14th Nov 2005 07:02
Business Post Group PLC14 November 2005 Business Post Group plc Transition to International Financial Reporting Standards Introduction Business Post Group plc has adopted International Financial Reporting Standards(IFRS) with effect from 1 April 2004. This announcement accompanies the 2006interim announcement and provides the transitional financial informationtogether with the principal accounting policies adopted under IFRS applied from1 April 2004. In order to illustrate how the Group's reported performance and financialposition are affected by this change, the following unaudited financialinformation is provided below: •Consolidated income statements under IFRS for the six months to 30 September 2004 and year to 31 March 2005; •Consolidated balance sheets under IFRS as at 1 April 2004, 30 September 2004 and 31 March 2005; •Consolidated statements of cash flows under IFRS for the six months to 30 September 2004 and year to 31 March 2005; •Reconciliation of consolidated income statements under IFRS to UK GAAP for the six months to 30 September 2004 and year to 31 March 2005; •Reconciliation of consolidated balance sheets under IFRS to UK GAAP as at 1 April 2004, 30 September 2004 and 31 March 2005; •Proforma changes to the consolidated balance sheet following the adoption of IAS 32 and IAS 39; and •A statement of the principal accounting policies of the Group under IFRS. The key changes to the financial statements for the year ended 31 March 2005arising from the transition to IFRS are: •Under IFRS, pre-tax costs of £1.0m are charged to income in relation to share-based incentives compared to £0.1m under UK GAAP. •Goodwill is not amortised under IFRS and consequently the £0.5m charge is reversed. •Under IFRS, dividends are recognised within equity in the period in which they are approved whereas, under UK GAAP, dividends were recognised in the period in which they were declared. This increases net assets at 31 March 2005 by £6.9m. •The recognition of a £1.8m deferred tax asset relating to share-based incentives as at 31 March 2005, £0.3m of which is recognised in the income statement. The impact of the change to IFRS on key ratios for the year ended 31 March 2005is: IFRS UK GAAPBasic earnings per share 25.6p 25.7pDiluted earnings per share 25.2p 25.3pProfit before tax £19.6m £20.0mShareholders' funds £62.7m £53.5m Peter Fitzwilliam 14 November 2005Finance Director Understanding the change IFRS has no impact on corporate strategy, operating decisions, cash flows, or onthe underlying value of the business. The significant accounting changes for the Group are: 1. Under IFRS, the costs of all share-based payments including employee sharesave schemes are recognised whereas, under UK GAAP, only awards granted at a discount to the market were recognised, with employee sharesave specifically exempted. For the year ended 31 March 2005, this has resulted in an additional pre-tax charge to the income statement of £0.9m, offset by a deferred tax credit of £0.3m. 2. The amortisation of goodwill under UK GAAP has been replaced by an annual impairment test under IFRS. For the year ended 31 March 2005, this has resulted in a £0.5m increase in net assets and profit after tax. 3. Dividends payable and receivable are recognised under IFRS in the period in which they are approved, rather than declared under UK GAAP. At 31 March 2005, this has increased net assets by £6.9m. 4. Deferred tax relating to share-based payments has been provided by charging to the income statement or, where applicable, directly to equity. Deferred tax assets and liabilities are no longer offset, whereas under UK GAAP these were shown on a net basis. 5. Under UK GAAP, capitalised computer software was included within property, plant and equipment whereas, under IFRS, capitalised software not integral to plant and equipment is classified as an intangible asset. The net book value of computer software reclassified as intangible assets was £0.6m at 31 March 2005. It should be noted that the standards currently in issue are subject tointerpretation issued from time to time by the International Financial ReportingInterpretations Committee (IFRIC). Further standards may be issued by the IASBthat may require adoption for financial years beginning on or after 1 January2005. Due to the large number of new and revised standards included within thebody of standards that comprise IFRS, there is not yet sufficient establishedpractice from which to draw in forming decisions regarding the interpretationand application of the standards. Accordingly, practice is continuing to evolve.At this stage therefore, the full financial effect of reporting under IFRS as itwill be applied and reported on in the company's first IFRS financial statementsfor the year ended 31 March 2006 may be subject to change. The IFRS results areunaudited. Consolidated Income Statement Half Year ended 30 September 2004 Year ended 31 March 2005 UK Effect of IFRS UK GAAP Effect of IFRS GAAP transition transition to IFRS to IFRS £m £m £m £m £m £m Revenue 109.9 - 109.9 233.3 - 233.3Cost of (87.1) - (87.1) (184.7) - (184.7)sales ------- -------- ------ ------- ------- ------Gross profit 22.8 - 22.8 48.6 - 48.6Administrativeexpenses (13.9) (0.2) (14.1) (28.3) (0.4) (28.7) ------- -------- ------ ------- ------- ------Operating 8.9 (0.2) 8.7 20.3 (0.4) 19.9profitNet interestpayable (0.1) - (0.1) (0.3) - (0.3) ------- -------- ------ ------- ------- ------Profit beforetaxation 8.8 (0.2) 8.6 20.0 (0.4) 19.6Tax on profit onordinaryactivities (2.8) 0.1 (2.7) (6.2) 0.3 (5.9) ------- -------- ------ ------- ------- ------ ------Profit for theperiod 6.0 (0.1) 5.9 13.8 (0.1) 13.7 ------- -------- ------ ------- ------- ------ Basic earningsper share 11.2p 11.0p 25.7p 25.6p Dilutedearnings 11.0p 10.9p 25.3p 25.2pper share The profit for the period is wholly attributable to equity holders of the company. Consolidated Balance Sheet At 30 September 2004 At 31 March 2005 Effect of Effect of transition transition UK GAAP to IFRS IFRS UK GAAP to IFRS IFRS £m £m £m £m £m £mAssetsNon-current assetsGoodwill 9.1 0.3 9.4 9.0 0.5 9.5Intangible assets 0.0 0.5 0.5 0.0 0.6 0.6Investment 0.0 1.2 1.2 0.0 1.1 1.1propertiesProperty, plant andequipment 35.1 (1.7) 33.4 34.8 (1.7) 33.1Trade and otherreceivables 1.1 0.0 1.1 3.3 0.0 3.3Deferred tax assets 0.0 1.1 1.1 0.0 1.8 1.8 -------- -------- ------ -------- ------- ------ 45.3 1.4 46.7 47.1 2.3 49.4 -------- -------- ------ -------- ------- ------Current assetsInventories 0.0 0.1 0.1 0.0 0.2 0.2Trade and otherreceivables 48.8 (0.1) 48.7 47.4 (0.2) 47.2Cash and cashequivalents 0.9 0.0 0.9 3.4 0.0 3.4 -------- -------- ------ -------- ------- ------ 49.7 0.0 49.7 50.8 0.0 50.8 -------- -------- ------ -------- ------- ------ LiabilitiesCurrent liabilitiesBorrowings (3.0) 0.0 (3.0) (1.0) 0.0 (1.0)Trade and other payables (26.7) 3.4 (23.3) (30.7) 6.9 (23.8)Current tax liabilities (3.1) 0.0 (3.1) (2.8) 0.0 (2.8)Provisions 0.0 (0.1) (0.1) 0.0 (0.1) (0.1) -------- -------- ------ -------- ------- ------ (32.8) 3.3 (29.5) (34.5) 6.8 (27.7) -------- -------- ------ -------- ------- ------ -------- -------- ------ -------- ------- ------Net current assets 16.9 3.3 20.2 16.3 6.8 23.1 -------- -------- ------ -------- ------- ------ Non-current liabilitiesBorrowings (8.0) 0.0 (8.0) (8.0) 0.0 (8.0)Deferred tax liabilities (1.3) 0.0 (1.3) (1.4) 0.0 (1.4)Provisions (0.4) 0.1 (0.3) (0.5) 0.1 (0.4) -------- -------- ------ -------- ------- ------ (9.7) 0.1 (9.6) (9.9) 0.1 (9.8) -------- -------- ------ -------- ------- ------ -------- -------- ------ -------- ------- ------Net assets 52.5 4.8 57.3 53.5 9.2 62.7 ======== ======== ====== ======== ======= ====== Shareholders' fundsShare capital 5.4 0.0 5.4 5.4 0.0 5.4Share premium 11.0 0.0 11.0 12.2 0.0 12.2Retained earnings 36.1 4.8 40.9 35.9 9.2 45.1 --------- --------- ------- --------- -------- ------- 52.5 4.8 57.3 53.5 9.2 62.7 ========= ========= ======= ========= ======== ======= Consolidated Balance Sheet at 1 April 2004(Date of transition to IFRS) At 1 April 2004 Effect of transition UK GAAP to IFRS IFRS £m £m £mAssetsNon-current assetsGoodwill 10.8 0.0 10.8Intangible assets 0.0 0.5 0.5Investment properties 0.0 1.2 1.2Property, plant and equipment 32.7 (1.7) 31.0Trade and other receivables 4.8 0.0 4.8Deferred tax assets 0.0 0.5 0.5 -------- -------- ------- 48.3 0.5 48.8 -------- -------- -------Current assetsInventories 0.0 0.1 0.1Trade and other receivables 37.4 (0.1) 37.3Cash and cash equivalents 4.6 0.0 4.6 -------- -------- ------- 42.0 0.0 42.0 -------- -------- -------LiabilitiesCurrent liabilitiesBorrowings (1.0) 0.0 (1.0)Trade and other payables (26.8) 6.4 (20.4)Current tax liabilities (2.8) 0.0 (2.8)Provisions 0.0 (0.1) (0.1) -------- -------- ------- (30.6) 6.3 (24.3) -------- -------- ------- -------- -------- -------Net current assets 11.4 6.3 17.7 -------- -------- ------- Non-current liabilitiesBorrowings (9.0) 0.0 (9.0)Deferred tax liabilities (1.2) 0.0 (1.2)Provisions (0.4) 0.1 (0.3) -------- -------- ------- (10.6) 0.1 (10.5) -------- -------- ------- -------- -------- -------Net assets 49.1 6.9 56.0 ======== ======== ======= Shareholders' fundsShare capital 5.3 0.0 5.3Share premium 10.3 0.0 10.3Retained earnings 33.5 6.9 40.4 --------- --------- -------- 49.1 6.9 56.0 ========= ========= ======== Consolidated Cash Flow Statement Half year ended Year ended 30 September 2004 31 March 2005 Effect of Effect of transition transition UK GAAP to IFRS IFRS UK GAAP to IFRS IFRS £m £m £m £m £m £mCash flows from operatingactivitiesOperatingprofit 8.9 (0.2) 8.7 20.3 (0.4) 19.9Depreciation ofproperty, plantand equipment 2.1 (0.1) 2.0 4.5 (0.2) 4.3Amortisation ofgoodwill 0.3 (0.3) 0.0 0.5 (0.5) 0.0Amortisation ofintangibles 0.0 0.1 0.1 0.0 0.2 0.2Interestreceived 0.2 0.0 0.2 0.4 0.0 0.4Interest paid (0.3) 0.0 (0.3) (0.7) 0.0 (0.7)Taxation paid (2.5) 0.0 (2.5) (6.1) 0.0 (6.1)Other non cashflow items 0.0 0.5 0.5 0.0 0.9 0.9Changes in working capital(excluding the effects ofacquisitions and disposal ofsubsidiaries)(Increase) ininventories 0.0 0.0 0.0 0.0 (0.1) (0.1)(Increase) inreceivables (6.3) 0.0 (6.3) (9.4) 0.1 (9.3)Increase in payables 3.3 0.0 3.3 5.5 0.0 5.5Increase inprovisions 0.0 0.0 0.0 0.1 0.0 0.1 ------- ------- ------ ------- ------- ------Net cash inflowfrom operatingactivities 5.7 0.0 5.7 15.1 0.0 15.1 ------- ------- ------ ------- ------- ------ Cash flows from investingactivitiesPurchase of subsidiaryundertakings 0.0 0.0 0.0 0.6 0.0 0.6Proceeds from disposal ofproperty, plant and equipment 0.0 0.0 0.0 0.1 0.0 0.1Purchase of property, plant andequipment (4.5) 0.1 (4.4) (6.7) 0.3 (6.4)Purchase of intangible assets 0.0 (0.1) (0.1) 0.0 (0.3) (0.3) ------- ------- ------ ------- ------- ------Net cash outflow from investingactivities (4.5) 0.0 (4.5) (6.0) 0.0 (6.0) ------- ------- ------ ------- ------- ------Cash flows from financingactivitiesEquity dividends paid (6.4) 0.0 (6.4) (9.9) 0.0 (9.9)Issue of share capital 0.7 0.0 0.7 2.0 0.0 2.0Purchase of treasury shares 0.0 0.0 0.0 (1.2) 0.0 (1.2)Repayment of borrowings (1.0) 0.0 (1.0) (1.0) 0.0 (1.0) ------- ------- ------ ------- ------- ------Net cash outflow from financingactivities (6.7) 0.0 (6.7) (10.1) 0.0 (10.1) ------- ------- ------ ------- ------- ------ Net decrease in cash and cashequivalents (5.5) 0.0 (5.5) (1.0) 0.0 (1.0)Cash and cash equivalents atbeginning of period 4.4 0.0 4.4 4.4 0.0 4.4 ------- ------- ------ ------- ------- ------Cash and cash equivalents at endof period (1.1) 0.0 (1.1) 3.4 0.0 3.4 ------- ------- ------ ------- ------- ------ UK GAAP required cash flows to be presented under seven different headingswhereas IAS 7 Cash Flow Statements requires cash flows to be presented underthree headings: cash flows from operating, investing and financing activities.Consequently there are a number of re-classifications. There are no materialdifferences between the cash flow statement presented under IFRS and the cashflow statement presented under UK GAAP. Consolidated Income Statement - IFRS AdjustmentsFor the half year ended 30 September 2004 Share-based Goodwill payments IFRS 3 IFRS 2 Total Note 1 Note 2 adjustments £m £m £m Revenue - - 0.0Cost of sales - - 0.0 -------- -------- ---------Gross profit - - 0.0Administrative expenses 0.3 (0.5) (0.2) -------- -------- ---------Operating profit 0.3 (0.5) (0.2)Net interest payable - - 0.0 -------- -------- ---------Profit before taxation 0.3 (0.5) (0.2)Tax on profit on ordinary - 0.1 0.1activities -------- -------- ---------Profit for the period 0.3 (0.4) (0.1) -------- -------- --------- Consolidated Income Statement - IFRS AdjustmentsFor the year ended 31 March 2005 Share-based Goodwill payments IFRS 3 IFRS 2 Total Note 1 Note 2 adjustments £m £m £m Revenue - - 0.0Cost of sales - - 0.0 -------- -------- ---------Gross profit - - 0.0Administrative expenses 0.5 (0.9) (0.4) -------- -------- ---------Operating profit 0.5 (0.9) (0.4)Net interest payable - - 0.0 -------- -------- ---------Profit before taxation 0.5 (0.9) (0.4)Tax on profit on ordinary activities - 0.3 0.3 -------- -------- ---------Profit for the period 0.5 (0.6) (0.1) -------- -------- --------- Consolidated Balance Sheet - IFRS AdjustmentsAt 30 September 2004 Share-based Goodwill payments Dividends IFRS 3 IFRS 2 IAS 10 Other Total Note 1 Note 2 Note 3 Note 4 adjustments £m £m £m £m £mAssetsNon-current assetsGoodwill 0.3 0.0 0.0 0.0 0.3Intangible assets 0.0 0.0 0.0 0.5 0.5Investment properties 0.0 0.0 0.0 1.2 1.2Property, plant andequipment 0.0 0.0 0.0 (1.7) (1.7)Trade and otherreceivables 0.0 0.0 0.0 0.0 0.0Deferred tax assets 0.0 1.1 0.0 0.0 1.1 -------- --------- -------- ------- --------- 0.3 1.1 0.0 0.0 1.4 -------- --------- -------- ------- ---------Current assetsInventories 0.0 0.0 0.0 0.1 0.1Trade and otherreceivables 0.0 0.0 0.0 (0.1) (0.1)Cash and cashequivalents 0.0 0.0 0.0 0.0 0.0 -------- --------- -------- ------- --------- 0.0 0.0 0.0 0.0 0.0 -------- --------- -------- ------- ---------LiabilitiesCurrent liabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Trade and otherpayables 0.0 0.0 3.4 0.0 3.4Current taxliabilities 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 (0.1) (0.1) -------- --------- -------- ------- --------- 0.0 0.0 3.4 (0.1) 3.3 -------- --------- -------- ------- --------- -------- --------- -------- ------- ---------Net current assets 0.0 0.0 3.4 (0.1) 3.3 -------- --------- -------- ------- --------- Non-currentliabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Deferred taxliabilities 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 0.1 0.1 -------- --------- -------- ------- --------- 0.0 0.0 0.0 0.1 0.1 -------- --------- -------- ------- --------- -------- --------- -------- ------- ---------Net assets 0.3 1.1 3.4 0.0 4.8 ======== ========= ======== ======= ========= Shareholders' fundsShare capital 0.0 0.0 0.0 0.0 0.0Share premium 0.0 0.0 0.0 0.0 0.0Retained earnings 0.3 1.1 3.4 0.0 4.8 --------- ---------- --------- -------- ---------- 0.3 1.1 3.4 0.0 4.8 ========= ========== ========= ======== ========== Consolidated Balance Sheet - IFRS AdjustmentsAt 31 March 2005 Share-based Goodwill payments Dividends IFRS 3 IFRS 2 IAS 10 Other Total Note 1 Note 2 Note 3 Note 4 adjustments £m £m £m £m £mAssetsNon-currentassetsGoodwill 0.5 0.0 0.0 0.0 0.5Intangible 0.0 0.0 0.0 0.6 0.6assetsInvestment 0.0 0.0 0.0 1.1 1.1propertiesProperty,plant and 0.0 0.0 0.0 (1.7) (1.7)equipmentTrade andother 0.0 0.0 0.0 0.0 0.0receivablesDeferred tax 0.0 1.8 0.0 0.0 1.8assets -------- -------- -------- -------- --------- 0.5 1.8 0.0 0.0 2.3 -------- -------- -------- -------- ---------CurrentassetsInventories 0.0 0.0 0.0 0.2 0.2Trade andother 0.0 0.0 0.0 (0.2) (0.2)receivablesCash and cashequivalents 0.0 0.0 0.0 0.0 0.0 -------- -------- -------- -------- --------- 0.0 0.0 0.0 0.0 0.0 -------- -------- -------- -------- ---------LiabilitiesCurrentliabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Trade andother 0.0 0.0 6.9 0.0 6.9payablesCurrent taxliabilities 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 (0.1) (0.1) -------- -------- -------- -------- --------- 0.0 0.0 6.9 (0.1) 6.8 -------- -------- -------- -------- --------- -------- -------- -------- -------- ---------Net current 0.0 0.0 6.9 (0.1) 6.8assets -------- -------- -------- -------- --------- Non-currentliabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Deferred taxliabilities 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 0.1 0.1 -------- -------- -------- -------- --------- 0.0 0.0 0.0 0.1 0.1 -------- -------- -------- -------- --------- -------- -------- -------- -------- ---------Net assets 0.5 1.8 6.9 0.0 9.2 ======== ======== ======== ======== ========= Shareholders'fundsShare 0.0 0.0 0.0 0.0 0.0capitalShare 0.0 0.0 0.0 0.0 0.0premiumRetained 0.5 1.8 6.9 0.0 9.2earnings --------- --------- --------- --------- ---------- 0.5 1.8 6.9 0.0 9.2 ========= ========= ========= ========= ========== Consolidated Balance Sheet - IFRS AdjustmentsAt 1 April 2004 Share-based Goodwill payments Dividends IFRS 3 IFRS 2 IAS 10 Other Total Note 1 Note 2 Note 3 Note 4 adjustments £m £m £m £m £mAssetsNon-current assetsGoodwill 0.0 0.0 0.0 0.0 0.0Intangible assets 0.0 0.0 0.0 0.5 0.5Investment properties 0.0 0.0 0.0 1.2 1.2Property, plant andequipment 0.0 0.0 0.0 (1.7) (1.7)Trade and otherreceivables 0.0 0.0 0.0 0.0 0.0Deferred tax assets 0.0 0.5 0.0 0.0 0.5 -------- -------- -------- -------- --------- 0.0 0.5 0.0 0.0 0.5 -------- -------- -------- -------- ---------Current assetsInventories 0.0 0.0 0.0 0.1 0.1Trade and otherreceivables 0.0 0.0 0.0 (0.1) (0.1)Cash and cashequivalents 0.0 0.0 0.0 0.0 0.0 -------- -------- -------- -------- --------- 0.0 0.0 0.0 0.0 0.0 -------- -------- -------- -------- ---------LiabilitiesCurrent liabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Trade and otherpayables 0.0 0.0 6.4 0.0 6.4Current taxliabilities 0.0 0.0 0.0 0.0 0.0Borrowings 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 (0.1) (0.1) -------- -------- -------- -------- --------- 0.0 0.0 6.4 (0.1) 6.3 -------- -------- -------- -------- --------- Net current assets 0.0 0.0 6.4 (0.1) 6.3 -------- -------- -------- -------- --------- Non-current liabilitiesBorrowings 0.0 0.0 0.0 0.0 0.0Deferred tax liabilities 0.0 0.0 0.0 0.0 0.0Provisions 0.0 0.0 0.0 0.1 0.1 -------- -------- -------- -------- --------- 0.0 0.0 0.0 0.1 0.1 -------- -------- -------- -------- --------- -------- -------- -------- -------- ---------Net assets 0.0 0.5 6.4 0.0 6.9 ======== ======== ======== ======== ========= Notes to the IFRS AdjustmentsKEY INCOME STATEMENT AND BALANCE SHEET ADJUSTMENTS 1. Business combinations IFRS 3 Business Combinations introduces significant changes to the accountingfor acquisitions compared to UK GAAP. The international standard requiresrecognition of all intangible assets that meet the IAS 38 recognition criteria.Any goodwill arising from business combinations is not amortised under IFRS 3,but is subject to impairment tests annually or whenever there is an indicationof impairment. Negative goodwill is recognised immediately in the incomestatement. The requirement to cease amortising goodwill has the impact ofincreasing profit before taxation by £0.5 million in the year to 31 March 2005(six months to 30 September 2004 - £0.3 million). Net assets at 31 March 2005increased by £0.5 million (30 September 2004 - £0.3 million; 1 April 2004 - notapplicable). 2. Share-based payments Under UK GAAP, the Group recognised a charge in respect of grants made toemployees under the long term incentive plan based on the difference between theexercise price of the option and the market value of a Business Post share atthe grant date. No other share-based payment charges were recognised under UKGAAP as either the grant had been made at market value (share option schemes) orwere specifically exempt from being reported (employee sharesave schemes). IFRS 2 requires that all share-based payments are reported in the profit andloss account, including share option schemes, long term incentive plans andemployee sharesave schemes, based on the fair value of the award at the grantdate (equity-settled plans) or at each reporting date (cash settled plans). Under the transitional rules the Group is required to report the costs of allgrants made after 7 November 2002 that had not vested at 1 April 2004, theeffective date of IFRS. However, the standard encourages application of IFRS 2to other grants providing the company has disclosed publicly the fair value ofthose awards determined in accordance with IFRS 2. The Group has thereforeelected to apply IFRS 2, 'Share-based Payments' retrospectively to all optionsgranted but not fully vested at the reporting date, rather than only thosegranted after 7 November 2002. The fair values of awards granted prior to 7November 2002 were published on the Business Post website on 16 May 2005.Consequently the share-based payment charge for the year ended 31 March 2005reflects all options granted and not fully vested at 31 March 2004. For the year ended 31 March 2005, application of IFRS 2 results in a pre-taxcharge to the income statement of £0.9m. The pre-tax effect is offset by adeferred tax credit of £0.3m, and thus the net effect on post-tax profit for theyear ended 31 March 2005 is £0.6m. Deferred tax is calculated on the basis ofthe difference between the market price at the balance sheet date and the optionexercise price. The excess of the deferred tax over the cumulative incomestatement charge is recognised in equity (for the year ended 31 March 2005 thisamounted to a credit of £1.0m to retained earnings). The deferred tax assetrecognised as at 31 March 2004 and 31 March 2005 relating to the share optionschemes is £0.5m and £1.8m respectively. 3. Dividends Under UK GAAP, the Group recognised a provision for the dividend declared withinits financial statements. IFRS states that dividends approved after thereporting date do not meet the definition of a present obligation and should nottherefore be recognised. Instead they should be accounted for in the period inwhich they are approved. The impact of this is to increase net assets at 31March 2005 by £6.9 million (30 September 2004 - £3.4 million; 1 April 2004 -£6.4 million). 4. Other Deferred taxationIn respect of deferred taxation, under UK GAAP, the Group recognised deferredtaxation only on timing differences that arose from the inclusion of gains andlosses in tax assessments in periods different from those in which they wererecognised in the financial statements. Under IAS 12, 'Income Taxes', deferred tax is provided in full, using theliability method, on temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the financial statements.Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Under UK GAAP, deferred tax assets and liabilities were shown on a net basis.IFRS requires separate disclosure of deferred tax assets and liabilities. Consequently, an additional £1.8m deferred tax asset, as calculated on thedifference in the market price of a Business Post Group share at the balancesheet date and the option exercise price following the application of IFRS 2,'Share-based payments', has been included within non-current assets as at 31March 2005. Investment propertiesIFRS significantly widens the definition of investment properties. Investmentproperties previously disclosed within property, plant and equipment have nowbeen separately reclassified. The net book value of investment propertiesreclassified was £1.1m at 31 March 2005, £1.1m at 30 September 2004, and £1.2mat 31 March 2004. Intangible assetsUnder UK GAAP, capitalised computer software was included within property, plantand equipment. In accordance with IFRS, capitalised software not integral toplant and equipment is classified as an intangible asset. The net book value ofcomputer software reclassified as intangible assets was £0.6m at 31 March 2005,£0.5m at 30 September 2004 and £0.5m at 1 April 2004. ProvisionsUnder UK GAAP, Group provisions are not disclosed according to their expectedusage date. IFRS requires that provisions should be classified into currentliabilities and non-current liabilities. As a result, £0.1m of provisions havebeen reclassified as current liabilities in the consolidated balance sheet as ateach of 31 March 2005, 30 September 2004 and 1 April 2004. 5. Financial instruments The exemption permitting the deferral of the introduction of IAS 32 and IAS 39,the International Accounting Standards on Financial Instruments, until 1 April2005 has been utilised. Comparative information has not been restated. IFRS requires that the interest rate cap contract is recognised at fair value,whereas under UK GAAP the cost of this hedging instrument was amortised over itsuseful economic life. This has resulted in a £0.1m write-down against reservesat 1 April 2005. Principal Accounting PoliciesThe principal accounting policies of the Group under IFRS are set out below.These have been applied with effect from 1 April 2004. Basis of AccountingThe financial statements have been prepared under the historical cost conventionas modified by the revaluation of certain financial assets and financialliabilities held for trading, using the accounting policies the Group expects toadopt in its 2006 Annual Report. These accounting policies are based on theEU-adopted International Financial Reporting Standards (IFRS) and IFRICinterpretations that the Group expects to be applicable at that time. The IFRSand IFRIC interpretations that will be applicable at 31 March 2006, includingthose that will be applicable on an optional basis, are not known with certaintyat the time of preparing these interim financial statements. a. Consolidation Subsidiaries are consolidated from the date on which control is transferred tothe Group and cease to be consolidated from the date on which control istransferred out of the Group. On acquisition of a subsidiary, all thesubsidiary's assets and liabilities that exist at the date of acquisition arerecorded at their fair values reflecting their condition at that date. Changesto those assets and liabilities, and the resulting gains and losses that ariseafter the Group has gained control of the subsidiary are credited or charged tothe post acquisition income statement. Goodwill represents the excess of the cost of the acquisition over the fairvalue of identifiable net assets of a subsidiary at the date of acquisition.Goodwill is not amortised but is measured at cost less impairment losses. Goodwill is tested for impairment at least annually. The company performs itsannual impairment review at the cash-generating unit level. On the disposal of a business, goodwill relating to that business remaining onthe balance sheet is included in the determination of the profit or loss ondisposal. b. Intangible assets Intangible assets include acquired computer software licences not part of theoperating software acquired with a related piece of hardware. These arecapitalised on the basis of the costs incurred to acquire and bring to use thespecific software. These costs are amortised over their estimated useful lives,normally four years. Intangible assets created within the business are not capitalised andexpenditure is charged against profits in the year in which it is incurred. c. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand any impairment in value. Land is not depreciated. Depreciation is calculatedover the estimated economic useful life of the asset as follows: Freehold buildings fifty years on a straight line basisShort leasehold premises the period of the lease on a straight line basisMotor vehicles, plant, and 10% to 33% annually on a reducing balanceequipment basisComputer equipment 14% to 33% annually on a straight line basis. Property, plant and equipment are impaired if their recoverable amount fallsbelow their carrying value. Impairment losses are charged immediately to theincome statement. Investment property is accounted for under the cost model, at cost lessaccumulated depreciation and accumulated impairment losses. d. Investments Investments in Group undertakings are stated at cost less any provision forimpairment. e. Inventories Inventories are stated at the lower of cost and net realisable value. f. Finance and operating leases Costs in respect of operating leases are charged on a straight-line basis overthe term of the lease. Leasing agreements, which transfer to the Groupsubstantially all the benefits and risks of ownership of an asset, are treatedas if the asset has been purchased outright. The assets are included in fixedassets and the capital elements of the leasing commitments are shown asobligations under finance leases. The lease rentals are treated as consisting ofcapital and interest elements. The capital element is applied to reduce theoutstanding obligations and the interest element is charged against profit so asto give constant periodic rates of charge on the remaining balance outstandingat each accounting period. Assets held under finance leases are depreciated overthe shorter of the lease term and the useful lives of equivalent owned assets. g. Revenue Revenue is recognised in the accounting period in which consignments aredelivered to customers. Franchise income is recognised over the life of the franchise agreement inproportion to the share of services rendered, by reference to the proportion ofthe total services to be provided. All revenues are stated net of value added tax. h. Deferred taxation The company provides deferred income tax using the balance sheet liabilitymethod on all temporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts for financialreporting purposes. Deferred tax assets are recognised for all deductibletemporary differences to the extent that it is probable that taxable profit willbe available against which the deductible temporary differences, carry-forwardof unused tax assets and unused tax losses can be utilised. Deferred income taxassets and liabilities are measured at the tax rates that apply to the periodwhen the asset is realised or the liability is settled, based on tax rates (andtax laws) that have been enacted or substantively enacted at the balance sheetdate. Deferred taxation is recognised in the income statement unless it relates totaxable transactions taken directly to equity, in which case the deferred tax isalso recognised in equity. The deferred tax is released to the income statementat the same time as the taxable transaction is recognised in the incomestatement. i. Pension costs The Group sponsors employees' personal pension plans. The assets of the plansare held separately from those of the Group in independently administered funds.The pension costs charged in the income statement represent contributionspayable by the Group to the plans together with the administration charges ofthe plans. j. Foreign currencies Transactions in foreign currencies are recorded in sterling at the rate rulingat the transaction date. Monetary assets and liabilities denominated in foreigncurrencies are translated at the rate of exchange ruling at the balance sheetdate. All exchange differences arising from trading transactions are dealt within the income statement. k. Share-based payments The costs of equity-settled share-based payments are recognised in the incomestatement with a corresponding increase in equity over the vesting period asservices are provided to the Group. The charge is based on the fair value of theequity instrument granted and the number of equity instruments that are expectedto vest. The fair value is measured at grant date and takes account of vesting conditionsthat relate to the market price of the company's shares. In order to determinethe value of the instrument a pricing model relevant to the type of instrumentis used. The costs of cash-settled share-based payments are recognised in the incomestatement with a corresponding increase in equity over the vesting period asservices are provided to the Group. The charge is based on the fair value of theliability at each reporting date, with any changes in fair value recognised inthe income statement. l. Provisions Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of the obligation. Where theGroup expects a provision to be reimbursed, for example under an insurancecontract, the reimbursement is recognised as a separate asset but only when thereimbursement is virtually certain. If the effect of the time value of money ismaterial, provisions are determined by discounting the expected future cashflowsat a pre-tax rate that reflects current market assessments of the time value ofmoney and, where appropriate, the risks specific to the liability. Wherediscounting is used, the increase in the provision due to the passage of time isrecognised as an interest expense. m. Dividends Dividends are recognised in the financial statements as a distribution fromretained earnings in the period in which they are approved. n. Financial instruments The Group classifies its financial assets into the following categories:financial assets at fair value through profit or loss, loans and receivables,and available for sale financial assets. The interest rate cap instrument is re-measured at fair value at each reportingdate, with any gains or losses credited or charged to the income statement. Loans and receivables are recorded at cost less provision for bad debts. Available for sale financial assets includes cash, which is stated inclusive ofaccrued interest. Financial liabilities are all classified at amortised cost. Key Exemptions and Exceptions In adopting IFRS, the principal exemptions and exceptions applied by thecompany, as set out within IFRS 1, are as follows: (a) The Group has elected not to apply IFRS 3, 'Business Combinations',retrospectively to business combinations that occurred before the date oftransition. Consequently, goodwill amortisation for the year ended 31 March 2005has been reversed.(b) The Group has elected to apply IFRS 2, 'Share-based Payments'retrospectively to all options granted but not fully vested at the reportingdate. Consequently the share-based payment charge for the year ended 31 March2005 reflects all options granted and not fully vested at 31 March 2004.(c) The Group has applied the IFRS 1 exemption from the requirement torestate comparative information for the effects of adopting IAS 32, 'FinancialInstruments: Disclosure and Presentation', and IAS 39, 'Financial Instruments:Recognition and Measurement'. The Group will not restate comparative informationat 1 April 2004 or for the year to 31 March 2005 for these standards. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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