20th Jun 2005 11:00
Trinity Mirror PLC20 June 2005 TRINITY MIRROR PLC UPDATE TO IMPACT OF IFRS ON TRINITY MIRROR Trinity Mirror plc ('the Group') announces an update on its transition to IFRS("International Financial Reporting Standards"). As part of its 2004 AnnualReport, the Group published a preliminary IFRS Consolidated Balance Sheet andIncome Statement for 2004. This was published for illustrative purposes on thebasis of IFRS, and interpretations thereof, in existence at that time. Deferred tax on intangible assets Following further interpretation of IAS 12 "Income Taxes", the Group will amendits accounting for deferred tax on identified intangible assets on its openingbalance sheet. The current interpretation of IAS 12 requires that a deferred taxliability is recognised in respect of intangible assets arising on past businesscombinations of £474 million. Such deferred tax liability was not included inthe Preliminary Consolidated balance sheet published as part of the 2004 AnnualReport for the period ended 2 January 2005. This accounting adjustment has no impact on either the Group's cash flows or onavailable distributable reserves, and, therefore, has no impact on the Group'sability to pay dividends. The Group has grown over the past ten years through the acquisition of a numberof newspaper publishing companies. These acquisitions were mainly structured asthe purchase of shares, and, as a result, for UK GAAP purposes, publishingrights acquired of £1,580 million have been recognised in the Group consolidatedbalance sheet as separately identified intangible assets described as'publishing rights and titles'. For IFRS purposes a deferred tax liability is recognised in a businesscombination in respect of any identified intangible asset representing thedifference between the fair value of the acquired asset and its tax base.Recognition of a deferred tax liability in respect of such a difference givesrise to a corresponding increase in goodwill accounted for in the consolidatedbalance sheet. However, the Group has taken the exemption under IFRS 1 'FirstTime adoption of International Financial Reporting Standards' whereby pastbusiness combinations need not be restated, and therefore cannot retrospectivelyadjust the carrying value of goodwill accounted for in respect of businesscombinations entered into prior to the transition date. As the carrying value ofgoodwill cannot be adjusted, recognition of the deferred tax liability resultsin a corresponding reduction in the Group's consolidated reserves. Financial Instruments The Group continues to make progress with respect to accounting for financialinstruments under IAS 39 "Financial Instruments: Recognition and Measurement"and the revision issued on 16 June 2005 by the IASB (International AccountingStandards Board). The Group has elected not to apply IAS 39 for the 53 weeksended 2 January 2005, and will adopt these standards prospectively from 3January 2005 onwards. The key items that will be impacted by IAS 39 are the $602m fixed rate privateplacement loan notes, and the cross-currency interest rate swaps related tothese borrowings. The cross currency interest rate swaps ensure that allinterest and principal payments in respect of the loan notes are fully hedged upuntil maturity. As these swaps were taken out to hedge the fair value exposureto the private placement loans, after having assessed the cost implications ofapplying hedge accounting, the Group has chosen not to apply hedge accountingunder IAS 39. Under UK GAAP the Group is required to adopt FRS 26 'Financial InstrumentsMeasurement' this year which contains the same provisions as IAS 39. Theadoption of IAS 39 under IFRS and FRS 26 under UK GAAP are likely to impactdistributable reserves, which at this stage, is not considered to be material. The profit impact of adopting IAS 39, on the results for the 26-weeks ended 3July 2005 will be determined by interest rates and exchange rates prevailing atthe Balance Sheet date. Deferred tax will have to be provided on adjustmentsarising from the adoption of IAS 39. Enquiries Vijay Vaghela 020 7293 3000Group Finance Director Nick Fullagar 020 7293 3622Director of Corporate Communications This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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