- -----------
Total assets 3(d) 24,711 2,821 - 27,532
----------- ----------- ----------- -----------
Current
liabilities
Bank
overdrafts (18) - - (18)
Borrowings (3,238) (5) - (3,243)
Trade and
other payables (2,789) 452 - (2,337)
Current tax
liabilities (103) - - (103)
Provisions - - (273) (273)
----------- ----------- ----------- -----------
Total current
liabilities (6,148) 447 (273) (5,974)
----------- ----------- ----------- -----------
Non-current
liabilities
Borrowings (10,963) (62) (22) (11,047)
Other
non-current
liabilities (1,837) (592) - (2,429)
Deferred tax
liabilities (3,036) (157) - (3,193)
Retirement and
other
post-retirement
benefit
obligations (512) (1,770) - (2,282)
Provisions (824) 39 273 (512)
----------- ----------- ----------- -----------
Total
non-current
liabilities (17,172) (2,542) 251 (19,463)
----------- ----------- ----------- -----------
Total
liabilities 3(d) (23,320) (2,095) (22) (25,437)
----------- ----------- ----------- -----------
Net assets 2(a) 1,391 726 (22) 2,095
=========== =========== =========== ===========
Equity
Called up
share capital 309 - - 309
Share premium
account 1,289 - - 1,289
Retained
earnings 4,892 659 73 5,624
Other reserves (5,131) 67 (73) (5,137)
----------- ----------- ----------- -----------
Total
shareholders'
equity 1,359 726 - 2,085
Minority
interests 32 - (22) 10
----------- ----------- ----------- -----------
Total equity 1,391 726 (22) 2,095
=========== =========== =========== ===========
An explanation of the nature of the IFRS adjustments is given in note 2 to this statement. An analysis of the IFRS
measurement and presentation adjustments is included in Appendix 3.
Group statement of recognised income and expense for the year ended 31 March 2005
As previously IFRS IFRS Remeasured
measured measurement presentation under
under adjustments adjustments
UK GAAP IFRS
Notes £m £m £m £m
============ ============ ============ ===========
Exchange
adjustments
(net of tax) (73) 69 (2) (6)
Actuarial
gains and
losses (net
of 2(b)(v) - 187 - 187
tax)
------------ ------------ ------------ -----------
Net
(expense)/
income
recognised (73) 256 (2) 181
directly in
equity
Profit for
the 2(a) 907 516 1 1,424
year
------------ ------------ ------------ -----------
Total
recognised
income and
expense for
the year 834 772 (1) 1,605
============ ============ ============ ===========
Group movements in shareholders' equity for the year ended 31 March 2005
As previously IFRS IFRS Remeasured
measured measurement presentation under
under adjustments adjustments
UK GAAP IFRS
Notes £m £m £m £m
============ ============ ============ ===========
At 1 April
2004 2(d) 1,271 (149) (38) 1,084
Net
(expense)/
income
recognised (73) 256 (2) 181
directly in
equity
Profit for
the
year
attributable
to equity 908 516 - 1,424
shareholders
Dividends 2(b) (731) 103 - (628)
(vii)
Redemption
of
non-equity
minority 2(c)(i) (18) - 18 -
interest
Issue of
share 9 - - 9
capital
Movement in
shares held
in
employee 5 - - 5
share
trusts
Employee
option
scheme
issues (net 20 - - 20
of tax)
------------ ----------- ----------- ----------
At 31 March
2005 2(a) 1,391 726 (22) 2,095
============ ============ =========== ==========
Group cash flow statement for the year ended 31 March 2005
As previously IFRS IFRS IFRS Remeasured
measured measurement presentation discontinued under
under adjustments adjustments operations
UK GAAP IFRS
£m £m £m £m £m
=========== =========== =========== =========== ===========
Cash flows
from operating
activities
Operating
profit 1,845 663 70 (436) 2,142
Adjustments
for:
Exceptional
items 251 45 - (74) 222
Depreciation
and
amortisation 1,132 (137) - (176) 819
Share based
payment charge 16 - - (4) 12
Changes in
working
capital (106) (26) - 65 (67)
Changes in
provisions (35) (88) - 4 (119)
Changes in
post-retirement
benefit
obligations - 22 - - 22
----------- ----------- ----------- ----------- -----------
Cash flows
before
exceptional
items -
continuing
operations 3,103 479 70 (621) 3,031
Cash flows
relating to
exceptional
items (194) - - 74 (120)
Cash flows
relating to
discontinued
operations - - - 547 547
----------- ----------- ----------- ----------- -----------
Cash generated
from
operations 2,909 479 70 - 3,458
Tax paid -
continuing
operations (150) - - 98 (52)
Tax paid -
discontinued
operations - - - (98) (98)
----------- ----------- ----------- ----------- -----------
Net cash
inflow from
operating
activities 2,759 479 70 - 3,308
----------- ----------- ----------- ----------- -----------
Cash flows
from investing
activities
Acquisition of
subsidiaries,
net of cash
acquired (1,122) - - - (1,122)
Purchase of
investments (16) - 16 - -
Sale of
investments 8 - - - 8
Purchases of
intangible
assets - (1) (78) - (79)
Purchases of
property,
plant and
equipment (1,354) (474) 78 323 (1,427)
Disposals of
property,
plant and
equipment 92 - (70) - 22
Net movements
in financial
investments (54) - (5) - (59)
Dividends
received from
joint ventures 5 - - - 5
----------- ----------- ----------- ----------- -----------
Cash flows
used in
continuing
operations
investing
activities (2,441) (475) (59) 323 (2,652)
Cash flows
relating to
discontinued
operations - - - (323) (323)
----------- ----------- ----------- ----------- -----------
Net cash used
in investing
activities (2,441) (475) (59) - (2,975)
----------- ----------- ----------- ----------- -----------
Cash flows
from financing
activities
Proceeds from
issue of share
capital 13 - - - 13
Increase in
borrowings 1,068 - (16) - 1,052
Net interest
paid (755) (4) (3) - (762)
Dividends paid
to
shareholders (628) - - - (628)
Dividends paid
to minority
interests (3) - 3 - -
----------- ----------- ----------- ----------- -----------
Net cash used
in financing
activities (305) (4) (16) - (325)
----------- ----------- ----------- ----------- -----------
Net increase /
(decrease) in
cash and cash
equivalents 13 - (5) - 8
Exchange
movements (1) - - - (1)
Cash and cash
equivalents at
start of year 70 - 177 - 247
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at
end of year 82 - 172 - 254
=========== =========== =========== =========== ==========
Notes to the IFRS conversion statement
1. Basis of preparation
This IFRS conversion statement has been prepared to present the impact of conversion from UK generally accepted
accounting principles (UK GAAP) to IFRS on the primary statements and selected notes to be included as comparative
information in the financial statements for the year ending 31 March 2006. The IFRS conversion statement does not
constitute a full set of statutory financial statements in compliance with the disclosure requirements of IFRS or as
defined in Section 240 of the Companies Act 1985.
The IFRS information in this statement is presented on the basis that it is expected to appear as comparatives in the
consolidated financial statements for the year ending 31 March 2006. The four regional gas distribution networks sold
on 1 June 2005 have therefore been presented separately within the Group income statement as discontinued operations for
the purpose of this IFRS conversion statement, even though they did not meet the criteria to qualify as discontinued
operations as at 31 March 2005.
The conversion to IFRS has been prepared on the basis of the provisional accounting policies to be adopted by the Group
for the year ending 31 March 2006 as presented in Appendix 1. The provisional accounting policies and/or the
quantified impact of conversion to IFRS could change if new standards, interpretations or accounting guidance were to
apply to IFRS in the year ending 31 March 2006.
The balance sheet at 31 March 2005 and income statement for the year ended 31 March 2005 have not been restated to
reflect the adoption of International Accounting Standard No. 39 Financial Instruments: Recognition and Measurement
(IAS 39) and International Accounting Standard No. 32 Financial Instruments: Disclosure and Presentation (IAS 32). The
impact of the adoption of IAS 39 and IAS 32 at 1 April 2005 is set out in note 9.
2. IFRS adjustments and reconciliations from UK GAAP to IFRS
(a) Reconciliation of profit for the year and net assets under UK GAAP to IFRS
The following tables show the effect of IFRS measurement and presentation adjustments on profit for the year and net
assets measured under UK GAAP as a consequence of applying IFRS measurement principles as compared with UK GAAP:
For the year ended 31 March 2005 Notes £m
===========
Profit for the year before minority interests under UK 907
GAAP
IFRS measurement adjustments
-----------
Replacement expenditure - gross 2(b)(i) 344
Replacement expenditure - depreciation 2(b)(i) (108)
Derecognition of regulatory assets 2(b)(ii) 151
Goodwill amortisation 2(b)(iii) 109
Amortisation of intangible assets other than goodwill 2(b)(iv) (4)
Pensions and other post-retirement benefits 2(b)(v) 41
Deferred taxation 2(b)(vi) (11)
Other adjustments 2(b)(viii) (6)
-----------
516
IFRS presentation adjustments
-----------
Non-equity minority interests 2(c)(i) (2)
Share of results of joint ventures 2(c)(iii) 3
-----------
1
-----------
Profit for the year under IFRS 1,424
Less: profit for the year under IFRS - discontinued 3(f) (304)
operations
-----------
Profit for the year under IFRS - continuing operations 1,120
===========
Amounts shown above are net of any related deferred tax on the underlying IFRS adjustment.
Notes to the IFRS conversion statement
2. IFRS adjustments and reconciliations from UK GAAP to IFRS (continued)
At 31 March 2005 Notes £m
===========
Net assets under UK GAAP 1,391
IFRS measurement adjustments
-----------
Replacement expenditure 2(b)(i) 3,014
Derecognition of regulatory assets 2(b)(ii) (1,613)
Goodwill 2(b)(iii) 18
Intangible assets other than goodwill 2(b)(iv) 99
Pensions and other post-retirement benefits 2(b)(v) (1,149)
Deferred taxation 2(b)(vi) (95)
Proposed final dividend 2(b)(vii) 469
Other adjustments 2(b)(viii) (17)
-----------
726
IFRS presentation adjustments
Non-equity minority interests 2(c)(i) (22)
-----------
Net assets under IFRS 2,095
===========
Amounts shown above are net of any related deferred tax on the underlying IFRS adjustment.
(b) IFRS measurement adjustments
The following notes relate to the measurement adjustments included in the income statement and balance sheet. Further
analysis is given in Appendices 2 and 3.
(i) Replacement expenditure (repex)
Repex represents the cost of planned replacement of gas mains and services assets, the vast majority of which relate to
the Group's UK Gas Distribution business. Under UK GAAP, repex is written off to the profit and loss account as
incurred. Under IFRS, it is capitalised and depreciated over its useful economic life. The adjustment to net assets
reflects the cumulative capitalisation of this expenditure net of related cumulative depreciation.
(ii) Derecognition of regulatory assets
Regulatory assets arise when a US-based public utility, authorised by its regulator, defers to its balance sheet certain
costs or revenues which will be recovered from or passed on to customers through future rate changes. These assets are
currently recognised in the balance sheet under UK GAAP. Under IFRS, regulatory assets are not permitted to be
recognised in the balance sheet. Instead, costs are charged to the income statement when incurred and recoveries from
customers are recognised when receivable.
(iii) Goodwill and goodwill amortisation
In accordance with IFRS 1, the Group has not restated any business combinations that occurred prior to 31 March 2004 and
goodwill at 1 April 2004, which mainly related to US businesses, has therefore not been adjusted from the amount
calculated under UK GAAP.
Goodwill arising on the acquisition of the UK operations of Crown Castle International Corp. during the year ended
31 March 2005 has been remeasured under IFRS, resulting in a reduction in goodwill of £90m, principally relating to the
recognition of intangible assets partially offset by higher deferred tax liabilities recognised on the acquisition under
IFRS.
In addition, an adjustment has been recorded in respect of goodwill amortisation of £109m. Under UK GAAP, goodwill is
amortised over a period of 20 years, whilst under IFRS goodwill amortisation ceased from 1 April 2004 onwards. IFRS
instead requires that goodwill is reviewed for impairment on an annual basis or when indicators of impairment are
identified.
(iv) Intangible assets other than goodwill and related amortisation
In a business combination, IFRS requires fair values to be attributed to intangible assets that are not recognised under
UK GAAP together with associated deferred tax balances. A corresponding reduction in goodwill arises as a consequence.
The acquisition of the UK operations of Crown Castle International Corp. during the year ended 31 March 2005 resulted in
the recognition under IFRS of certain intangibles, amounting to £188m at the date of acquisition, which are being
amortised on a straight-line basis over periods ranging from 10 to 25 years.
Notes to the IFRS conversion statement
2. IFRS adjustments and reconciliations from UK GAAP to IFRS (continued)
(v) Pensions and other post-retirement benefits Under UK GAAP, the Group's pensions and other post-retirement
benefits are accounted for under SSAP 24. Under IFRS, these benefits are accounted for under IAS 19, with the Group
recognising all of its net pension and other post-retirement benefit obligations in the balance sheet at 1 April 2004
with a corresponding adjustment to opening reserves. There are also differences in the measurement of the annual pension
expense under IAS 19 compared with SSAP 24.
(vi) Deferred taxation
Under UK GAAP, deferred tax is recognised in respect of timing differences. Under IFRS, deferred tax is recognised in
respect of temporary differences, being the differences between the book recorded value and the tax base of assets
and liabilities. The adoption of IFRS resulted in a reduction in the net deferred tax liability of £179m, principally
reflecting the tax effect of the other IFRS adjustments recorded.
(vii) Proposed final dividend
Under UK GAAP, final ordinary dividends are recorded as a liability in the year in respect of which they are proposed by
the Board of Directors for approval by the shareholders. Under IFRS, dividends are not provided until approved.
(viii) Other measurement adjustments
Other differences on transition from UK GAAP to IFRS for the year ended 31 March 2005 are not individually material and
relate to recognition of finance lease obligations and the related finance lease assets, certain intangible assets and
the timing of recognition of provisions.
(c) IFRS presentation adjustments
The following notes relate to the presentation adjustments included in the income statement and balance sheet. Further
analysis is given in Appendices 2 and 3.
(i) Non-equity minority interests
In the income statement, under UK GAAP, dividends paid to non-equity minority interests are included within 'Loss for
the year attributable to minority interests'. Under IFRS, this amount is included within 'Net finance costs'.
Under UK GAAP, non-equity minority interests are shown separately from shareholders' equity within capital and reserves.
Under IFRS this amount is included within liabilities, resulting in lower net assets.
(ii) Gains on disposal of property, plant and equipment
Under UK GAAP, gains and losses on disposal of properties by our property management business are included within
exceptional items, even though these are considered to be part of the normal recurring operating activities of the
Group. Under IFRS such gains and losses are included within other operating income.
(iii) Share of results of joint ventures
Under UK GAAP, the Group's share of the joint ventures' operating profits, interest and tax are classified within their
respective profit and loss account captions. IFRS instead requires that, where equity accounting is adopted, the
post-tax share of results from joint ventures is separately disclosed as a single line-item in the income statement.
(iv) Profit on disposal of joint venture
Under UK GAAP, the profit on disposal of a joint venture has been disclosed as a non-operating exceptional item. Under
IFRS, this profit has been disclosed within the single line-item 'profit from discontinued operations' in the income
statement.
(v) Cash and cash equivalents
Under UK GAAP, cash excludes short-term highly liquid investments that are readily convertible to known amounts of cash
and subject to an insignificant change in value. Under IFRS, such investments are included within cash and cash
equivalents.
(vi) Software
Under UK GAAP, software is capitalised together with the related hardware within property, plant and equipment. Under
IFRS, software is classified within intangible assets.
(vii) Short term provisions
Under UK GAAP, provisions are presented on the balance sheet separately from creditors and include both current and
non-current provisions. Under IFRS, the current portion of provisions is included within current liabilities.
(viii) Cumulative translation differences
Exchange adjustments arising on the retranslation of overseas subsidiaries' net assets on consolidation are recorded
directly in equity within the reserve for cumulative translation differences. In accordance with IFRS 1 this was set at
nil on 1 April 2004. This adjustment reflects the reclassification of UK GAAP translation differences from retained
earnings into the cumulative translation differences reserve during the year ended 31 March 2005.
Notes to the IFRS conversion statement
2. IFRS adjustments and reconciliations from UK GAAP to IFRS (continued)
(d) Impact of adoption of IFRS on net assets at 1 April 2004 (date of adoption of IFRS)
The following is a summary of the IFRS measurement and presentation adjustments as they affected net assets at
1 April 2004 (the date of adoption of IFRS), which arise as a consequence of applying IFRS measurement principles as
compared with UK GAAP.
At 1 April 2004 Notes £m
===========
Net assets under UK GAAP 1,271
IFRS measurement adjustments
Replacement expenditure 2(b)(i) 2,778
Derecognition of regulatory assets 2(b)(ii) (1,817)
Pensions and other post-retirement benefits 2(b)(v) (1,382)
Deferred taxation 2(b)(vi) (84)
Proposed final dividend 2(b)(vii) 366
Other 2(b)(viii) (10)
(149)
IFRS presentation adjustments
Non-equity minority interests 2(c)(i) (38)
-----------
Net assets under IFRS 1,084
===========
Amounts shown above are net of any related deferred tax on the underlying IFRS adjustment.
3. Segmental analysis
Segmental information is presented in accordance with the management responsibilities and economic characteristics,
including consideration of risks and returns, of the Group's business activities. The following table describes
the main activities for each business segment:
------------------ ---------------------------------------
UK electricity and High-voltage electricity transmission networks and the gas
gas transmission National Transmission System in the UK
US electricity High-voltage electricity transmission networks and
transmission management of electricity transmission operations for other
utilities in the US
UK gas Four of the eight regional networks of Britain's gas
distribution distribution system
US electricity and Electricity and gas distribution in New York and electricity
gas distribution distribution in New England
US stranded cost The recovery of stranded costs from US customers as
recoveries permitted by regulatory agreements
Wireless Broadcast and mobile telephony infrastructure in the UK and
infrastructure US
------------------ ---------------------------------------
Continuing operations - other activities primarily relates to: UK based gas metering activities; our liquefied natural
gas storage activities; the electricity interconnectors business; and Advantica, the energy technology and systems
solutions business.
Discontinued operations comprise the operations of the four gas distribution networks that the Group sold on
1 June 2005 and the results of Citelec, an Argentinian joint venture sold in August 2004.
The Group assesses the performance of its businesses principally on the basis of operating profit before exceptional
items. The Group's primary reporting format is by business and the secondary reporting format is by geographical area.
Segmental results have been affected by relevant IFRS measurement and presentation adjustments described in note 2.
The IFRS presentation adjustments also reflect the reallocation of £38m of corporate overheads from segments to
other activities.
The Group manages its business segments on a global basis. The operations are based in two main geographical areas being
the UK and the US. There is no intra-group revenue between the UK and US geographical areas.
Notes to the IFRS conversion statement
3. Segmental analysis (continued)
(a) Group revenue for the year
ended 31 March 2005
UK GAAP IFRS IFRS IFRS
measurement discontinued
adjustments operations
£m £m £m £m
=========== =========== =========== ===========
Continuing
operations
UK electricity
and gas
transmission 1,930 - - 1,930
US electricity
transmission 283 1 - 284
UK gas
distribution 2,215 - (1,102) 1,113
US electricity
and gas
distribution 3,114 (27) - 3,087
US stranded
cost
recoveries 420 (11) - 409
Wireless
infrastructure 208 - - 208
Other
activities 844 - - 844
Sales between
businesses (493) - - (493)
----------- ----------- ----------- -----------
Group 8,521 (37) (1,102) 7,382
revenue
=========== =========== =========== ===========
Continuing
operations
UK 4,723 - (1,102) 3,621
US 3,798 (37) - 3,761
----------- ----------- ----------- -----------
Group 8,521 (37) (1,102) 7,382
revenue
=========== =========== =========== ===========
(b) Group operating profit - before exceptional items and goodwill amortisation for the year ended 31 March 2005
UK GAAP before IFRS IFRS IFRS IFRS
exceptionals measurement presentation discontinued before
and goodwill adjustments adjustments operations exceptional
amortisation items
£m £m £m £m £m
============ =========== =========== =========== ===========
Continuing
operations
UK electricity
and gas
transmission 809 (5) 13 - 817
US electricity
transmission 123 (2) 1 - 122
UK gas
distribution 570 349 15 (510) 424
US electricity
and gas
distribution 374 (44) 8 - 338
US stranded
cost
recoveries 121 306 - - 427
Wireless
infrastructure 46 (8) 4 - 42
Other
activities 162 3 29 - 194
Share of joint
ventures'
operating
profit 7 - (7) - -
----------- ----------- ----------- ----------- -----------
Operating
profit -
before
exceptional
items 2,212 599 63 (510) 2,364
and goodwill
amortisation
============ =========== =========== =========== ===========
Continuing
operations
UK 1,583 339 61 (510) 1,473
US 623 260 8 - 891
Latin America 1 - (1) - -
Rest of the
World 5 - (5) - -
----------- ----------- ----------- ----------- -----------
Operating
profit -
before
exceptional
items 2,212 599 63 (510) 2,364
and goodwill
amortisation
============ =========== =========== =========== ===========
Notes to the IFRS conversion statement
3. Segmental analysis (continued)
(c) Group operating profit - after exceptional items and goodwill amortisation for the year ended 31 March 2005
UK GAAP after IFRS IFRS IFRS IFRS
exceptionals measurement presentation discontinued after
and goodwill adjustments adjustments operations exceptional
amortisation items
£m £m £m £m £m
============ =========== =========== =========== ===========
Continuing
operations
UK electricity
and gas
transmission 807 (5) 13 - 815
US electricity
transmission 102 16 1 - 119
UK gas
distribution 390 364 15 (436) 333
US electricity
and gas
distribution 286 (36) 8 - 258
US stranded
cost
recoveries 121 306 - - 427
Wireless
infrastructure 10 15 4 - 29
Other
activities 129 3 29 - 161
Share of joint
ventures'
operating
profit 7 - (7) - -
----------- ----------- ----------- ----------- -----------
Operating
profit - after
exceptional
items 1,852 663 63 (436) 2,142
and goodwill
amortisation
============ =========== =========== =========== ===========
Continuing
operations
UK 1,336 374 61 (436) 1,335
US 510 289 8 - 807
Latin America 1 - (1) - -
Rest of the
World 5 - (5) - -
------------ ----------- ----------- ----------- -----------
Operating
profit - after
exceptional
items 1,852 663 63 (436) 2,142
and goodwill
amortisation
============ =========== =========== =========== ===========
(d) Group assets and liabilities at 31 March 2005
Total assets Total liabilities
--------------------------------------- ---------------------------------------
UK GAAP IFRS IFRS UK GAAP IFRS IFRS
adjustments adjustments
£m £m £m £m £m £m
=========== =========== =========== =========== =========== ===========
UK electricity
and gas
transmission 6,448 (4) 6,444 (713) (603) (1,316)
US electricity
transmission 1,469 76 1,545 (30) (69) (99)
UK gas
distribution 5,167 4,899 10,066 (1,608) (1,164) (2,772)
US electricity
and gas
distribution 5,311 (350) 4,961 (1,066) (668) (1,734)
US stranded
cost
recoveries 2,311 (2,252) 59 (618) - (618)
Wireless
infrastructure 1,462 115 1,577 (247) (14) (261)
Other
activities 1,818 1 1,819 (920) 156 (764)
Joint ventures 17 - 17 - - -
Unallocated 708 336 1,044 (18,118) 245 (17,873)
----------- ----------- ----------- ----------- ----------- -----------
Group total 24,711 2,821 27,532 (23,320) (2,117) (25,437)
=========== =========== =========== =========== =========== ===========
UK 14,494 5,008 19,502 (3,441) (1,625) (5,066)
US 9,229 (2,523) 6,706 (1,730) (737) (2,467)
Rest of the
World 280 - 280 (31) - (31)
Unallocated 708 336 1,044 (18,118) 245 (17,873)
----------- ----------- ----------- ----------- ----------- -----------
Group total 24,711 2,821 27,532 (23,320) (2,117) (25,437)
=========== =========== =========== =========== =========== ===========
Unallocated total assets include cash and cash equivalents, financial investments and taxation. Unallocated total
liabilities include borrowings, tax, interest and dividends. UK gas distribution includes the assets and liabilities
of the four sold regional gas networks. Notes to the IFRS conversion statement
3. Segmental analysis (continued)
(e) Other segmental information for the year ended 31 March 2005
Capital expenditure Depreciation and amortisation
--------------------------------------- -------------------------------------
UK GAAP IFRS IFRS UK GAAP IFRS IFRS
adjustments adjustments
£m £m £m £m £m £m
=========== =========== =========== ========== ========== ==========
UK electricity
and gas
transmission 522 - 522 279 7 286
US electricity
transmission 74 - 74 61 (20) 41
UK gas
distribution 272 474 746 191 148 339
US electricity
and gas
distribution 234 - 234 254 (119) 135
US stranded
cost
recoveries - - - 136 (136) -
Wireless
infrastructure 19 - 19 54 (17) 37
Other
activities 310 - 310 157 - 157
----------- ----------- ----------- ---------- ---------- ----------
Group total 1,431 474 1,905 1,132 (137) 995
=========== =========== =========== ========== ========== ==========
UK 981 474 1,455 675 141 816
US 312 - 312 457 (278) 179
Rest of the
World 138 - 138 - - -
----------- ----------- ----------- ---------- ---------- ----------
Group total 1,431 474 1,905 1,132 (137) 995
=========== =========== =========== ========== ========== ==========
Capital expenditure comprises additions to property, plant and equipment and to intangible assets other than goodwill.
UK gas distribution includes £387m of capital expenditure and £176m of depreciation in respect of the four sold
regional gas distribution networks.
(f) Results of discontinued operations for the year ended 31 March 2005
The IFRS disclosures for the year ended 31 March 2005 are presented on the basis that they would appear as comparatives
in the Group financial statements for the year ended 31 March 2006. As a result, the four regional gas distribution
networks that were sold on 1 June 2005 have been shown as discontinued operations even though they did not qualify as
discontinued operations under IFRS as at 31 March 2005.
UK GAAP IFRS measurement IFRS presentation IFRS
adjustments adjustments
£m £m £m £m
=========== =========== =========== ===========
Revenues 1,102 - - 1,102
Operating
costs (831) 165 - (666)
----------- ----------- ----------- -----------
Operating
profit
before
exceptional 345 165 - 510
items
Exceptional
items (74) - - (74)
----------- ----------- ----------- -----------
Total
operating
profit from
discontinued
operations 271 165 - 436
Share of
post-tax
results of
joint - - (5) (5)
venture
----------- ----------- ----------- -----------
Profit
before
taxation
from 271 165 (5) 431
discontinued
operations
Taxation (91) (49) - (140)
----------- ----------- ----------- -----------
180 116 (5) 291
Gain on
disposal of
joint - - 13 13
venture
----------- ----------- ----------- -----------
Profit for
the year
- Before
exceptional
items 241 116 (5) 352
-
Exceptional (61) - 13 (48)
items ----------- ----------- ----------- -----------
Profit for
the
year from
discontinued 180 116 8 304
operations
=========== =========== =========== ===========
The results of the four regional gas distribution networks under UK GAAP have been remeasured under IFRS. The principal
measurement adjustments relate to repex and deferred taxation.
Both the share of post-tax results of joint venture and gain on disposal of joint venture relate to Citelec.
Notes to the IFRS conversion statement
4. Other operating income
Other operating income represents income on disposal of property, plant and equipment, principally properties disposed
by the Group's property management business.
5. Operating costs for the year ended 31 March 2005
UK GAAP IFRS measurement IFRS presentation IFRS
adjustments adjustments
£m £m £m £m
========= ============= ============== =========
Depreciation 860 129 - 989
Amortisation 272 (266) - 6
Payroll costs 941 60 50 1,051
Other operating
charges: --------- ------------- -------------- ---------
- Purchases of
electricity 1,678 182 - 1,860
- Purchases of
gas 385 - - 385
- Rates and
property taxes 490 - - 490
- Electricity
transmission
services
scheme direct
costs 301 - - 301
- Replacement
expenditure 474 (474) - -
- Other
operating
charges 1,275 (331) (50) 894
--------- ------------- -------------- ---------
4,603 (623) (50) 3,930
--------- ------------- ------------- ---------
Total
operating
costs 6,676 (700) - 5,976
========= ============= ============== =========
Less:
operating
costs of
discontinued
operations as (666)
measured under
IFRS
---------
Total
operating
costs -
continuing
operations 5,310
=========
Analysed as:
- Exceptional
items 222
- Other
operating
costs 5,088
---------
Total
operating
costs -
continuing
operations 5,310
=========
Notes to the IFRS conversion statement
6. Exceptional items for the year ended 31 March 2005
In accordance with IAS 1, the Group separately discloses items of income and expense that are material, by virtue of
their size or nature, when such presentation is relevant to an understanding of the Group's financial performance.
Such items do not include gains and losses on disposal of properties by the Group's property management company that are
considered part of the Group's normal recurring activities, which are included within exceptional items under UK GAAP,
but are included within other operating income under IFRS.
UK GAAP IFRS IFRS IFRS IFRS
measurement presentation discontinued
adjustments adjustments operations
Notes £m £m £m £m £m
========== =========== =========== ========== ==========
Restructuring
costs 2(b)(v) 210 (15) - (74) 121
Environmental
charges 2(b) 41 60 - - 101
(ii) ---------- ----------- ----------- ---------- ----------
Operating
exceptional
charges 251 45 - (74) 222
---------- ----------- ----------- ---------- ----------
Gains on
disposal of
property,
plant &
equipment 2(c) (70) - 70 - -
(ii)
Gain on
disposal of
investment in
joint venture (13) - 13 - -
---------- ----------- ---------- --------- ----------
Non-operating
exceptional
credits (83) - 83 - -
---------- ----------- ---------- --------- ----------
Total
exceptional
items before
taxation 168 45 83 (74) 222
---------- ----------- ---------- --------- ----------
Restructuring
costs 2(b)(v) (52) 5 - 13 (34)
Environmental
charges 2(b) (15) (24) - - (39)
(ii)
Other
exceptional
tax credits - - (13) - (13)
---------- ----------- ---------- --------- ----------
Tax credit on
operating
exceptional
items (67) (19) (13) 13 (86)
---------- ----------- ---------- --------- ----------
Gains on
disposal of
property,
plant &
equipment 1 - (1) - -
Other
exceptional
tax credits (13) - 13 - -
---------- ----------- ---------- --------- ----------
Tax on
non-operating
exceptional
items (12) - 12 - -
---------- ----------- ---------- ---------- ----------
Tax on
exceptional
items (79) (19) (1) 13 (86)
---------- ----------- ---------- --------- ----------
Exceptional
items after
tax -
continuing 89 26 82 (61) 136
Exceptional
items after
tax -
discontinued 3(f) - - (13) 61 48
---------- ----------- ---------- --------- ----------
Total
exceptional
items 89 26 69 - 184
========== =========== ========== ========= =========
Notes to the IFRS conversion statement
7. Taxation for the year ended 31 March 2005
The deferred tax calculated on the IFRS measurement adjustments described in note 2 above have been computed at the
appropriate marginal rate of tax attributable to the taxation jurisdiction in which the pre-tax adjustment arises.
Deferred tax IFRS adjustments arising as a result of the application of IFRS measurement rules compared with UK GAAP
increased the tax charge by £11m relating to gains on property disposals rolled over into replacement assets. Under
UK GAAP, no provision for deferred tax is made where it is not envisaged that any tax rolled over would become payable
in the foreseeable future.
A summary of the effect of the application of IFRS accounting principles on the UK GAAP tax charge for the Group is
shown below:
Excluding exceptional Exceptional tax charge / Total tax
items (credit) charge
£m £m £m
===================== ======================== ============
Tax charge /
(credit) as
computed under
UK GAAP 324 (79) 245
Tax effect of
IFRS
measurement
adjustments 224 (19) 205
Recalculation
of deferred
tax using the
temporary
method instead
of the timing
method 11 - 11
--------------------- ------------------------ ------------
Tax charge /
(credit) as
measured under
IFRS 559 (98) 461
Reclassification
of tax on
disposal of
property,
plant and
equipment 1 (1) -
Less: share of
tax on joint
ventures
presented as
part of
results of
joint ventures (2) - (2)
Less: tax
(charge)/credit
on
discontinued
operations (153) 13 (140)
--------------------- ------------------------ ------------
Tax charge /
(credit) as
measured under
IFRS on
continuing
operations 405 (86) 319
===================== ======================== ============
8. Earnings per share and profit before taxation for the year ended 31 March
2005
(a) Earnings per share - continuing
and discontinued operations
Remeasured Weighted Remeasured
under IFRS average under IFRS
Profit for no. of Earnings per
the year shares share
£m million pence
=========== =========== ===========
Earnings per share
- continuing
operations 1,120 3,082 36.3p
Earnings per share
- discontinued
operations 304 - 9.9p
----------- ----------- -----------
Earnings per share 1,424 3,082 46.2p
=========== =========== ===========
Dilutive impact of
employee share
options - 14
----------- ----------- -----------
Diluted earnings
per share -
continuing
operations 1,120 3,096 36.2p
Diluted earnings
per share -
discontinued
operations 304 - 9.8p
----------- ----------- -----------
Diluted earnings
per share 1,424 3,096 46.0p
=========== =========== ===========
Notes to the IFRS conversion statement
8. Earnings per share and profit before taxation for the year ended 31 March
2005 (continued)
(b) Reconciliation from adjusted
earnings per share to earnings per
share
Note Remeasured Weighted Remeasured
under IFRS average under IFRS
Profit for no. of Earnings per
the year shares share
£m million pence
=========== =========== ===========
Adjusted
earnings per
share -
continuing
operations 1,256 3,082 40.8p
Adjusted
earnings per
share -
discontinued
operations 352 - 11.4p
----------- ----------- -----------
Adjusted
earnings per
share 1,608 3,082 52.2p
Exceptional
items -
continuing
operations 6 (222) - (7.2)p
Tax on
exceptional
items -
continuing
operations 6 86 - 2.8p
Exceptional
items -
discontinued
operations
(net of tax) 6 (48) - (1.6)p
----------- ----------- -----------
Earnings per
share 1,424 3,082 46.2p
=========== =========== ===========
Adjusted earnings per ordinary share, which excludes the impact of exceptional
items and discontinued operations, is provided in order to better reflect the
underlying performance of the Group's continuing operations.
(c) Reconciliation of diluted adjusted earnings per
share to diluted earnings per share
Note Remeasured Weighted Remeasured
under IFRS average under IFRS
Profit for no. of Earnings per
the year shares share
£m million pence
=========== =========== ============
Diluted
adjusted
earnings per
share -
continuing
operations 1,256 3,096 40.6p
Diluted
adjusted
earnings per
share -
discontinued
operations 352 - 11.4p
----------- ----------- ------------
Diluted
adjusted
earnings per
share 1,608 3,096 52.0p
Exceptional
items -
continuing
operations 6 (222) - (7.2)p
Tax on
exceptional
items -
continuing
operations 6 86 - 2.8p
Exceptional
items -
discontinued
operations
(net of tax) 6 (48) - (1.6)p
----------- ----------- ------------
Diluted
earnings per
share 1,424 3,096 46.0p
=========== =========== ============
Adjusted profit before taxation
The following table reconciles adjusted profit before taxation to profit before taxation for the year ended
31 March 2005.
UK GAAP IFRS IFRS IFRS IFRS
measurement presentation discontinued
adjustments adjustments operations
£m £m £m £m £m
=========== =========== =========== =========== ===========
Adjusted
profit before
taxation 1,429 668 74 (510) 1,661
Exceptional
operating
items (251) (45) - 74 (222)
Goodwill
amortisation (109) 109 - - -
Exceptional
non-operating
items 83 - (83) - -
----------- ----------- ----------- ----------- -----------
Profit before
taxation 1,152 732 (9) (436) 1,439
=========== =========== =========== =========== ===========
Notes to the IFRS conversion statement
9. Adoption of IAS 39 and IAS 32 and presentation of net debt at 1 April 2005
(a) Adoption of IAS 39 and IAS 32
In accordance with IFRS 1, the balance sheet at 31 March 2005 and the income statement for the year ended 31 March 2005
have not been restated to reflect the adoption of IAS 39 and IAS 32 on 1 April 2005.
The principal effect of the adoption of these standards at 1 April 2005 is to record derivative financial instruments
and available for sale investments in the balance sheet at their fair value, while deferred gains and losses relating
to items qualifying for hedge accounting are derecognised and instead recorded in equity (for cash flow hedges and net
investment hedges) or by adjusting the carrying value of the hedged financial instrument (for fair value hedges).
(b) Effect of IAS 39 on net debt and net assets
As previously IFRS IFRS Remeasured IAS 39 IAS 39 IFRS
measured measurement presentation under IFRS transition reclass-ifications post-IAS 39
under adjustments adjustments pre-IAS 39 adjustment
UK GAAP
----------- ----------- ----------- ----------- ----------- ----------- ----------
At 31 March At 31 March At 31 March At 31 March At 1 April At 1 April At 1 April
2005 2005 2005 2005 2005 2005 2005
(i) (ii) (iii) (iv) (v) (vi) (viii)
(vii)
£m £m £m £m £m £m £m
=========== =========== =========== =========== =========== =========== ==========
Cash and
cash 100 - 172 272 - - 272
equivalents
Bank
overdrafts (18) - - (18) - - (18)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net cash and
cash
equivalents 82 - 172 254 - - 254
Financial
investments 570 - (172) 398 3 - 401
Borrowings (14,201) (67) (22) (14,290) (539) (314) (15,143)
----------- ----------- ----------- ----------- ----------- ----------- ----------
(13,549) (67) (22) (13,638) (536) (314) (14,488)
Derivative
financial
assets - - - - 633 92 725
Derivative
financial
liabilities - - - - (178) (4) (182)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net debt (13,549) (67) (22) (13,638) (81) (226) (13,945)
Accrued
interest (255) - - (255) 29 226 -
Deferred
gains (39) - - (39) 39 - -
and losses
Available
for
sale 131 - - 131 4 - 135
investments
Commodity
contract
assets - - - - 63 - 63
Commodity
contract
liabilities (327) - - (327) (193) - (520)
Purchased
power
obligations (144) - - (144) 130 - (14)
Other assets
and
liabilities 15,574 793 - 16,367 (5) - 16,362
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets 1,391 726 (22) 2,095 (14) - 2,081
=========== =========== =========== =========== =========== =========== ===========
(i) The net impact of IFRS measurement adjustments described in note 2(b) on net assets was £726m. This included the
recognition of £67m of finance lease obligations as described in note 2(b)(viii), together with corresponding
recognition of £65m of property, plant and equipment, which is included within the £793m of IFRS measurement
adjustments affecting other assets and liabilities.
(ii) As described in note 2(c)(v), short term highly liquid investments are included within cash and cash
equivalents under IFRS.
(iii) As described in note 2(c)(i), minority interests have been reclassified as part of borrowings under IFRS.
Notes to the IFRS conversion statement
9. Adoption of IAS 39 and IAS 32 and presentation of net debt at 1 April 2005 (continued)
(iv) On the adoption of IAS 39, derivative financial assets and liabilities are recognised on the balance sheet,
with corresponding adjustments to retained earnings or to other reserves within equity (in respect of derivatives
qualifying as cash flow hedges or net investment hedges) or to the carrying value of debt (in respect of derivatives
qualifying as fair value hedges). The impact on other assets and liabilities principally relates to the deferred tax
effect of these adjustments.
(v) Under UK GAAP, deferred gains and losses relating to hedged financial instruments are carried forward in the
balance sheet and reflected in the profit and loss account in line with those hedged financial instruments. Under
IAS 39, deferred gains and losses relating to qualifying hedge relationships are recorded in equity (for cash flow
hedges and net investment hedges) or by adjusting the carrying value of the hedged financial instrument (for fair value
hedges) or in the income statement if hedge accounting is not achieved.
(vi) On the adoption of IAS 39, available for sale investments (being financial investments not held for
financial management purposes) and financial investments have been adjusted by £4m and £3m respectively. Under UK GAAP
and IFRS at 31 March 2005, these are carried at cost, while under IAS 39 these are carried at fair value.
(vii) Under UK GAAP, index-linked swap contracts are carried at fair value. Under IAS 39, these commodity contracts
are treated as derivative financial instruments and are also carried at fair value. In addition, assets and
liabilities arising from certain other commodity contract assets and liabilities not previously recognised under UK GAAP
and IFRS as at 31 March 2005 are recorded on the balance sheet as at 1 April 2005, offset by a reduction in purchased
power obligations.
(viii) Under UK GAAP and IFRS at 31 March 2005, accrued interest is presented separately within creditors from the
financial instruments to which it relates. Under IAS 32 and IAS 39 the carrying value of borrowings and derivative
financial assets and liabilities includes the related accrued interest balance.
APPENDIX 1
Provisional Accounting Policies for the year ending 31 March 2006
(a) Basis of preparation of Group financial statements
These Group financial statements have been prepared in accordance with International Financial Reporting Standards
('IFRS').
The Group financial statements have been prepared on an historical cost basis, except for the revaluation of
financial instruments from 1 April 2005 onwards.
These Group financial statements are presented in pounds sterling because that is the currency of the primary economic
environment in which the Group operates.
The IFRS disclosures for the year ended 31 March 2005 are presented as comparatives for the purpose of the Group
financial statements for the year ended 31 March 2006. As a consequence, the gas distribution networks which were
sold on 1 June 2005 have been shown separately as discontinued operations even though they did not meet the criteria to
qualify as discontinued operations under IFRS until after 31 March 2005.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from these estimates.
(b) Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and its subsidiaries
('Group undertakings'), together with the Group's share of the results, assets and liabilities of jointly controlled
entities ('joint ventures') using the equity method of accounting, less any provision for impairment.
Losses in excess of the Group's interest in joint ventures are not recognised, except where the Group has made a
commitment to make good those losses.
Where necessary, adjustments are made to bring the accounting policies used under relevant local GAAP in the individual
financial statements of the Company, subsidiaries and joint ventures into line with those used by the Group under IFRS.
The results of subsidiaries and joint ventures acquired or disposed of during the year are included in the Group income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The accounting treatment for business combinations which occurred prior to 1 April 2004 and were accounted for under
UK GAAP has not changed with the transition to IFRS. In particular the accounting for the business combination
with Lattice Group plc on 21 October 2002 as a uniting of interests ('merger') has been retained, based on the
previously applied UK GAAP accounting principles.
(c) Foreign currencies
Transactions in currencies other than the functional currency of the Group undertaking concerned are recorded at the
rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at closing exchange rates.
As set out in note (p) below, as permitted by IFRS 1, prior to 1 April 2005 the Group adopted UK GAAP for hedge
accounting and, consequently, monetary assets and liabilities denominated in foreign currencies were translated at
hedged rates instead of closing exchange rates.
Gains and losses arising on retranslation of monetary assets and liabilities are included in the income statement.
On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates
prevailing at the balance sheet date. Income and expense items are translated at the weighted average exchange rates for
the period. Exchange differences arising are classified as equity and transferred to the Group's translation reserve.
Other non-monetary assets are not retranslated unless they are carried at fair value.
(d) 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 or joint venture at the date of acquisition.
Goodwill is recognised as an asset and is not amortised, but is reviewed for impairment at least annually. Any
impairment is recognised immediately in the income statement and is not subsequently reversed.
Goodwill recorded under UK GAAP arising on acquisitions before 1 April 2004, the date of transition to IFRS, has been
frozen at that date, subject to testing for impairment.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing exchange rate.
(e) Intangible assets other than goodwill
With the exception of goodwill, as described above, identifiable intangible assets are recorded at cost less accumulated
amortisation and any provision for impairment.
Internally generated intangible fixed assets, such as software, are recognised only if an asset is created that can be
identified; it is probable that the asset created will generate future economic benefits; and that the development
cost of the asset can be measured reliably. Where no internally generated intangible asset can be recognised,
development expenditure is recorded as an expense in the period in which it is incurred.
Provisional Accounting Policies (continued)
On a business combination, as well as recording separable intangible assets possessed by the acquired entity at their
fair value, identifiable intangible assets that arise from contractual or other legal rights are also included in the
balance sheet.
Intangible assets, other than goodwill are amortised on a straight-line basis over their estimated economic useful
lives. Amortisation periods for categories of intangible assets are:
-------------------- ---------
Amortisation periods for categories Years
of intangibles
-------------------- ---------
Software 3 to 5
Telecommunication licences 10 to 25
Acquired customer relationships 10 to 25
-------------------- ---------
(f) Property, plant and equipment
Property, plant and equipment is recorded at cost, less accumulated depreciation and any impairment losses.
Cost includes payroll and finance costs incurred which are directly attributable to the construction of property, plant
and equipment.
Property, plant and equipment includes assets in which the Group's interest comprises legally protected statutory or
contractual rights of use.
Additions represent the purchase or construction of new assets, including capital expenditure for safety and
environmental assets, and extensions to, enhancements to, or replacement of existing assets.
Contributions received towards the cost of property, plant and equipment are included in creditors as deferred income
and credited on a straight-line basis to the profit and loss account over the estimated economic useful lives of the
assets to which they relate.
No depreciation is provided on freehold land and assets in the course of construction.
Other property, plant and equipment are depreciated, principally on a straight-line basis, at rates estimated to write
off their book values over their estimated useful economic lives. In assessing estimated useful economic lives, which
are reviewed on a regular basis, consideration is given to any contractual arrangements and operational requirements
relating to particular assets. Unless otherwise determined by operational requirements, the depreciation periods for the
principal categories of property, plant and equipment are, in general, as shown below.
Depreciation periods by category of asset Years
---------------------- -------
Plant and machinery
Electricity transmission plant 15 to 60
Electricity distribution plant 15 to 60
Interconnector plant 15 to 60
Gas plant - mains, services and 30 to 65
regulating equipment
Gas plant - storage 40
Gas plant - meters 10 to 33
Wireless towers/infrastructure 20 to 55
Freehold and leasehold buildings Up to 65
Motor vehicles and office equipment Up to 10
---------------------- -------
(g) Impairment of assets
Impairments of assets are calculated as the difference between the carrying value of the asset and its recoverable
amount, if lower. Where such an asset does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which that asset belongs.
Recoverable amount is defined as the higher of fair value less costs to sell and estimated value in use at the date the
impairment review is undertaken.
Value in use represents the present value of expected future cash flows, discounted using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
Goodwill is tested for impairment at least annually. Otherwise, tests for impairment are carried out only if there is
some indication that the carrying value of the assets may have been impaired.
Impairments are recognised in the income statement and, where material, are disclosed separately.
(h) Deferred taxation and investment tax credits
Deferred tax is provided in full on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally 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. Such assets and liabilities are not recognised if the temporary difference arises
from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
jointly controlled entities, except where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable future.
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, based on tax rates (and tax laws) that have been enacted or substantively enacted by the
balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity.
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.
Investment tax credits are amortised over the economic life of the asset which gives rise to the credits.
Provisional Accounting Policies (continued)
(i) Discontinued operations and non-current assets held for sale
Cash flows and operations that relate to a major component of the business, or geographical area of operations, that
have been sold or are classified as held for sale are shown separately from the continuing operations of the Group.
The gas distribution networks sold on 1 June 2005, are shown separately as discontinued operations as are the
comparative results and cash flows for the year ended 31 March 2005 even though the criteria to qualify as discontinued
operations under IFRS were not met until after 31 March 2005.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and
fair value less costs to sell. No depreciation is charged on assets and disposal groups classified as held for sale.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is
highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classification.
(j) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs as well as those overheads that have been incurred in bringing the inventories to their
present location and condition.
(k) Decommissioning and environmental costs
Provision is made for decommissioning and environmental costs, based on future estimated expenditures, discounted to
present values. Where appropriate, the establishment of a provision is recorded as part of the original cost of the
related property, plant and equipment.
Changes in the provision arising from revised estimates or discount rates or changes in the expected timing of
expenditures that relate to property, plant and equipment are recorded as adjustments to their carrying value and
depreciated prospectively over their remaining estimated useful economic lives, otherwise such changes are recognised in
the income statement.
The unwinding of the discount is included within the income statement as a financing charge.
(l) Revenues
Revenues primarily represent the sales value derived from the transmission and distribution of energy and recovery of
stranded costs together with the sales value derived from the provision of other services, including wireless
infrastructure services, to customers during the year and excludes value added tax and intra-group sales.
The recovery of stranded costs and other amounts allowed to be collected from customers under regulatory arrangements
are recognised in the period in which they are recoverable from customers.
Revenues include an assessment of energy and transportation services supplied to customers between the date of the last
meter reading and the year end, exclude inter-business and inter-company transactions, and are stated net of value added
tax and similar sales-based taxes.
Where revenues received or receivable exceed the maximum amount permitted by regulatory agreement and adjustments will
be made to future prices to reflect this over-recovery, no liability is recognised. Similarly no asset is recognised
where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery.
(m) Pensions and other post-retirement benefits
For defined benefit retirement schemes, the cost of providing benefits is determined using the projected unit method,
with actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognised in full in the period in which they occur in the Statement of Recognised
Income and Expense.
Past service costs are recognised immediately to the extent that benefits are already vested. Otherwise such costs are
amortised on a straight-line basis over the period until the benefits vest.
The retirement benefit obligations recognised in the balance sheet represent the present value of the defined benefit
obligations, as reduced by the fair value of scheme assets.
The expected return on scheme assets and the unwinding of the discount on defined benefit obligations are recognised
within interest income and expense respectively.
(n) Leases
Rentals under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Assets held under finance leases are recognised at their fair value on inception and depreciated over their useful
economic lives. The corresponding liability is recognised as a finance lease obligation within borrowings. Rental
payments are apportioned between finance costs and reduction in the finance lease obligation, so as to achieve a
constant rate of interest.
(o) Financial instruments
Financial assets, liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
of its liabilities and is recorded at the proceeds received, net of direct issue costs.
Financial assets and financial liabilities are initially recognised in the balance sheet at cost.
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances
for estimated irrecoverable amounts.
Trade payables are not interest bearing and are stated at their nominal value.
Investments are initially measured at cost including transaction costs, but with effect from 1 April 2005 are
subsequently carried at fair value.
From 1 April 2005 changes in the fair value of investments classified as held for trading are included in the income
statement, whilst changes in the fair value of investments classified as available for sale are recognised directly in
equity, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the net profit or loss for the period.
Interest-bearing loans and overdrafts are recorded at the proceeds received, net of direct issue costs plus accrued
interest less any repayments. Prior to 1 April 2005, accrued interest is presented as part of current liabilities and
not combined with the principal amounts payable.
Derivative financial instruments are recorded as described below.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accruals basis using the effective interest rate method.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (being assets
that necessarily take a substantial period of time to get ready for their intended use or sale) are added to their cost.
Such additions cease when the assets are substantially ready for their intended use or sale. All other borrowing costs
are recognised in the income statement in the period in which they are incurred.
(p) Hedge accounting and derivative financial instruments
The Group enters into both derivative financial instruments ('derivatives') and non-derivative financial instruments in
order to manage its interest rate and foreign currency exposures and commodity price risks in respect of expected
energy usage. The principal derivatives used include interest rate swaps, currency swaps, forward foreign currency
agreements, interest rate swaptions and indexed swap contracts relating to the purchase of energy.
All derivative transactions are undertaken, or maintained, with a view to providing a commercial hedge of the interest,
currency or commodity price risks associated with the Group's underlying business activities and the financing of
those activities.
With effect from 1 April 2005, derivatives are carried in the balance sheet at their fair value.
Prior to 1 April 2005, the Group adopted UK GAAP accounting principles for hedge accounting and for derivatives.
Derivatives used for hedge accounting were not recorded on the balance sheet as assets or liabilities. Monetary assets
and liabilities in foreign currencies were retranslated at hedged rates instead of closing rates. Exchange gains and
losses relating to the hedge of the net investment in overseas subsidiaries were recorded directly in equity.
As permitted by the provisions of IFRS 1, the comparative balance sheet and income statement for the year ended
31 March 2005 have not been restated to reflect the adoption of IAS 39 Financial Instruments: Recognition and
Measurement.
From 1 April 2005, the accounting policy for hedge accounting is as described below. Disclosures on the impact of
implementing IAS 39 at 1 April 2005 are set out in note 9.
Changes in the carrying value of financial instruments that are designated and effective as hedges of future cash flows
('cash flow hedges') are recognised directly in equity and any ineffective portion is recognised immediately in the
income statement. Amounts deferred in equity in respect of cash flow hedges are subsequently recognised in the income
statement in the same period in which the hedged item affects net profit or loss. Where an asset or a liability results
from a forecasted transaction or firm commitment being hedged, the amounts deferred in equity are included in the
initial measurement of that asset or liability.
Changes in the carrying value of financial instruments that are designated as hedges of the changes in the fair value of
assets or liabilities ('fair value hedges') are recognised in the income statement. An equal and opposite amount is
recorded as an adjustment to the carrying value of hedged items, with a corresponding entry in the income statement, to
the extent that the change is attributable to the risk being hedged and that the fair value hedge is effective.
Exchange gains or losses arising on financial instruments that are designated and effective as hedges of the Group's net
investment in overseas operations ('net investment hedges') are recorded directly in equity, with any ineffective
portion recognised immediately in the income statement.
Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised in the income statement
as they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative gains or losses relating to cash flow hedges recognised in
equity are initially retained in equity and subsequently recognised in the income statement in the same periods in which
the previously hedged item affects net profit or loss. For fair value hedges the cumulative adjustment recorded to its
carrying value at the date hedge accounting is discontinued is amortised to the income statement using the effective
interest method.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is
transferred to the income statement immediately. Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of
host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the
income statement.
(q) Restructuring costs
Costs arising from Group restructuring programmes primarily relate to redundancy costs. Redundancy costs are charged to
the income statement in the year in which the Group becomes irrevocably committed to incurring the costs and the main
features of the restructuring plan have been announced to affected employees.
(r) Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value 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, based on the Group's estimate of
shares that will eventually vest.
(s) Exceptional items
Exceptional items are transactions that are material, significant or by their nature are relevant to understanding the
Group's financial performance and are shown separately to provide a better indication of the underlying results of the
Group.
(t) Other operating income
Other operating income includes profits or losses arising on the disposal of properties by the Group's property
management business, which is considered to be part of the normal recurring operating activities of the Group.
APPENDIX 2
Analysis of IFRS adjustments to the income statement - total Group
For the year ended 31 March 2005
IFRS measurement adjustments - see note 2(b)
-------------------------------------------------------------------------------------------------------
(i) (ii) (iii) (iv) (v) (vi) (viii) Total
Replacement Regulatory Goodwill Intangibles Pensions Deferred Other measurement
expenditure assets amortisation amortisation and OPBs* taxation adjustments adjustments
£m £m £m £m £m £m £m £m
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Continuing
operations:
Group - (37) - - - - - (37)
revenue
Other
operating
income - - - - - - - -
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
- (37) - - - - - (37)
Operating
costs 336 246 109 (6) 21 - (6) 700
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Share of joint
ventures' - - - - - - - -
operating
profit
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Operating
profit
- Before
exceptional
items 336 269 - (6) 6 - (6) 599
- Exceptional
items - (60) - - 15 - - (45)
- Goodwill
amortisation - - 109 - - - - 109
Total
operating
profit 336 209 109 (6) 21 - (6) 663
Non-operating
exceptionals - - - - - - - -
Net finance
costs - 37 - - 36 - (4) 69
Share of
post-tax
results of - - - - - - - -
joint
ventures
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Profit before
taxation 336 246 109 (6) 57 - (10) 732
Taxation
- Excluding
exceptional
items (100) (119) - 2 (11) (11) 4 (235)
- Exceptional
items - 24 - - (5) - - 19
Total taxation (100) (95) - 2 (16) (11) 4 (216)
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Profit from
continuing
operations
- Before
exceptional
items 236 187 - (4) 31 (11) (6) 433
- Exceptional
items - (36) - - 10 - - (26)
- Goodwill
amortisation - - 109 - - - - 109
Profit from
continuing
operations 236 151 109 (4) 41 (11) (6) 516
Discontinued
operations:
Profit from
discontinued
operations - - - - - - - -
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Profit for the
year 236 151 109 (4) 41 (11) (6) 516
- including MI
share
Attributable
to minority
interests - - - - - - - -
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
Attributable to equity
shareholders:
Profit for the
year
- Continuing
operations
before 236 187 - (4) 31 (11) (6) 433
exceptional
items
- Discontinued
operations
before - - - - - - - -
exceptionals
- Exceptional
items
- continuing
operations - (36) - - 10 - - (26)
- discontinued
operations - - - - - - - -
- Goodwill
amortisation - - 109 - - - - 109
Profit for the
year 236 151 109 (4) 41 (11) (6) 516
----------- ---------- ------------ ------------ -------- -------- ----------- ----------
A discussion of the underlying differences between UK GAAP and IFRS is provided in note 2 to the IFRS adoption
statement.
* Other Post-retirement Benefits
Analysis of IFRS adjustments to the income statement - total Group
For the year ended 31 March 2005
IFRS presentation adjustments - see note 2(c)
---------------------------------------------------------------------
(i) (ii) (iii) (iv) Total TOTAL
Non-equity Disposals Share of JVs Profit on presentation IFRS
expenditure assets amortisation amortisation adjustments ADJUSTMENTS
£m £m £m £m £m £m
----------- ---------- ------------ ------------ ------------ -----------
Continuing
operations:
Group - - - - - (37)
revenue
Other
operating
income - 70 - - 70 70
----------- ---------- ------------ ------------ ------------ -----------
- 70 - - 70 33
Operating
costs - - - - - 700
----------- ---------- ------------ ------------ ------------ -----------
Share of joint
ventures' - - (7) - (7) (7)
operating
profit
----------- ---------- ------------ ------------ ------------ -----------
Operating
profit
- Before
exceptional
items - 70 (7) - 63 662
- Exceptional
items - - - - - (45)
- Goodwill
amortisation - - - - - 109
Total
operating
profit - 70 (7) - 63 726
Non-operating
exceptionals - (70) - (13) (83) (83)
Net finance
costs (2) - 10 - 8 77
Share of
post-tax
results of - - 3 - 3 3
joint
ventures
----------- ---------- ------------ ------------ ------------ -----------
Profit before
taxation (2) - 6 (13) (9) 723
Taxation
- Excluding
exceptional
items - (1) 2 - 1 (234)
- Exceptional
items - 1 - - 1 20
Total taxation - - 2 - 2 (214)
----------- ---------- ------------ ------------ ------------ -----------
Profit from
continuing
operations
- Before
exceptional
items (2) 69 8 - 75 508
- Exceptional
items - (69) - (13) (82) (108)
- Goodwill
amortisation - - - - - 109
Profit from
continuing
operations (2) - 8 (13) (7) 509
Discontinued
operations:
Profit from
discontinued
operations - - (5) 13 8 8
----------- ---------- ------------ ------------ ------------ -----------
Profit for the
year (2) - 3 - 1 517
- including MI
share
Attributable
to minority
interests 2 - (3) - (1) (1)
----------- ---------- ------------ ------------ ------------ -----------
Attributable to equity
shareholders:
Profit for the
year
- Continuing
operations
before - 69 5 - 74 507
exceptional
items
- Discontinued
operations
before - - (5) - (5) (5)
exceptionals
- Exceptional
items
- continuing
operations - (69) (13) - (82) (108)
- discontinued
operations - - 13 - 13 13
- Goodwill
amortisation - - - - - 109
Profit for the
year - - - - - 516
----------- ---------- ------------ ------------ ------------ -----------
A discussion of the underlying differences between UK GAAP and IFRS is provided in note 2 to the IFRS adoption
statement.
APPENDIX 3
Analysis of IFRS adjustments to the balance sheet - total Group
At 31 March 2005
IFRS measurement adjustments - see note 2(b)
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Total
Replacement Regulatory Goodwill Intangible Pensions Deferred Proposed Other measurement
expenditure assets assets and OPBs* taxation dividend adjustments adjustments
£m £m £m £m £m £m £m £m £m
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Assets
Non-current
assets
Goodwill - - 18 - - - - - 18
Other
intangible
assets - - - 182 - - - 1 183
Property,
plant and
equipment 4,910 108 - - - - - 64 5,082
Investments
in joint
ventures - - - - - - - - -
Deferred tax
assets - 45 - - 291 - - - 336
Other
receivables - (2,402) - - - - - - (2,402)
Available for
sale investments - - - - - - - - -
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total
non-current
assets 4,910 (2,249) 18 182 291 - - 65 3,217
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Current assets
Inventories - - - - - - - - -
Trade and
other
receivables - (369) - - (12) - - (15) (396)
Financial
investments - - - - - - - - -
Cash and cash
equivalents - - - - - - - - -
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total current
assets - (369) - - (12) - - (15) (396)
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total 4,910 (2,618) 18 182 279 - - 50 2,821
assets
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Current liabilities
Borrowings - - - - - - - (5) (5)
Trade and
other (17) - - - - - 469 - 452
payables
Current tax - - - - - - - - -
liabilities
Provisions - - - - - - - - -
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total current
liabilities (17) - - - - - 469 (5) 447
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Non-current
liabilities
Borrowings - - - - - - - (62) (62)
Other
non-current
liabilities (588) - - - - - - (4) (592)
Deferred tax
liabilities (1,291) 1,005 - (83) 301 (95) - 6 (157)
Retirement
benefit
obligations - - - - (1,770) - - - (1,770)
Provisions - - - - 41 - - (2) 39
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total
non-current
liabilities (1,879) 1,005 - (83) (1,428) (95) - (62) (2,542)
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total
liabilities (1,896) 1,005 - (83) (1,428) (95) 469 (67) (2,095)
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Net assets 3,014 (1,613) 18 99 (1,149) (95) 469 (17) 726
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Called up - - - - - - - - -
share
capital
Share premium - - - - - - - - -
account
Retained
earnings 3,014 (1,666) 19 99 (1,164) (95) 469 (17) 659
Other - 53 (1) - 15 - - - 67
reserves
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total
shareholders'
equity 3,014 (1,613) 18 99 (1,149) (95) 469 (17) 726
Minority
interests - - - - - - - - -
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
Total 3,014 (1,613) 18 99 (1,149) (95) 469 (17) 726
equity
----------- ---------- -------- ---------- -------- -------- -------- ----------- -----------
A discussion of the underlying differences between UK GAAP and IFRS is provided in note 2 to the IFRS adoption
statement.
* Other Post-retirement Benefits.
Analysis of IFRS adjustments to the balance sheet - total Group
At 31 March 2005
IFRS presentation adjustments - see note 2(c)
(i) (v) (vi) (vii) (viii) Total TOTAL
Non-equity Cash Software Short term Cumulative presentation IFRS
MI equivalents provisions translation adjustments ADJUSTMENTS
£m £m £m £m £m £m £m
----------- ---------- -------- ---------- ------------ ------------ -----------
Assets
Non-current
assets
Goodwill - - - - - - 18
Other
intangible
assets - - 175 - - 175 358
Property,
plant and
equipment - - 175 - - 175 4,907
Investments
in joint
ventures - - - - - - -
Deferred tax
assets - - - - - - 336
Other
receivables - - - - - - (2,402)
Available for
sale investments - - - - - - -
----------- ---------- -------- ---------- ------------ ------------ -----------
Total
non-current
assets - - - - - - 3,217
----------- ---------- -------- ---------- ------------ ------------ -----------
Current assets
Inventories - - - - - - -
Trade and
other
receivables - - - - - - (396)
Financial
investments - (172) - - - (172) (172)
Cash and cash
equivalents - 172 - - - 172 172
----------- ---------- -------- ---------- ------------ ------------ -----------
Total current
assets - - - - - - (396)
----------- ---------- -------- ---------- ------------ ------------ -----------
----------- ---------- -------- ---------- ------------ ------------ -----------
Total - - - - - - 2,821
assets
----------- ---------- -------- ---------- ------------ ------------ -----------
Current liabilities
Borrowings - - - - - - (5)
Trade and
other - - - - - - 452
payables
Current tax - - - - - - -
liabilities
Provisions - - - (273) - (273) (273)
----------- ---------- -------- ---------- ------------ ------------ -----------
Total current
liabilities - - - (273) - (273) 174
----------- ---------- -------- ---------- ------------ ------------ -----------
Non-current
liabilities
Borrowings (22) - - - - (22) (84)
Other
non-current
liabilities - - - - - - (592)
Deferred tax
liabilities - - - - - - (157)
Retirement
benefit
obligations - - - - - - (1,770)
Provisions - - - 273 - 273 312
----------- ---------- -------- ---------- ------------ ------------ -----------
Total
non-current
liabilities (22) - - 273 - 251 (2,291)
----------- ---------- -------- ---------- ------------ ------------ -----------
----------- ---------- -------- ---------- ------------ ------------ -----------
Total
liabilities (22) - - - - (22) (2,117)
----------- ---------- -------- ---------- ------------ ------------ -----------
----------- ---------- -------- ---------- ------------ ------------ -----------
Net assets (22) - - - - (22) 704
----------- ---------- -------- ---------- ------------ ------------ -----------
Called up - - - - - - -
share
capital
Share premium - - - - - - -
account
Retained
earnings - - - - 73 73 732
Other
reserves - - - - (73) (73) (6)
----------- ---------- -------- ---------- ------------ ------------ -----------
Total
shareholders'
equity - - - - - - 726
Minority
interests (22) - - - - (22) (22)
----------- ---------- -------- ---------- ------------ ------------ -----------
Total
equity (22) - - - - (22) 704
----------- ---------- -------- ---------- ------------ ------------ -----------
A discussion of the underlying differences between UK GAAP and IFRS is provided in note 2 to the IFRS adoption
statement.
This information is provided by RNS
The company news service from the London Stock Exchange
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